Comment on the Downtown Condo market

[swingline]

I would like the forum's thoughts and opinions on the condo market in and around downtown Dallas for the short term. A lot has happened in the last 1-2 years in the real estate market in America. Most recently we have had problems in the mortgage market with the increased default rates on subprime loans. Its touhger now for borrowers to get approved and this in turn has decreased the number of buyers. With treasury yield breaking 5%, mortgage rates will be going up, causing housing prices to decrease. This is creating a high supply low demand environment. How will this affect Dallas? I would like to get your opinions. I am considering purchasing a condo in downtown as the long term prospects are great no question. But will I be able to buy the same property a year for now for a better price?

[AZDallasite]

I would like the forum's thoughts and opinions on the condo market in and around downtown Dallas for the short term. A lot has happened in the last 1-2 years in the real estate market in America. Most recently we have had problems in the mortgage market with the increased default rates on subprime loans. Its touhger now for borrowers to get approved and this in turn has decreased the number of buyers. With treasury yield breaking 5%, mortgage rates will be going up, causing housing prices to decrease. This is creating a high supply low demand environment. How will this affect Dallas? I would like to get your opinions. I am considering purchasing a condo in downtown as the long term prospects are great no question. But will I be able to buy the same property a year for now for a better price?

You have good reasons to be concerned but with the healthy job market Dallas has and continually growing population, the housing market in terms of prices, should at worst only decline 1.5% imo. In terms of waiting it out, while you may get a lower price, you'll more likely get a higher rate. I doubt the drop in price,if it occurs, wouldn't offset the increase in your rate. I personally don't see the market going down. I think volume is going to be flat for the next 6 months and prices will increase 1-2% over the next 12 months.

[psukhu]

I would like the forum's thoughts and opinions on the condo market in and around downtown Dallas for the short term. A lot has happened in the last 1-2 years in the real estate market in America. Most recently we have had problems in the mortgage market with the increased default rates on subprime loans. Its touhger now for borrowers to get approved and this in turn has decreased the number of buyers. With treasury yield breaking 5%, mortgage rates will be going up, causing housing prices to decrease. This is creating a high supply low demand environment. How will this affect Dallas? I would like to get your opinions. I am considering purchasing a condo in downtown as the long term prospects are great no question. But will I be able to buy the same property a year for now for a better price?

One year is a short time in any area that has a lot of new units being built over the coming years. You may find yourself competing with the builders when you go to resell. (they'll kill you with the power of their margin) If the the condo building sells out in less than a year, you'll do much better. However, I would not count on anything above 6%.

Mortgage rates shouldn't have that much of an impact because most of the units being built in and around downtown are upscale and above $300,000. These buyers tend to put down more money and have great credit scores.

Dallas didn't see the big spike in prices that many other parts of the country saw in the past couple of years. There was healthy growth in values, but not a boom. We're still cheaper than many other metros that have similar per capita GDP.

[swingline]

Thank you for comments. another question, with all the units in downtown being put up for lease by the buildings, will it be hard for me to get renters? The unit I am considering is a small 1 br/ 1 bath 750 sq ft. It does have great views... Is there anywhere on the internet wher i can fidn rent statistics for CBD Dallas? thanks,

[effulgent]

You should be aware that in downtown Dallas right now, in most cases it is cheaper to rent than to buy. Most places to rent run between $1.20/1.60 sf in downtown. I know this to be the case in the building I live in (Post Wilson building).

Here's a comparison of some average prices for buying vs renting:

Post Wilson Building:
Unit 701 (http://www.postproperties.com/ApartmentHome/PropertyInfo.aspx?PropertyId=Post%20Wilson%20Build ing&Type=PAH)
1250 sf
1b/1ba
$1500/mo ($1.20/sf) + $50/mo Parking = $1550 total per month

1505 Elm:
Unit 805 (http://www.ebby.com/details/-2409820.html)
1324 sf
Desc: 1/1.1/0
$219,000
Mortgage Calculator payment -
Monthly Payment at 20% down (43,800)
Principal & interest: 1,107.38
Estimated tax: 456.25
Estimated PMI: 0
Estimated homeowner's insurance: 91.25

Total payment: 1,654.88 + HOA: $780 Monthly (Mandatory) = $2434 total per month

It's that kind of math that keeps us from buying in downtown Dallas. Even without the HOA fees, it's still substantially cheaper to rent than to buy in downtown Dallas.

[LH_Newbie]

E-gads... 780/mo HOA!?!?!

[TexasStar]

E-gads... 780/mo HOA!?!?!

1505 Elm is far from typical with regard to HOA fees.

[elmstreetdallas]

That formula didn't take into account the thousands you save on your taxes by owning, or appreciation.

So many other factors to weigh as well. Like when you own, you don't have to put up with bitchy, ineffective apartment management staff. That's worth $100 a month right there. :)

[psukhu]

E-gads... 780/mo HOA!?!?!

I don't know about this building, but sometimes the HOA includes home owner's insurance and other things. This allows the residents to get a group rate on things that everyone has to get anyway. There may be other perks like on-site security person 24 hours a day, or a personal trainer who is always in the gym to help residents.

So you have to factor in these extra perks. Plus, doesn't this building have a fancy wine vault?

[AZDallasite]

I don't know about this building, but sometimes the HOA includes home owner's insurance and other things. This allows the residents to get a group rate on things that everyone has to get anyway. There may be other perks like on-site security person 24 hours a day, or a personal trainer who is always in the gym to help residents.

