Housing is a hot property, real estate pros say
By STEVE BROWN Real Estate Editor  
Published June 17, 2005

Carloads of Californian speculators shopping for suburban tract housing.

Wealthy speculators snapping up in-town condos.

The buzz in the Dallas housing market is about investors.

Depending on whom you talk to, these opportunistic buyers are either a boon or bad news."Is it happening? Yes," said real estate broker Kyle Crews. "Can I tell you how deep and wide this market is? No.

"But I hear more and more chatter about people coming in from out of state and buying housing," said Mr. Crews, an agent with Allie Beth Allman & Associates who recently sold two new high-rise condos in Uptown Dallas and one in Austin to the same California buyer. "Compared to prices in other markets, Dallas has got to be looked at very favorably."

Average residential prices here are half or less what they are in many West Coast cities, which is bound to attract speculators, brokers say.

Coming up with statistics on the investor market is almost impossible. It's never easy to tell who's buying a home to live in and who's making an investment play.

One market that's easier to gauge for investor demand is high-rise condominiums. Developers report that a great many of these expensive homes are going to investors.

"The last number I saw for our building was 20 percent investors," said Jonas Woods, president of Hillwood Capital, which is building the W Dallas Victory Hotel & Residences in Uptown. "There is no question that this is a phenomenon we are seeing in markets around the country."

Too many?

Builders are always reluctant to turn away wealthy buyers, but investor sales are not something they promote, Mr. Woods said.

"It's a disaster waiting to happen for people who develop in this market," he said. "It gives you a false sense of security about buyer demand.

"But someday the investor market will shut down overnight," he said. "If 20 and 30 percent of your buildings have been taken by speculators, and your price has been driven up, then we can all find ourselves in a tough spot."

Some of the country's top housing economists share those worries.

"We are seeing increasing shares of investor activity," said David Seiders, chief economist for the National Association of Home Builders in Washington, D.C. "It raises the question if the recent level of home sales and prices has something of an unsustainability - particularly if it's buying solely for the generation of short-term capital gains."

To guard against this, some high-rise condo developers are requiring buyers to keep their units at least 12 months. They are also adding clauses that prevent buyers from assigning or flipping the purchase contract to another buyer.

"You can't prevent speculators from purchasing, but there are some measures you can take to discourage it," said Christine Lutz of Garrison Partners Consulting, a Chicago company that markets high-rise residential projects all over the country, including the Metropolitan condominium tower at 1200 Main St. "There is too much speculation out there, and we are trying to limit it."

A recent report by the National Association of Realtors estimated that 23 percent of residences sold in the United States last year went to investors. Based on 2004's total sales, that would be more than 1 million homes.

But the Realtors estimate that only about 3 percent of buyers sell in a year's time or less.
Investor's dream

Many investor buyers come from cities where they've already made a bundle on housing.

"We have made so much money here that people are uncomfortable about plowing it back into this market," said Christopher P. Van Slyke, a Southern California financial adviser who has suggested some of his clients buy properties in Texas. "It's hot, inflated money out here looking for prices more related to value.

"All this money out here is looking for bargains."

And compared with California, the Dallas-Fort Worth area must seem like an investor's dream.

"People are asking why should I buy another condo here for $2 million when you can buy a really nice one in Texas for a half million?" said Mr. Van Slyke, managing director of Capital Financial Advisors of San Diego. "It's cheap for us and great for you."

Christian Hibberd, who works in the entertainment industry in the Los Angeles area, recently bought two investment units in a downtown Dallas condominium project.

"I've seen what's happened to prices out here in the last few years," Mr. Hibberd said. "I think downtown Dallas has lots of potential."

North Texas real estate agents say Mr. Hibberd has plenty of company.

"They are coming in by the busloads - especially from California," said Bill Sabino, manager of Re/Max Premier Group Realtors. "They will go into a new home subdivision and buy three or four.

"They are buying pre-owned homes, too," he said. "And they are not buying them at discount prices."

More on the market

Most investors plan to rent the house out for a year or so and then resell. Good luck, says Mr. Sabino.

"I don't know how they are going to rent them," he said.

The North Texas Multiple Listing Service currently shows about 3,900 rental homes and condos on the market. That's up from about 1,600 in 2002.

Maybe so, but investors "are definitely more prevalent, especially in the last six months or so," said David Brown, director of the Dallas office of housing analyst Metrostudy Inc., which tracks the new-home market in North Texas.

Most big homebuilders don't want to sell to speculators, Mr. Brown said.

"They don't want a new subdivision with seven or eight 'for lease' signs," he said. "You could wind up competing against yourself."

John Landon, co-chairman and chief executive of Meritage Homes, which has dual headquarters in Dallas and Scottsdale, Ariz., says investor sales are still only a small part of the North Texas new home market.

"There have definitely been many investors in the Phoenix market, in California and the Las Vegas market," Mr. Landon said. "But in Dallas-Fort Worth, we are not going to see great appreciation like you have in those markets.

"The barriers to entry are much less in the housing market, and there is no housing bubble here," he said.

E-mail stevebrown@dallasnews.com