Dallas Real Estate: Is The North Texas Condo Market Finally on its Knees?
The Fort Worth Star Telegram’s Mitchell Schnurman says yes, that both Dallas and Fort Worth share a glut of condos but that Dallas is in more trouble because we have more unsold units — more than 400 vacant properties, a host of million dollar plus homes, and about one foreclosure for every four condo units posting.
It could be worse — we could be Miami. And I’ve heard that condos in Austin are moving like molasses, this in a town where parents often buy real estate for their UT undergrads.
I agree with Schnurman and the folks he consulted — Residential Strategies’ Ted Wilson and RECON’s James Gaines: too many condos were built. They knew it, we all knew it. As I was purging papers for our move to Saint Paul Street last week, I found a brochure from the Cresta Bella — remember that? And Museum Tower was supposed to break ground this spring or fall. Schnurman says Mandarin Oriental pulled the plug last summer; I heard the writing was on the wall last March. And a reader asked me this week what, if anything, could be done with that sad Stoneleigh Residences shell — the ghost condo is the view from her front window. The Ritz opened The Tower Residences last Tuesday — all of phase one sold, though re-sales are slow and have seen two foreclosures, and the new 95-unit Tower Residences has 30 units left to sell. (David Farmer reminded me how bullish I was on the Stoneleigh; I still think it’s an excellent location for a high-rise. I asked what they thought would happen to that shell — nothing, I was told, until someone starts lending some money.) What was their secret to success? Great timing.
Here are the problems: a lack of financing in the jumbo market ($417,000 or above in Dallas); if you do obtain funds, getting an appraisal through the new Home Valuation Code of Conduct; and in fact getting any money at all. Buyers are also skiddish over HOA’s, which I hope to examine more on this blog. But why do lenders get the heebie jeebies still with Dallas condosl? Last Wednesday night at The Travis, one of the developers told me it was like pulling teeth to obtain financing on those units, but they did get a bank to sign on. I maintain that the real estate market would be a whole lot healthier if the lenders would just start lending again — not to anything that has a pulse, but to qualified people.
The good news is that Dallas now has 30,000 people living downtown — and I saw with my own eyes last weekend how we are becoming a city that never sleeps. (Yes!) The units will get absorbed, but it will take time, a few foreclosures,maybe even an auction or two.
Meantime, hold the cranes, please. Just please pass the credit.
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Is the Museum Tower sales office still open?
Yes, it is.
MT will not happen. Dallas can’t even sell the $400 a foot condo inventory – why does MT people think they can pull $800 a square foot? Good luck with that.
They should put the building in half and sell, cut the finishes, and sell them at $350 a foot just to monetize the land.
There are definetely some obstacles to overcome before the Dallas condo market and real estate market as a whole is on the road to recovery.
As mentioned above, lending seems to be one of the most crucial issues to address in Dallas, esp. with condos, townhomes, and lofts. For example, take the new FHA Loan Revisions which 86 spot approvals, place 2 year approval caps on condo projects, and expire all FHA approved projects which received approved status over two years. These FHA revisions, which are effective Nov. 1st, combined with the expiration of the Home Buyer Tax Credit on Nov. 30th, will create more lending roadblocks and especially hurt the first time buyer market.
It’s definitely an issue with the lenders, at least on the homebuyer’s side. With a 6-figure income, no debt, excellent credit, I practically had to sell my first-born to buy a $150K mid-century modern in California – and this in the state that basically gave loans to anyone with or WITHOUT a pulse!
And I’m getting sick and tired of it…
Anyone know how HOA’s would fit into a loan qualification equation?
I would like to see more info regarding which segment of the market has any/most of the glut?
In my experience, there are segments of the condo market that have no glut and even perhaps a shortage (i.e. under $200K)…on the other hand, condos over $250 psf seems to be in major over-supply.
I would be interested to see a market break-down, rather than more marginally informed people spouting sound-bites and perpetuating the myth that condos=bad in Dallas TX
And yes, lending is close to impossible unless you have at least 10-20% down payment or the condo complex is FHA approved(which is going to experience MAJOR changes next month).
Condo owners need to have their HOA partner with a lender to initiate FHA approval after Nov 1. From what I understand, FHA will only accept approval packets from lenders or condo developers. If you have an existing condo complex with no developer involved, you’re really left out in the cold as far as FHA re-approval is concerned.
Let me restate the above question. Say, if monthly HOA fee is $2000.00, or whatever amount you like, does anyone know how that fits into a lender’s formula for getting a mortgage on a condo. Say the condo is $500,000.00, and the monthly HOA is $2000.00, I am curious as to how that affects the lending evaluation. Anyone know?
HOA dues, like anything else – property taxes, insurance, etc – factor in when a lender is qualifying a buyer – there’s no magic involved…
The lender is going to determine how much the “all in” cost would be, and how that squares with the buyer’s qualification(i.e. debt, credit score, income, etc).
Thanks Uptown/Downtown. The thing is, the HOA’s are rather inflatable. I mean, I’ve heard of increases in older buildings of 50% in a period of five years. I guess to keep up with the increased maintenance. Then, you have the new buildings, whose fees also seem to go up quite a bit when the developer “lets go” and the new majority homeowners take over. Just wondering if there is any kind of formula. Don’t really know much about this. The idea of highrise condo living is very appealing to me (especially after reading about Candy’s Ritz II adventures), but just not sure about HOA’s. Maybe there is a general rule about how much they typically go up, and maybe it relates to age of building, or other things. Sorry, I’m not even quite sure how to ask the question, because I know so little.
Well, the general rule is that when a developer leaves a condo property, the hoa dues ALWAYS go up – sometimes a lot, sometimes a little.
The newer high-rises have done a better job at trying to create a realistic budget, so that after 1 yr the owners aren’t shocked with a huge increase.
I personally bought in one of these newer buildings in 2006, and the dues had gone up 8% between the time I contracted, and the time I closed. I found this out at the closing table – not fun!
Since then, the dues have gone up another 7%, for a total of 15% in 3 years time. **I think that my situation is somewhat uncommon in general, but be aware, it could happen**
PS – I recently heard that consumers can get a rider with their condo insurance for HOA special assessments, which I think is a fabulous thing. I don’t think this applies to a dues increase, but rather a one-time situation where the HOA has to raise cash fast. As with anything, read the fine print to make sure it’s worth the increased insurance premium.
A person can really learn a lot here (with great photos as well, Candy). Thanks to Candy, and to others who have so much knowledge and share it. It helps make Dallas a great place to live.