Trump Appointee Could Cause Next Crash? : Dallas Real Estate News #1
DOWNTOWN RENTS ARE CATCHING UP WITH UPTOWN
Klyde Warren Park is marks the boundary between Downtown and Uptown. Prior to its construction, the two neighborhoods were separated sharply by Woodall Rodgers.
In Dallas, Uptown has always been the best neighborhood in terms of livability with bars, restaurants and entertainment lining McKinney avenue. The same environment that attracts Dallas’ high income earners also draws in their employers, driving up rents to an average of $51 per square foot for office space.
In comparison, Downtown’s relative lack of of the same amenities has always depressed the rents in comparison Uptown. However, over the past decade downtown rents have slowly begun to creep up. Most experts attribute the increase in rents to the opening of Klyde Warren Park in 2012. Downtown office buildings along and near the green space are newer and are typically built for multiple tenants to reduce vacancy and increase revenue. In comparison, many of the older office buildings in Downtown are in need of renovation.
There has been a 12-month gap since the last new construction project for office and most of the newer buildings are being filled at 85% to 95% occupancy. Meaning that as uptown is being filled to capacity, newer office spaces in Klyde Warren will be next and eventually renovated spaces in spaces in Downtown as well.
This graph displays the correlation between the opening of Klyde Warren and an increase in Downtown rents.
MAJOR MORTGAGE RULE SET TO EXPIRE IN 2021
Dodd-Frank has regulated the mortgage industry for more than a decade after the subprime mortgage crisis but a rule designed to prevent predatory lending is set to expire on January 1st, 2021. The Consumer Financial Protection Bureau (CFPB) has recently indicated that they will not extend the Qualified Mortgage standard or ability to pay rule, which many analyst predict will cause an increase in predatory lending as loan issuers will no longer have to comply with guidelines.
The reason for this policy change is that the CFPB plans to phase out their Government Sponsored Enterprise Patch (GSE Patch) which backs Fannie-Mae and Freddie-Mac loans that do not meet the qualified mortgage standards. An estimated 16% of Mortgages in 2019 were backed by the GSE Patch which means that a vital program that effectively subsidizes mortgages for subprime borrowers.
The new changes will mean that unscrupulous lenders can issue more loans to riskier borrowers and those loans will not be backed by the GSE Patch. There is a legitimate concern that the CFBP under the Trump administration has shifted it focus away from consumer protection.
Kathleen Kraninger at the congressional hearing reviewing her appointment as director of the Consumer Financial Protection Bureau (CFPB).
DALLAS CONSTRUCTION SLOWS DOWN AFTER YEARS OF AGGRESSIVE GROWTH
Construction in the first half of 2019 was $10.7 billion dollars which was second only to New York City. Although, real estate development is still booming relative to the rest of the country, North Texas is actually 14% lower in comparison to a year ago. Showing a downward trend in new construction from the DFW’s 2017 high if $24.6 billion.
In terms of single family construction, the rate of new projects have fallen by 10% which is the biggest slowdown in Dallas since the housing crisis. Multi-family is fairing worse since the construction boom in the early 2010’s has saturated the market with mid rises across the DFW.
Although the trends are negative, it mirrors the pull back in real estate that we have been expecting since early 2018. The general shift towards a buyers market have decreased demand for expensive new builds and higher construction costs have decreased the margins for builders. The slowdown may concern many in the real estate industry but Dallas ranking nationally proves that the market is strong but after nearly a decade of growth, this slowdown was expected and healthy.
TRAIL EXPANSION COULD MAKE DESIGN DISTRICT MORE WALKABLE
A biking trail announced in 2016 is seeking approval for construction of a new section that intends to connect Victory Park to the Design District. Although a lot of neighborhoods in car heavy Dallas suffers from a similar issue, the Design District in particular is disconnected from the rest of the city by I-35 to its west and the trinity river to its east.
Extension would begin on the Katy Trail at the intersection of Houston street and Victory avenue. It would include updated signage, widened bike lanes and sidewalks, and extending street mediums to create a more pedestrian friendly environment. There is also a proposed elevated bridge that would provide cyclists with a dedicated path, however there are concerns over funding and the construction methods proposed for the project.
Planners are optimistic that the trail extension will be approved however the elevated bridge portion of the plan is under intense scrutiny. The benefits of a trail connection the two neighborhoods are fairly apart as the shift towards pedestrian friendly, mixed use development has been the catalyst for most urban growth. A trail that makes traversing the two neighborhoods safer and more comfortable would help to further include the design district in that trend.
The proposed site where the new trail expansion will connect to the Katy Trail.
