The Future Of Dallas’s Luxury Real Estate Market

We sat down with Luis Torres Ruiz, a research economist at Texas A&M, to discuss the changes occurring in the Dallas real estate landscape and what we can expect to witness in the next few years.

The high-end market drives a lot of the economy. Where do you see the luxury real estate business heading in Dallas?

Yes, compared to the other major metropolitan regions like Houston and San Antonio, homes with a price above $500,000 represent a higher percentage of the sales. Currently we are observing a slowdown in sales with a price tag above $500,000 flattening out.

University Park and Highland Park parts of Dallas continue to represent the majority of the high end sales, but now Frisco has started to see some important growth in the last three years.

What are the most surprising trends in the luxury market over recent years that you wouldn’t have originally anticipated?

No surprises due to the migration from other states because of businesses moving to Dallas and generating economic growth causing a strong demand for high end homes.

What effect, if any, do you predict the Millennial generation might have on the first-time-buyer market and why?

Increased the demand of homes with price tag below $250,000 as they represent the starter home price tags in Texas. The peak age group of Millennials will be going out trying to purchase a new home causing an increase in demand.

Are you seeing any noticeable reactions to the new tax reform laws in other states that might be pushing buyers to purchase real estate in Dallas?

Texas continues to have a comparative advantage with other states regarding prices, that allows people who move to Texas from a state like California to purchase a bigger home so they can still get the Federal exemption, but remember Texas has a home property tax that other states do not have because it does not have a state income tax. There was an article on WSJ that some people could purchase a home in Texas to escape paying state income tax in other states. Have not evidence of this occurring.

Experts have issued warning that the Dallas market is over-heating, have prices reached their peak?

Low months of inventory and days on market still show strong demand. It is difficult to maintain strong growths rates for very prolong time periods, it is normal to see a slowing down in price pressures. The high end market is slowing down, the demand for housing is with a price tag below $300,000, there is where you see a greater increase in prices and since they represent the majority of the market overall greater price increases are registered.

How has the massive industrial and economic growth of the city contributed to the real estate market?

The major reason why the real estate market has done so well. As the economy grows and more people and business migrate to Dallas they demand housing benefiting the residential market. The issue has been supply the lack of developed lots and labor to keep up with such strong demand.

Why should real estate investors pay attention to Dallas?

Because it is a high growth market with a lot of potential going forward. The economy is expected to continue to grow attracting businesses and people not only from the country but also from all around the world. In addition, it still has an affordable comparative advantage with respect to other major cities like San Francisco, Boston, etc.

What should investors pay attention to the Dallas Market going forward?

Going forward they should look at months of inventory and days on market to see if the real estate market is slowing down, especially by price cohorts. Like I mentioned to you earlier months of inventory for homes with a price above $500,000 has risen constantly above the 7.3 months of inventory, but days on market remain around 72 days on the market. Also, important to look if the migration to Dallas starts to slow down as well if the U.S. economy starts to slow down because the Dallas economy is more related to the U.S. economy than to the energy sector.