West Plano Home Appreciation: 2-3 years? (Dallas: houses, neighborhoods, prices)

[FirstRE]

House prices are going up in CA too, so there should still be a significant difference in two years' time. You can buy a very nice home for $350k in most DFW areas and for a lot less in others.

[serger]

Originally Posted by rikity

1. I have been following the real estate market for LA/OC and have talked to some realtor buddies of mine. The market here in LA/OC have started to show signs of leveling off. Now I have not see anything to show the market in DFW to even level off. If I'm not mistaken, the market in the DFW is at an all time high while the market in LA/OC have not and does not appear to reach the pre bubble peak yet.

2. I fully agree with this to an extent. If the job market was crappy in DFW area, I wouldn't consider moving there. But the key is that this area is not the only area where there are plenty of good jobs. People don't move to an area strictly for work unless they have no other option from where they are coming from. That's why not all of Toyota's employees in Torrance is moving. I know a few families personally that won't make this move because certain trade offs aren't worth it for them. We all have our own personal reason to want to move somewhere. One of it is cost of living and as the real estate price continues at this pace, it's going to lose the incentives for some people to make this move which can in turn slow down the market. I think we all can agree that this market increase can't keep going until the price of real estate is the same as LA/OC/NY or most major cities along the coast. There's going to be a breaking point where people would think twice about wanting to move to this area. We would all be rich if we knew what this breaking point is.

3. You're absolutely right. We pay 1.25% in property tax in CA. So I would be paying the same amount of property tax on a $600k house in CA as I would in some places in TX for a $300k house. As the price increase in the $300k house, the gap narrows even at a greater rate than the actual house value.

The other thing is that we have Prop 13 in CA which limits the tax increase per year on the property tax. So if I had bought my house while it was $300k, the chances are would be that I'll be paying way less tax than had I bought it for $600k so the actual percentage would be less than the 1.25% of the appraised value of the home. That's why in one neighborhood you can have two identical houses next door to each other and one guy will pay thousands less in property tax than the guy living next door in the same house even if both house are appraised the same amount.

1. It will start to level off. I don't know if it really was 10% per year or not in the last several years but going forward I don't see this as sustainable. For example, let's take the desirable W. Plano, and loosely define it as 75093 that feeds into Plano West. A quick search gives a total of 5 houses below 300k (cheapest 250), and about another 20 below 500k. So unless, the wages start increasing at a tremendous rate, how much higher can the entry range go, even with all the relocation hype.

And as you said, no prop 13 here, so the only limitation to the property tax bill is 10% per year

[TR95]

Originally Posted by synchronicity

It is very rare that I disagree with you on much of anything, and this is more nitpicking than anything else, but...

per the Case-Schiller Home Price Index for Dallas, we certainly are NOT experiencing 10+% annualized growth over the last 4 years, or even the last 3.
S&P/Case-Shiller Dallas Home Price Index - S&P Dow Jones Indices

The most recent nadir on the chart is January of 2012, when the index was at 112.63. The most recent reported data was December of 2014, with an index value of 142.77. That's 35 months, just under 3 years. The annualized growth rate over that period is 8.47%, which is certainly strong but is under 10% per year. So "most parts" of the metroplex can't be doing over 10% unless the few that aren't are doing much MUCH worse than that.

You can also see annualized growth rates over the last 1, 3, 5 and 10 years here: S&P Dow Jones Indices= (you may have to hit the "all" tab near the top to see results by city). Over the last 3 years, DFW home price appreciation has actually been below the median out of the 20 cities tracked. This makes some sense as home prices here are generally less volatile than in most other metros. As an aside, over the last 10 years, including both boom and bust cycles, only Portland and Seattle (great, my favorite places. Darn!) have outpaced DFW in home price appreciation (annualized growth over that period barely exceeded 2% in all 3 places).

I would also add that home price appreciation leveled off considerably in DFW during the second half of 2014, although whether that is the start of a long term trend or merely a short-term blip is another issue.

All of that said, obviously that's metro-wide, and certain areas such as West Plano may well experience better appreciation due to the tremendous development going on there. That said, I'd be loath to expect 10%+ annualized growth for the next several years going forward.

No we are not. Just sold a W Plano house that increased 20% in 3 years. Sure there were multiple offers for a great area, but many houses I have seen in this area have not gone up 10% annually. Now, Park Cities has experienced more appreciation but the hype for other areas is overblown from the turnover in houses I have seen in the last 4 years. Also, people have made improvements and performed maintenance on their homes that decreased that % increase.

[wallawallahoohoo]

Agreed, if the average home sale price is going to be around $500k (let's say W Plano), the rising property taxes can push out a lot of older residents who can't afford to live in that certain area anymore and possibly push them to downsize. Obviously this isn't the case in CA, but in Texas there has been a lot of that in Houston where places inside the loop are gentrifying. Higher home prices, if sustained, won't look very pretty for existing residents with 10% increases in property tax rates per annum.

[octo]

If you are concerned that houses in Plano come close to CA prices, there are plenty of suburbs or Dallas neighborhoods without the popularity of Plano with home prices that are WAAAAYYYYY cheaper than comparable homes in CA.
Last time I was in Cupertino, homes that looked like the tiny ranches around Jupiter and NW Hwy in Dallas cost $700k+ compared to $100k here. Sure Cupertino has Apple but Dallas has tech companies like TI that are a 7 miles drive from those $100k ranch homes.

