Young couple looking to buy our first home in M Streets/Lakewood or Preston Hollow (Dallas: fit in, real estate market)

[thebears1982]

My wife and I moved to Dallas from Washington, D.C. this past fall and are looking to buy our first home in the late summer or early fall. My wife is from the area and lived in Dallas for a few years before she moved to DC, but I'm completely new to Dallas. We are renting downtown right now and definitely want to be in the city.

We don't have any kids, but would like to have some in the very near future. We really like the M Streets, Lakewood, and Preston Hollow (I know this area is pretty vague, but the area between Northwest Highway, Forest, 75, and Midway is what I'm referring to). We are trying to stay under $400k and really like these neighborhoods for their proximity to downtown/Uptown/Park Cities, where there are restaurants and shopping. We enjoy going to nice restaurants, etc., are both conservative, and would like to live in the Park Cities in the next 5 or so years when we can afford to buy there.

My wife's parents used to live around Preston and Forest, so she's partial to that area and based on my research, it looks like we could get a larger home for the money there, as compared to the M Streets or Lakewood, for our price range.

I was wondering if folks on the forum could give their opinions/thoughts on these areas and how we might fit in to them. I appreciate your thoughts.

[jennifw]

if you are looking to move to the Park Cities within 5 years, I would probably keep renting and save your money. Anything in Lakewood/M streets/Preston Hollow is not likely to appreciate enough in 5 years to make money. I think I am close with the 5yr number. Maybe TC80 will chime in.

[Lakewooder]

East Dallas Area 12 has appreciated 16%, 11% and 7% in the last three quarterly reports. M-Streets and Lakewood have driven those numbers since Area 12 includes Far East Dallas and South Dallas. Those are since Woodrow was accredited as an IB World School and J.L. Long was selected as a candidate school for IB MYP. Things are really picking up steam in the school department. We are becoming well known for our schools and if that continues along the same trajectory (which I expect it will - look for an SMU announcement soon) that will really get the prices going up.

I also expect 'the other side of the lake' to start appreciating. There are already many hip establishments opening over there since it went wet.

I think if this couple gets involved with Lakewood Early Childhood PTA Home they may change their minds about wanting to move later.

[TurtleCreek80]

Originally Posted by jennifw

if you are looking to move to the Park Cities within 5 years, I would probably keep renting and save your money. Anything in Lakewood/M streets/Preston Hollow is not likely to appreciate enough in 5 years to make money. I think I am close with the 5yr number. Maybe TC80 will chime in.

I do agree with jennifw's advice. We are actually a young married couple (I grew up in the Park Cities) in the same position --> figuring out if we have time to move somewhere else (currently in husband's bachelor home in East Dallas) before we end up in the Park Cities for the first child to go to Kindergarten. Being that we want to start having kids in the next year, we have done the math and decided it is too risky to move again with a 5-6 year deadline of getting into the Park Cities.

Interest rates are so low right now and promise to be until 2014 (per Mr. Bernake & the Fed). Housing prices have definitely scraped the bottom in the Park Cities and activity (and prices) are started to head up again (per my real estate family & other trusted sources). Therefore, we are going to stay in the bachelor pad (which I H-A-T-E) for 2 years as we continue to save all our extra cash towards a Park Cities down payment. It would be ideal to buy next year in the spring 2013 market, catching prices on the way up again but still locking in a 4% range loan.

If you move somewhere else first, you risk interest rates being so sigificantly higher in 5-6 years (they WILL eventually have to go up or else we'll be seeing inflation out the wazoo) that your purchasing power in HPISD is drastically limited. Case in point--> An $800k Park Cities starter home with 20% down --> $650k mortage @ 4.5% is $3,200/mo, but @ 5.5% is $3,700 and @ 6.5% is $4,100. Or backwards, if all you can afford is $3,200/ mo for your mortage, then you can only afford a $490,000 mortgage @ 6.5% rates. $490k + your $150k down payment yields $640,000 of house in HPISD. If you've looked in the area recently, you'll know that $800k is a decent budget to work with right now and $640k is not.

Also- thinking worst case scenario, if you want HPISD quality schools for your future kiddos then if you end up in a home outside the district that you can't sell in 5-6 years (ie, another bad real estate market & not enough liquidity to cash out, etc), you start paying anywhere from $10,000-$25,000 per child per year in private school tuition.....further eating into your HPISD down payment.

The 5-year plan for LW/PH starter home & then into HPISD would have worked about 10 years ago. As a 4th generation Dallasite & Parkie, I'm not so confident the 5-year plan will work today. I think it's best to sacrifice NOW to get into HPISD as soon as you can to lock in your rate and a relatively low housing price.