So you have to factor in these extra perks. Plus, doesn't this building have a fancy wine vault?

In addition, hoa fees sometimes include your water & electric. If that's the case, then the $708 sounds more reasonable.

[monogodo]

I don't know about this building, but sometimes the HOA includes home owner's insurance and other things. This allows the residents to get a group rate on things that everyone has to get anyway. There may be other perks like on-site security person 24 hours a day, or a personal trainer who is always in the gym to help residents.

So you have to factor in these extra perks. Plus, doesn't this building have a fancy wine vault?
But if you don't/won't use those perks, it's wasted money.

[swingline]

I have decided against buying a condo for now. I did some calculations and its just too expensive. I would have a net cash outflow of $20K extra per year. i was thinking of purchasing a unit for investment, but it makes no sense to have a negative cashflow, when I can invest riskfree in a CD or something at 5%. I know this isnt an investment forum, but just had post. Even buying a condo to live in downtown, would run like $2400 a month out of pocket and for what? like 7-800 sq ft! I would have some sweet views though. I need to find a better paying job I guess...

[1999McKinneyAve]

Our HOA includes gas, water, all building maintenance and upkeep, concierge service, 24 hour security, T-1 internet connection, and building insurance for all "common areas." You are responsible for insuring everything inside the walls of your home. HOA dues are appropriated based on square footage. I think ours is about $0.35/sq. foot. One thing to be very careful about if buying into a new building. The Developer controls the HOA until 70% or more of the units have been sold. Your HOA dues are artificially low until that happens as the Developer subsidizes the HOA. My homeowner dues were $450 back in 2002; today they are close to $1,100. That was a very rude surprise...

[elmstreetdallas]

A condo downtown is a lifestyle choice.

If you want an investment, buy a house in Highland Park, Preston Hollow, or anywhere south of LBJ.

My parents' house near Inwood and Royal has appreciated at a shocking rate....

[tamtagon]

But if you don't/won't use those perks, it's wasted money.

As downtown evolves and becomes a residential neighborhood as well as a business district, there will be more and more condos that dont have all the fringe benefits.

[KesslerDweller]

If you are buying for the long haul you will be fine. Flip days are over.

It may cost more per month, but the tax benefits are far greater. The outrageous HOA dues at 1505 Elm are ridiculous.

Go buy a house in Kessler Park or a townhome somewhere. You will be happier and have a lot more living area.

[Highway 6]

A condo downtown is a lifestyle choice.

If you want an investment, buy a house in Highland Park, Preston Hollow, or anywhere south of LBJ.

My parents' house near Inwood and Royal has appreciated at a shocking rate....

I have to agree with Elm Street Dallas. For the past 10-15 years condos have appreciated at roughly the rate of inflation, while Park Cities, Preston Hollow, Lakewood and Kessler Park have doubled/tripled that. I think it's partly a Texas thing. Condo life is not a mainstream choice for the majority of buyers here.

[downtownguy25]

Even buying a condo to live in downtown, would run like $2400 a month out of pocket and for what? like 7-800 sq ft! I would have some sweet views though. I need to find a better paying job I guess...

My condo downtown runs me 750 a month, morgage and hoa. I could easily lease my place out for about 1000. Guess it really depends on what building you are in.

[vman]

My condo downtown runs me 750 a month, morgage and hoa. I could easily lease my place out for about 1000. Guess it really depends on what building you are in.
Where do you live...if that's not to personal. I'm thinking of buying soon.

[KesslerDweller]

Inwood and Royal is a great place as well.

[Lakewooder]

A good investment would be to buy a single family home in East Dallas and look for a real deal - something just over or under $200K. $250K is even more 'do-able'.
They can be found if you look for a bit..however, it will probably need some work. Even if you can put up with just painting and not doing anything else, you will make money. The DCAD says every home I own went up by $40,000 to $50,000 last year.

I know a few of these deals have happened in my Junius Heights Historic District. Another good area would be just north of Mockingbird (50s and early 60s ranch homes) but make sure they are in Lakewood or Stonewall Elementary districts, not Dan D. Rogers.

I have limited experience 'on the other side of the lake' but I would say anywhere close to Casa Linda (Little Forest Hills, Old Lake Highlands) would also be good. I would tend to avoid the Casa View area. I think it has potential but is a much bigger risk. Similarly, Mount Auburn is a risk - but could be a big payoff if certain things happen.

[Rob]

Even buying a condo to live in downtown, would run like $2400 a month out of pocket and for what? like 7-800 sq ft! I would have some sweet views though. I need to find a better paying job I guess...

I guess it depends on what you're looking for... but I pay around $1200 a month including taxes and HOA and have 1100 square feet. This is at Live Oak Lofts - a real nice building, but not a high-rise, and on the edge of downtown, not in the heart of Main Street.

[dtdresident]

One thing that could bea a challenge to home sales in general are the rising interest rates. They are rising significantly and would force a higher payment for perspective buyers.

[mjblazin]

Inwood and Royal is a great place as well.

How is that castle in the SE corner doing? When I first moved to Dallas, I regularly drove by that corner and watched, amazed, as it was built. I thought "so this is what they mean by Big D." I did not know anyone built homes that big out of stone anymore. Subsequently built homes like the Muse estate on Lakeside have gone way beyond that standard, but it was impressive at the time.