That’s right, thank them. Buy them some chocolates and champagne … maybe a spa day. Why?
Because without the over-rotation on apartments that’s happening during this building cycle, your condo would be worth less. Now, this doesn’t hold in the over-saturated, million-dollar end — in fact that part of the market has so much product, the Limited Edition was cancelled from a lack of interest and the Stoneleigh and Museum Tower are still far from full. But in the price points most of us play in? Definitely.
Think about it: if a fraction of the tens of thousands of apartments that have been and continue to be built were vaguely affordable condos, there would be more product on the market. As it is, condo prices are in a stranglehold that has driven up far more quickly than is typical/comfortable.
From the depths of the Great Recession, many Turtle Creek condos have doubled and even tripled in price simply because there are no new choices for buyers. High-rises in other parts of town, outside the urban core (who have lagged), report similar, though slightly less robust increases.
Downtown’s Metropolitan, Beat Lofts, and 1505 Elm were all built pre-Recession, making them over a decade old. The Knox at Travis is 17 years old. The Wyndemere and Renaissance, the newest mid-market buildings on Turtle Creek, both turned 19 this year. Perennial starter condo buildings like Preston Tower and 3883 Turtle Creek (21) are over 50 years old.
It’s a Little Like Cuba … Cuba?
In Cuba, without access to new cars, the pre-Castro American cars gained mythic status along with value. Without new cars available, those cars became more valuable (along with replacement parts and repair experience). Or to be less vivid, it’s Supply and Demand 101.
Because it’s not like there aren’t a mess of people wanting to buy mid-priced condos. Builders aren’t not building condos because there’s no demand. Apartments are more profitable, banks prefer to finance apartments due to their quicker payback, and insuring condo buildings against defect for 10 years is costly. Those are the big reasons keeping the condo building market constrained … not demand.
What if You’re a Buyer, Not an Owner?
Without new product in the pipeline, prices should continue to climb although not at the multiples of the prior few years. The main reason for this isn’t lack of interest, but lack of paychecks keeping pace with prices. It will take some time for buyers to afford more.
So if you’re a buyer today, I think there are smart buys out there. Of course, like all housing in the lower-to-mid price bands, acting quickly is the key. Also key will be the resignation that renovations will be likely. Yes, there are flips and renovated units on the market, but they cost more and (if done well) sell quicker. People are lazy or frightened of renovations.
But buyers also may not be able to finance a purchase with a good down payment AND have cash left to renovate. Speaking from experience, it’s better to get a bigger, better condo that’s a livable dump and renovate over time than to buy a smaller finished condo with no space for a toothbrush. My first home had no kitchen for 10 months, my most recent took about two years to scrape the cash together to fully renovate. In both cases, the space surpassed my need for a quicker, smaller property. In the end you live in a place you could never have afforded without the sweat equity.
Dallas Condo Market
I hear a lot of people say that Dallas isn’t a condo market by pointing to the various economic crashes that plagued the area. From the 1980s banking scandals to the recent Recession, condos suffered sometimes more than the single-family market. Some buildings and areas more than others, of course.
The Recession saw prices plummet in Victory Park more than any other condo area in Dallas. New buildings were cancelled, some became rentals temporarily (The House), some sold tons of units to investors that became rentals (W Residences), and some twisted in the wind while foreclosure took its course (Uptown’s Stoneleigh). Outside Victory Park, The Centrum and Metropolitan went to auction to shed units.
But you know what? So did single-family homes and townhouse projects. They just didn’t get the headlines these larger buildings did. How many single-family foreclosures were there? Does that mean Dallas isn’t a single-family market? Hardly.
So do condo buildings suffer more during these enormous economic events? Perhaps slightly more, but you have to understand the increased risk. A high-rise is 100 homes at once versus one-by-one of the single-family world. It’s easy to stop single-family production compared to a half-built skyscraper.
But at any rate, that level of economic event is fairly rare. The Dallas economic boom of today is based on jobs coupled with organic and inflow population growth. It would take a major national or global financial event to stop us these days. The local fundamentals remain strong.
One thing is certain, other cities of similar size have a lot more high-rise condos than Dallas. As populations shift and people move to the area, many will be condo owners from elsewhere looking for that product here. Couple that with the increased clamor to live inside LBJ and the only way to service that need is up, and that means condos. I foresee Dallas’ appetite for condos and high-rises increasing, not slacking. If only someone would build some!
Remember: High-rises, HOAs and renovation are my beat. But I also appreciate modern and historical architecture balanced against the YIMBY movement. If you’re interested in hosting a Candysdirt.com Staff Meeting event, I’m your guy. In 2016 and 2017, the National Association of Real Estate Editors has recognized my writing with two Bronze (2016, 2017) and two Silver (2016, 2017) awards. Have a story to tell or a marriage proposal to make? Shoot me an email firstname.lastname@example.org.