[VirtualM]

$800k for a starter home? Wow, I definitely went into the wrong field lol.

[GreyDay]

Originally Posted by TurtleCreek80

Interest rates are so low right now and promise to be until 2014 (per Mr. Bernake & the Fed). Housing prices have definitely scraped the bottom in the Park Cities and activity (and prices) are started to head up again (per my real estate family & other trusted sources). Therefore, we are going to stay in the bachelor pad (which I H-A-T-E) for 2 years as we continue to save all our extra cash towards a Park Cities down payment. It would be ideal to buy next year in the spring 2013 market, catching prices on the way up again but still locking in a 4% range loan.


The 5-year plan for LW/PH starter home & then into HPISD would have worked about 10 years ago. As a 4th generation Dallasite & Parkie, I'm not so confident the 5-year plan will work today. I think it's best to sacrifice NOW to get into HPISD as soon as you can to lock in your rate and a relatively low housing price.

The prices have definitely started to creep up. My realtor is always on the lookout for a 'modern' home in HPISD for me, but there is nothing available at my former point, whereas 1 year ago the market was relatively flooded with 'entry level' homes.

On quick scan, under a million there's not much besides SFA and a few smaller, non-updated homes that'll run you 1.2-1.3 once all updates are done, whereas last year there were alot of good lower priced homes.

Also remember there are many people in Park Cities looking to do a switcheroo and move into a bigger home with equity they have from a home purchased much cheaper pre-2005-2006.

[elan]

You sound like a "between Northwest Highway, Forest, 75, and Midway" person to me. However, good luck finding a house for $400 in your wife's old stomping grounds at Preston & Forest (proper at least), those houses go for about $535 > $799. There was one house on Forest and another one right behind the shopping center that were cheaper, but they are tear downs. As you head south on Preston (my fav area) the prices rise. But, if you go east toward Midway there are some jewels close to your price range. Imho, renting for five years is throwing money down the drain. Just make sure your realtor shows you the up and coming streets and get more than one inspection.

[TurtleCreek80]

Originally Posted by elan

Imho, renting for five years is throwing money down the drain. Just make sure your realtor shows you the up and coming streets and get more than one inspection.

Renting isn't throwing money away when done correctly. A $400k home with Dallas taxes is going to run a bit shy of $3,000/mo with a 20% ($80k) down payment. That doesn't include any upgrades/ repairs/ maintenance expenses which can be between .5-1% of the home's value- broken sprinkler head here, plumbing issues there, etc.

SURELY this couple can find an adequate place to rent- a duplex, small house, etc - in M Streets/ East Dallas for $1,500 and have NO repair liabilities whatsoever. Which leaves them with their original down payment, plus approx $18-22k extra cash flow each year- basically an amount equal to a 5% increase in value on a $400k home. An amount they KNOW they can cash out when they're ready to buy in the Park Cities and not have to sink $40k or appreciation/ investment into selling said "starter home".

I'm just saying I have a lot of friends who are now unexpectedly shelling out for private schools because their Devonshire/ M Streets/ Preston Hollow into HPISD within 5 years plans didn't pan out due to sinking home values and loss of liquidity. It's just not a sure bet in the current market and if you know you wouldn't send your kids to the neighborhood elementary school, it's just too big a risk IMO for 5 years.

Save, save, save and aim for HPISD in 3 years.

[TurtleCreek80]

Originally Posted by GreyDay

The prices have definitely started to creep up. My realtor is always on the lookout for a 'modern' home in HPISD for me, but there is nothing available at my former point, whereas 1 year ago the market was relatively flooded with 'entry level' homes.

On quick scan, under a million there's not much besides SFA and a few smaller, non-updated homes that'll run you 1.2-1.3 once all updates are done, whereas last year there were alot of good lower priced homes.

Also remember there are many people in Park Cities looking to do a switcheroo and move into a bigger home with equity they have from a home purchased much cheaper pre-2005-2006.

I think the prices are definitely higher this year, but the early spring market looks much better- much better homes up this year, I think because the people selling last year were either desperate and had to or old timers with tons of equity but no upgrades/ updates.

[ru4real]

Regardless of location or how many homes one has bought or plans to buy the age and condition of any property should be considered due to rising operational costs, maintenance and repairs that will be required during ownership.
Older properties require this consideration from an energy efficiency and component replacement standpoint. Homes built within the past 10 years and older do not meet today’s requirements and older properties will have major systems such as but not limited to structural foundation, walls, roof, electrical, plumbing, HVAC, water heater(s), doors, windows and insulation that will either beak down, wear out or should be considered for upgrade due to their inefficiency.
A qualified professional property inspector can factually report on the current property conditions, associated systems and should be essential to any property purchase considerations.