Residential on the rise: The current and future state of real estate in North Texas
Dallas Business Journal
June 26, 2020
Expect a wave of moves to the suburbs and continued relocations as COVID-19 redirects, rather than deters, the DFW residential real estate market.
Those were some of the key takeaways from a recent virtual panel discussion hosted by the Dallas Business Journal on the current state and the future of residential real estate in North Texas.
“History is the best predictor of the future, in my mind, and I feel like we’ve weathered some really great storms in the past 10 years since the last recession,” said Janet Allen, a senior vice president and leader of Republic Title’s team of Business Development representatives for the company’s 13 residential branches. “I honestly believe we’re going to be fine. I do believe that there’s going to be a big wave out to the suburbs. I’m seeing a little piece of that right now”
In addition to Allen, panelists included Fred Balda, president of Dallas-based residential development company Hillwood Communities; Rogers Healy, founder, owner and CEO of The Rogers Healy Cos. based in Dallas; and Brian Palmer, president of McKinney-based mortgage brokerage Pinnacle Funding Group Inc.
Below, panelists discuss the pandemic’s impact on the workforce, opportunities ahead in the residential space and more.
How has COVID-19 impacted your workforce or customers?
Fred Balda: Our two objectives were making sure the team was safe and able to work from home remotely, of course, and so I give a lot of credit to our IT group. They really got us up and running pretty quickly.
Second, the main objective was to keep the machine rolling. We needed to to continue to do business in a different manner – and I will say we fared very well. We are starting to bring our people back into the office now. I’m in the office right now and probably 20 percent of our people stayed in the office [since March]. We probably have 50 percent of our people back here working.
We are requiring testing, so before anybody comes back to the office, they must get tested. We’ve gone through two rounds of testing with our employees and it’s worked quite well. We have a pretty strict protocol. When I come to the office, I’m greeted by a nurse. I’ve got my mask on. She takes my temperature. And then she takes my oxygen level through a pulse oximeter. Only then and I able to enter the building.
I wear my mask all the way to my office. Whether I’m going to the cafeteria or to the restroom, or going to see anybody, I put the mask back on. It’s a deliberate protocol that we have instituted.
Rogers Healy: My approach is probably different than most real estate people. I’m a cautious guy and my grandma is almost 100 years old lives and in an assisted living facility and my fiancée has chronic asthma, so those two things are always going to trump bringing in revenue. I just lead with my head differently and with my heart.
We’ve adjusted well, and something that we’ve learned is in the world of real estate, especially residential, we become very routine, right?
Which means it’s hard for an older dog to learn new tricks, but we just really became attached to the word agile. And I think, being agile, you learn how to be proactive versus reactive.
The first thing I had to change was the way that I thought, because I’ve been in real estate for a long time and part of my assumption was I can’t be productive and mounted an office.
But it’s been a great surprise that our numbers have still increased year-over-year with everything going on, even with people working from home. I’m probably the most extreme business owner in terms of being cautious.
For example, our office is shut down. I can’t get into my own office. I haven’t heard of any owner locking themselves out, so it may seem extreme, but we all need to be taking precautions.
Brian Palmer: It really hasn’t been much different for me. I feel fortunate more than anything, because started to move to an electronic closing process a couple of years ago. I feel like the mortgage industry in its entirety is probably going to be forced to move into that electronic world, probably a lot faster because of the circumstances I’ve always balanced working from home, the office or wherever.
Most of our stuff is all done electronically through e-mail, phone calls and text messages until we get to the closing table, so nothing really changed for us in that regard.
Janet Allen: We have more than 400 employees spread across DFW. We did our very best to execute a plan quickly and actually had about 70 percent of our workforce working from home starting in March. Our residential people really stuck it out. They have done an incredible job and taking care of our customers, buyers, sellers, realtors, lenders and developers.
We’ve talked about the challenges of COVID-19. What are some of the opportunities it presents?
Janet Allen: Last year, we started moving more into the digital space. I am so glad we did because it allowed us to get ahead of things, rather than fall behind when we had to move to a remote work environment.
The other thing is learning that we might be able to have people work from home a lot more often than in the past. Maybe they can actually do the job better.
This could result in more of a work-from-home situation for our employees in the future.
Fred Balda: I’m in the master-planned community business, building in the suburbs, and so the demographics are playing to our favor. You have a variety of demographics that are hitting us right now. There’s a millennial that obviously is creating families right now, and has basically located in the urban sectors, and there’s a big desire right now to move out of the urban area.
I think urban will survive, of course. But we are seeing this demand coming in, the urban sectors into suburban areas, more so than we’ve seen in the past.
The relocation activity has always been good here, so we’ve always been attracted new companies. It just seems to be accelerating more now.
I think our business in the long run, even short-term, is going to take off again. We were all expecting a bit of a drop off in 2020, maybe a hiccup. Obviously due to coronavirus, it was more than that – it went pretty deep. Nobody expected this kind of hit, so the opportunities I see are in the future. At least in our master-planned communities, we about why you’re moving out and why you are reconsidering your shelter.
