THE BUBBLE BUILDERS

It is not in my nature to be critical, but I disagree with Danielle DiMartino, business columnist for the Dallas Depressing News…I mean Morning News… a bright writer and fellow Columbia grad. She wrote a column Jan. 26 titled “Builders should study data – carefully”. Her point – builders are living in la la land, ignoring the signs of a cooling housing market.

I remember the boom and bust of the 80’s. Danielle was probably in kindergarten then. I remember my husband and I trying to buy our very first home in 1980 when interest rates were 18% — we looked in an area now called Midway Hills, 2 bedroom clapboard homes. This was pre-electronics: I would have had to place Dobermans in every corner of the house for security protection. The Hunts had cornered the silver market, the two of us were earning about $35,000, yet we could not afford a $40,000 home.

Not that we should throw caution to the wind. I, too, am concerned that we will have 4000 to 6000 condo units in Dallas to fill, most of them starting at a base sales price of $700,000! I am concerned that too many working people are stretched to make house payments – “creative mortgages” that start low and bite you when the real numbers kick in. Appraisers tell me that’s where the real trouble starts, when young professionals try living in $1.5 million dollar homes when $800,000 would have been a better fit. I had lunch with a foreclosure expert last week who told me that any area with high appreciation yields foreclosures… and that foreclosures follow purchases by about 2 years. Right now, Desoto and Cedar Hill are hurting.

But… here’s my counter. Home prices in Dallas have not appreciated with the lunacy seen in Florida, California and Nevada. Santa Barbara, CA, homes are 86% over market value — 72% in Naples, Fla. where my sister now owns two condos, 41% in Atlanta according to The Market Monitor. Dallas/Fort Worth, it says, is actually 14% UNDER market value. Which correlates to what all the Realtors keep telling me: Dallas is still a wholesale Real Estate market.

And then, Danielle thinks that the baby boomers are going to get rid of their second homes or go back to renting. Honey, I don’t think so.

Second home sales have increased, up16.3 % from 2.42 million in 2003 to 2.82 million in 2004. Twenty three percent of all homes purchased in 2004 were for investment, thirteen percent for vacation homes. And boomers may be selling their homes, but they are not going back to rentals. First of all, if you sell the family home you end up with this thing called equity, a big chunk of cash that you will pay taxes on (they are called capital gains) if you do not re-invest in real estate. That money is going to go back into real estate somehow, somewhere.

And then there are the children of the boomers, like my children, who are graduating from college and professional schools and asking mom and dad to help them buy a home, their first home. Like we did back in ‘80, they want to get on the train before it leaves the station.

Finally, there are property taxes which are due Monday Jan. 31. This is the time of the year where I look for quarters in the sofa cushions to scrape together $30,000 to keep my check from bouncing. I have spoken with many Realtors who agree that one of the things that keeps a lid on our home appreciation in Texas is our ridiculously, inanely high property taxes which are among the highest in the country.

Each spring, the Dallas County Appraisal office is overflowing with people begging the appraisers to lower their home values.

I think demographics ARE on our side in Dallas, and will continue to be so. We boomers do not plan on checking out in the next five years, and we will be, I guarantee, the most active, annoying, hell-raising, property-owning group of senior citizens our civilization has ever seen. Smart builders know how to sell homes to this demographic: reduce square footage, ramp up the trimmings, add elevators or potential shafts, and make homes more pet friendly than kid. I see evidence of that everywhere.

We boomers need our space, to be in our own homes. And we will.