[Transplanted99]

Originally Posted by rikity

2. I fully agree with this to an extent. If the job market was crappy in DFW area, I wouldn't consider moving there. But the key is that this area is not the only area where there are plenty of good jobs. People don't move to an area strictly for work unless they have no other option from where they are coming from. That's why not all of Toyota's employees in Torrance is moving. I know a few families personally that won't make this move because certain trade offs aren't worth it for them. We all have our own personal reason to want to move somewhere. One of it is cost of living and as the real estate price continues at this pace, it's going to lose the incentives for some people to make this move which can in turn slow down the market. I think we all can agree that this market increase can't keep going until the price of real estate is the same as LA/OC/NY or most major cities along the coast. There's going to be a breaking point where people would think twice about wanting to move to this area. We would all be rich if we knew what this breaking point is.

Yes, jobs are key.

Only quibble with the argument here is the cause and effect relationship (as highlighted).

Presumably, in the case of Toyota, people who choose not to move are replaced by new hires in DFW. The new hire took that job and gave up another, likely lower paying, job within DFW. To keep it simple, lets assume the person replacing his old job is someone moving into DFW.

Of course, we could repeat this process any number of times until we find the person who does move to DFW and takes a job, which would happen if DFW is still "growing jobs" (the happy situation we are in, for the moment).

In our simple scenario, the new hire can afford more home than before and the person who replaced his job created new demand for housing.

Among many factors, rising commercial/industrial real estate prices, and related property taxes for a company considering relocating are probably the main factor that causes a slow down. Companies will locate where there is an existing critical mass of the skills they need and can probably make a decent estimate of how many will make the relocation.

So, while housing prices are correlated to non-residential, it is not the residential rising prices themselves and their impact on the desire of employees to relocate that is a big factor in a potential slow down for a city like DFW.

[Transplanted99]

Originally Posted by synchronicity

...per the Case-Schiller Home Price Index for Dallas, we certainly are NOT experiencing 10+% annualized growth over the last 4 years, or even the last 3.
S&P/Case-Shiller Dallas Home Price Index - S&P Dow Jones Indices

Thanks for the link.

IIRC, Case Shiller has two stats/index numbers for each of the 20 cities: 1) overall average, as in this link; 2) one for "jumbo" (as in mortgages) priced homes.

The latter might be a better indication of the effect TC80 is talking about. Any link for that?

[synchronicity]

Originally Posted by Transplanted99

Thanks for the link.

IIRC, Case Shiller has two stats/index numbers for each of the 20 cities: 1) overall average, as in this link; 2) one for "jumbo" (as in mortgages) priced homes.

The latter might be a better indication of the effect TC80 is talking about. Any link for that?

I haven't seen the Case-Schiller numbers for Jumbos, and didn't even know they had them. I don't believe they have links to those on their website but they might be buried in there.

Is it possible that you're thinking of the quarterly Fannie Mae/Freddie Mac indices? I know they have various numbers, including some indices for low/middle/high priced homes for each metro (and IIRC those cutoffs varied by metro). Bear in mind that this is "off the top of my head, haven't looked at those numbers in a couple years".

It would be interesting to see, although my understanding is that in Plano/Frisco/Richardson especially, the hottest markets were in the 250K-350K ranges, rather than the 500K+ range, but the usual "I defer to those with more knowledge in this specific area" note.

[Transplanted99]

Originally Posted by synchronicity

I haven't seen the Case-Schiller numbers for Jumbos, and didn't even know they had them. I don't believe they have links to those on their website but they might be buried in there.

Is it possible that you're thinking of the quarterly Fannie Mae/Freddie Mac indices? I know they have various numbers, including some indices for low/middle/high priced homes for each metro (and IIRC those cutoffs varied by metro). Bear in mind that this is "off the top of my head, haven't looked at those numbers in a couple years".

It would be interesting to see, although my understanding is that in Plano/Frisco/Richardson especially, the hottest markets were in the 250K-350K ranges, rather than the 500K+ range, but the usual "I defer to those with more knowledge in this specific area" note.

This was a head scratcher, as I know I saw it frequently in the past.

However, checking the collection of them on the S&P site, there is no indication that they do this.

Googling around, found these that indicate that they do, indeed, track multiple tiers:
Case-Shiller Tiers: A Mostly Flat December • Seattle Bubble
Calculated Risk: Case-Shiller Tiered Price Indices

And finally found this (page 17 of their 2015 Methodology document), which says that they do not currently track tiers for Dallas (nor Charlotte, Cleveland, Detroit):
http://us.spindices.com/documents/me...ce-indices.pdf

[synchronicity]

Originally Posted by Transplanted99

This was a head scratcher, as I know I saw it frequently in the past.

However, checking the collection of them on the S&P site, there is no indication that they do this.

Googling around, found these that indicate that they do, indeed, track multiple tiers:
Case-Shiller Tiers: A Mostly Flat December • Seattle Bubble
Calculated Risk: Case-Shiller Tiered Price Indices

And finally found this (page 17 of their 2015 Methodology document), which says that they do not currently track tiers for Dallas (nor Charlotte, Cleveland, Detroit):
http://us.spindices.com/documents/me...ce-indices.pdf

Good stuff to know, even if they don't do it for DFW. Thanks for the info!