You may need a bigger house, you need a better designed home, you need a cleaner home, you need to a better technology package for your home. New homes are able to really address that quite well. Our master plans right now are very appealing, because of all the normal amenities that we normally do, and you’re able to do it a little bit further out. All of our parks, and trails, and playgrounds, and those sorts of things are really a premium right now for folks coming in and want to see that sort of lifestyle. I think that’s a big focus.
But the rental side is really another opportunity now, too. We build lots of multifamily ourselves. The single-family rental right now is another focus of ours that I hope we can roll out, at least a pilot program, in the next six months or so. I think will go quite well. That’s another line of business that we’ve observed that really makes sense.
I think affordability is always going to be an issue here. We’d need to really address that interest rates have healthy affordability right now, that’s going to creep back up. How do you design homes that are semi-affordable right now in these in these places that people want to be?
Brian Palmer: I feel like it’s a great opportunity, just because there are going to be people that change their direction a little bit. For us, it’s just going to be full force ahead, to continue to try to serve the clients even better than what we already did.
We’re making sure that we can get to a full digital world. There are some things that Gov. Abbott has done in the interim that make it easier, like how notaries don’t necessarily have to be in front of anybody.
There are going to be some people that are going to be cautious and don’t want to go out, whereas others will and we want to serve those people, too.
If Covid-19 becomes worse in coming months, do you think that it would it be a positive or negative impact on rental market? Do the obvious effects — prospective buyers putting purchases on hold; increase in unemployment numbers — balloon into something worse, or can North Texas weather it?
Rogers Healy: I think real estate is going to change to a hybrid of affordability and space.
We’re going to see that the days of the $30,000 millionaire are probably going to be over, because I think people would rather live somewhere in a rental home community. Which I think is going to be a trend we’re going to see in the next few years: people literally developing communities for that sole purpose, which we’ve never really seen happen.
Living on the penthouse right now is not as good as living on the first floor, for example, in a lot of these buildings, too. So we have seen a pretty big shift in trends and the amount of people that we’ve worked with on the first-time homebuyer front that normally would live within the loop or moving north … instead, they’re moving east and west, too.
We’re going to see pockets like Mansfield and Richardson get people in certain demographics who historically wouldn’t have purchased there. So, you know, it’s interesting to see what’s happening.
And DFW still has people moving here, too. You have to provide housing, but I think that it’s going to shift to where people are going to start renting and if they have to, they’re going to rent single-family detached homes, if they have the option to do so.
Fred Balda: I think we’ll be more prepared at this time. Chapter One was pre-coronavirus, which was stellar. It was just very robust, and people were moving in and it was going to be another banner year. Everything was looking really positive.
And then corona hits and we probably had about a six-week slowdown. In our business, it really probably dropped to a 50 percent level, from the prior 10 weeks or so. But there was still activity, which was interesting, to see that we still had that activity, even if it was 50 percent. And then, the last six weeks or so, we’re starting to come to work again and people are getting out. It’s been incredible.
I believe the next few weeks will be robust.
I think we are more prepared because now we can work remotely a little bit better. But let’s hope we find a solution to coronavirus right now, because it’s not fun. Let’s hope it’s not the new normal. We’ll get past this, but I appreciate being an essential business. I appreciate having the opportunity to sell homes and building new communities.
How is DFW’s inventory right now — and how do you think it will look over the next year?
Rogers Healy: Surprisingly, inventory, up until about a month ago, was awful.
The last three weeks, especially in the larger home market above $3 million, it’s been gangbusters.
And in terms of a recession, it’s important how you interpret or communicate it. My favorite class in school was recess. Got me a break from the classes that were kind of work. And so I think that we have an opportunity to lead. Our industry said, “Hey, it’s OK to take a little bit of a break, right?” Because work is not going to define you. And we all work so hard.
It’s OK to just take a step back and relax. Because you know, it’s always going to be there, right?
I don’t know anything about the stock market, but I’ve watched it the last three months and it literally makes me nauseous.
One tweet can go and change the world and then the next day, another tweet changes the world the other way. That means I have people that may have to have to sell pretty quickly, right?
And on top of that, the thing that we’ve seen that’s been crazy is secondary homes are flying off the shelves as well. Historically, you don’t see lake houses farms and ranches so in the late spring and the summer. Because people already want them.
And we’ve seen that, and also the short-term rental market has been insane as far as inventories are concerned, too, like Airbnb-type places. I’m talking like 3-to 6-month places, where you don’t have to obviously have an appraisal. You can ask for whatever you want, and we’ve seen those things go crazy as well, because people want to get the heck out of town.
So inventory is starting to get a little bit healthier. But again, North Texas is the unicorn of real estate, versus some cities like New York, where you can’t even show properties at this time. And DFW has a shortage?
I don’t think we really had a recession. I think we’re at a time out.
Who knows what, the immediate future holds, but it’s a good time still to be in real estate, you know, four months into a pandemic. And that’s absolutely crazy.