Real Estate Forecast

Why Dallas-Fort Worth’s sizzling real estate market may start to simmer

The craziness of buying a house in Dallas-Fort Worth is slowing down, experts say.

Photo courtesy of Ebby Halliday Realtors

At the MetroTex Association of Realtor’s annual “state of the DFW Real Estate union,” Dr. James Gaines, chief economist with the Real Estate Center at Texas A&M University, told 300-plus Dallas-Fort Worth real estate agents that they might expect a slowdown in the frenetic market we are experiencing, to what he called a “new norm”: 2.3 percent growth instead of the 3, 4, or 5 percent we have been seeing.

Gaines said prolonged lower oil prices and job cuts in the energy industry will result in slower growth in Texas. But the impact hasn’t really been felt yet, he said.

“We went through this in the ’80s — there is a lag effect of when those prices come down, and it really hits the economy,” Gaines said. “It’s anywhere between one to three years. We know that it is going to impact the state’s economy — it’s going to affect employment throughout the state,” he said. “It’s coming, but it hasn’t hit yet.”

Gaines predicted that even in North Texas, which has less exposure to the energy industry than other regions do, employment gains will moderate next year.

“But the slowdown is from a record high to a little bit less,” he said. “Growth in Dallas-Fort Worth has accelerated enormously.”

Houston is hurting, said Gaines in so many words, due to loss of oil jobs. Midland too. The energy sector is definitely down, and $80 a barrel is not in the wings.

Dallas-Fort Worth, Plano, and all, not so much. Gaines said North Texas will still see growth in high tech, healthcare (all those doc in the boxes sprouting up like banks in high-net worth neighborhoods), and professional and business services. The population expansion continues. But the local growth issues are a strain on our in-state and local resources.

Texas produces 50 percent of the nation’s oil, and we are still the homebuilding capital of the world. According to Gaines, these are the macro issues facing Texas real estate today:

Changing demographics. First-time homebuyers are increasingly millennials, and they have changing lifestyles and buying habits.
Capital. Foreigners are coming in and buying up real estate with cash.
Interest rates. Prepare for them to go a little higher. The increase won’t kill us, but it could hurt buyers on the credit fringes.
Credit terms and availability. Washington is finally slackening the reins on lending.
Urbanization. Two out of three people live in the big Metropolitan Statistical Areas in Texas, and more people are heading there.
Home affordability. This could be a problem — looking at Gaines charts, it appears that the median price of a home in DFW is now near $280,000. That’s a lot better than the average home price in the Bay Area or LA, or metro New York or D.C., but that’s high for us. Where do people who can only afford $150,000 for a house live?

Home affordability may be a bigger problem in Dallas-Fort Worth, given that home price increases have been outpacing wage gains that in the area.

“We have smaller household income today in real terms than we had in 1999,” Gaines said. “Affordable workforce housing is going to be a major issue. We are not building enough houses in the $150,000-to-$200,000 bracket.”

Lower gas prices may be bad news for the oil industry, but it’s great news for consumer and makes the suburbs more attractive to buyers.

Local agents say the market is already simmering down. As Dave Perry-Miller told me earlier this week, it’s still busy, just not as frenetic. I do see home prices on the upper end of the luxury market softening; home prices that may have been over-reaching are being pulled back. But beautiful, exciting product will still fly off the shelves, and the under $700,000 market is still extremely hot because of demand.

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A version of this story originally was published on Candy's Dirt.

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Prep to Protest

Texas homeowners have one month to protest and lower their property taxes

Jessie Street home front Austin tour of remodeled homes

Photo courtesy of Austin NARI Tour of Remodeled Homes

Here's how Texans can correct their property taxes when they feel their home appraisal is too high.

Texans who are unhappy with their home appraisal this tax season have a chance to do something about it if they get the process going in the next month. The deadline for most people to protest their property valuation — thus lowering their property tax — in Dallas County is May 15.

If you haven't done it before, don't worry: There are steps to follow online and companies that do it for you at no cost unless you save money.

Why protest?
Texans pay the 7th highest property taxes in the country, according to personal finance website WalletHub. If your county has overappraised your home, you are paying more than you need to in property taxes.

Protests are especially important and easy for people who closed on their homes in the past year, because the value of the property upon sale is accepted as the true value of the property. This assumes that if the property were worth more, it would have sold for more. The more recently the home sold, the more likely it is that homeowners haven't meaningfully altered the property since the purchase.

Submitting a protest is free, and there is almost no risk in doing so. The Appraisal Review Board is prohibited from raising the property value in a hearing. Homeowners may decide it's not worth their time if their appraisal barely changes and they don't save a significant amount of money.

When to submit
Most homeowners whose home has increased in value according to the county should have received a Notice of Appraisal in the mail by now. It tells them how much the county believes their home is worth this year. To check online, homeowners can search for their property at dallascad.org.

The deadline to submit a protest is May 15 or 30 days after the notice is mailed — whichever comes later. However, the notice may have been lost or delivered to the wrong place, so it is important to check before May 15 just in case. Notices are also sent later for property owners whose primary residence is somewhere else.

There are lots of ways homeowners can try to prove their home value has not increased, or even that it has decreased due to damage on the property. Whether the evidence is photos of damage or "comps" around the neighborhood — comparing the home's value to others of a similar quality in the same area — homeowners submitting their claim themselves should be prepared to meet with an appraiser or even a review board.

Set it and forget it
Homeowners who don't want to deal with the paperwork, phone call, or hearing can hire service to protest on their behalf. For them, savings are essentially passive income; the service uses data from past years and the surrounding neighborhood to argue the client's case. It is easy to find a service that works on a contingency fee, so the cost is only a portion of the successful savings. Ownwell is a popular choice, but it's not the only one.

Finally, homeowners should also make sure they're not leaving money on the table by applying for a homestead exemption. This is available to people who own the homes they live in, as opposed to people who own homes and rent them out to others. It subtracts $140,000 from the total valuation of the home before applying the tax rate.

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