I wish I had $100 for every time I said, “I cannot believe it’s almost Christmas,” this past week. But here we are — gifts under the tree, house decorated, Christmas dinner ready, and the North Texas real estate market has slowed to its annual holiday trickle.
We started the year with a market so hot we could barely write up listings — they’d sell by the second graf. Then the Federal Reserve raised interest rates and the market slowed in a fell swoop to get a grip on inflation — inflation created not by real estate (this time) but by Washington pumping dollars into the economy, encouraging us to spend. All of which meant we had to tool up our real estate reporting game.
This year we added “Three Things to Know” to our regular lineup. The column by Fort Worth-based mortgage broker Ryan Stephens helps us navigate swiftly changing market dynamics. While I was cursing the Fed, Ryan reminded us that inflation, not the Fed rate, is the enemy of mortgage bonds.
High Demand And Higher Interest Rates Literally Slapped Us
“If the Fed can manage to lower inflation by raising their rate, it should cause mortgage rates to ease in the future,” he wrote. Got it.
Truth is, those record-low interest rates took a lot of home shoppers out of the game. Texas did have more houses on the market in July than any time since late 2020 as home sales declined in the state’s major metros — especially Austin, ouch! Since the fall, sellers have had to make repairs and trim prices to entice buyers. The median sales price of a single-family North Texas home fell almost 9 percent from a record $435,000 in May and June to $396,500 in November. But hold your anxiety — that’s still way higher than the median price three years ago: $280,000.
And we’ve got buyers. As long as folks keep moving to Texas (and Florida, Georgia, Alabama, Tennessee, the Carolinas, etc.) and as long as our inventory remains low, housing here will remain a sought-after commodity.
“Dallas-Fort Worth has experienced a growing influx of tech workers. This is another emerging tech in the U.S., with many new start-ups moving in this area,” says Lawrence Yun, National Association of Realtors chief economist and senior vice president of research. “Not only is housing more affordable than nationally, but this area provides more options to buyers.”
He’s talking about the growing tech corridor from Celina to Sherman where remote employment has changed the workforce dynamic and Texas Instruments’ $30 billion semiconductor facility in Sherman, the largest private sector investment in Texas history, is being built. Ground broke on the project this spring, and production is expected to start in 2025.
From Dallas to Denison, CandysDirt.com Has so Much to Cover!
I have about given up on tracking the population changes from Plano and further north. Between rapidly developing McKinney and Anna, Melissa tripled in population.
But even the fast-growing exurbs need affordable or “workforce” housing. According to Up For Growth, Texas needs 85,226 more affordable (working class) units. In fact, Texas ranked No. 2 behind California in the total number of missing affordable homes according to this group. We knew in 2010 why California has a dearth of homes. Texas has traditionally been way more affordable than the Golden State, but like the reverse Gold Rush, now Californians are coming to us, seeking housing nirvana.
Until we talk property taxes: We still lead the nation in this inglorious realm, and I expect the legislature will address this in 2023. We will be on it, of course. Property taxes are, in a large part, responsible for the area’s increase in rents. So, too, may be algorithms: Richardson-based RealPage is now being accused of using proprietary algorithms, one aptly dubbed YieldStar, to help landlords raise rents, turn profits, and basically screw renters out of affordable housing. We will be reporting more on this and the lawsuits generated by it in 2023.
Dallas is finally trying some revolutionary new programs to cure its lack of affordable housing, which is why we have our assistant editor April Towery glued to Dallas City Council meetings. But is the city going too far in using Public Facility Corporation finance structures that take taxable units off the rolls for 75 years?
Dallas is Shifting The Property Tax Burden
In an exclusive interview with CandysDirt.com, a University of Texas housing expert warned that the Public Facility Corporation finance structure will shift the property tax burden to other taxpayers. There are no reporting requirements and no accountability for this method of redevelopment. The City of Dallas is also giving up county and school taxes. That’s really problematic, and you should be concerned.
And you should be concerned about the still-down website over at DCAD. We found out from our insiders that hackers asked for a ransom. We just hope taxpayer information was not hacked, too.
2022 Saw Real Estate Disruptors Getting Disrupted
We watch the real estate industry 24/7, which made our heads spin during the second half of the year. Lots of layoffs, mostly at the “disruptors.” That includes OfferPad, Opendoor, Redfin, and Compass. The tech-driven, early-to-mid-2000s were the birthplace of the internet broker — brokerages who called themselves tech companies looking to provide consumers with one-stop, hassle-free online shopping for a home and maybe even replace the agent. OfferPad recently laid off more than 7 percent of its workforce, suffered losses of $8 million in Q3, and is posting anemic stock prices.
But some, like Opendoor, now find themselves property-heavy because they used investor money to, well, go shopping! It’s really rocky now over at Opendoor; cofounder and CEO Eric Wu stepped down in early December, along with President Andrew Low Ah Kee, shocking and significant moves from a company that went public in December 2020, saw shares triple in value to nearly $35 in less than two months. Numerous publicly traded real estate companies are way down from their all-time high share stock prices, but Mike DelPrete says Opendoor is “leading the pack” and “definitely down more than the mean.”
Compass’ stock has fallen 85 percent since going public last year and experienced two rounds of layoffs. The aggressive NYC-based brokerage from founder Robert Reffkin reached a market capitalization of $8 billion on its first day of trading April 1, 2021. Now the company is valued at just $1 billion following disappointing earnings, including a second-quarter report outlining how its losses have risen to $101 million.
It’s not just the disruptors: Ryan Gorman was pushed out as CEO of Coldwell Banker, a subsidiary of Anywhere Real Estate, whose stock has fallen nearly 60 percent this year despite turning a $55 million profit in Q3. Gorman made $3.5 million annually, and shareholders are liking that he won’t be replaced.
The non-traditional brokerages that focus on revenue and pleasing shareholders rather than old-fashioned profits seem to be ailing. (Mike Del Prete calls it a race to the bottom. Ouch!) The traditional legacy brokers are sharpening pencils and are doing fine — some even expanding.
What does this mean for anyone wanting to buy or sell a house in 2023? The market will cool, but not all that much given our lack of inventory. Cash buyers will reign supreme. Agents will remain in the driver’s seat, more necessary now than ever. We will see more off-market listings and deals. Technology will be important but it will never, ever replace the agent and their relationships. Technology, we love you, but don’t rely on a bot to do the job of a seasoned human being, especially us old ones!
We’re looking forward to 2023 and sharing even more deep dives and juicy stories. Thanks for reading and Happy Holidays from the whole team at CandysDirt.com!