The increased demand for housing in DFW has some Dallas leaders looking for ways to calm down the market and help buyers get into new homes, including potentially limiting real estate investors.
An analysis by Redfin shows April home prices were up 13.1% over last year in the region, with the average home selling for around $440,000. Houses are also spending nine fewer days on the market than last year and selling for about 4% over asking.
Dallas City Councilmember Jaynie Schultz says investment groups pricing the average homebuyer out of the market is one problem the city is facing.
“Are we working on a bigger policy regarding the scourge of investment buyers?” Schultz asked. “It is across the country, where individuals are no longer buying homes, but REITs (real estate investment trusts) are.”
Dallas Director of Housing David Noguera offered a “radical” idea he heard from other city leaders across Texas. That is, limiting the number of investors that are allowed to buy properties in an area.
“Canada restricts how many foreign investors can come into your market and buy up your real estate,” Noguera said.
According to FOX 4, Canada banned foreign investors from buying homes for two years.
Ty Lee, the founder of a local real estate investment start-up, disagrees with the proposed approach.
He says the problem is supply shortages, not investment groups.
“I can’t speak for other investors, but we can’t overpay. That’s not a profitable strategy. Consumers are driving up the housing prices because they aren’t buying based on a proforma,” Lee said. “It’s an emotional purchase, so they will overpay, and in the long run, it will still be a good investment for them. Shortage of supply is the problem, not investors.”
According to Lee, many factors affect the price of homes, including “interest rates, wage growth, population, and job growth.”
Lee does not think that restricting sales of real estate investors would positively impact the market for single-family dwellings, given that there is already a shortfall of 5 million units nationwide.
A better solution, according to Lee, would be to provide more builder permits and faster rezoning processes to build houses. Additionally, he said logistics and supply chain issues need to be prioritized and addressed to increase supply, which he thinks will normalize purchase prices.
While there is substantial building activity in the Dallas-Fort Worth metroplex, there are also challenges. The increase in the price of goods and materials and supply chain issues are affecting builders’ ability to meet demand.
Despite Noguera’s suggestion, City of Dallas Director of Communications Catherine Cuellar said Dallas has no plans to limit investor activity.