As the holiday season drew to a close, we embarked on a mission to gather insights from leading real estate experts. Our goal was to peer into the proverbial crystal ball and uncover what the coming year holds for the dynamic real estate market. While I harbor my own distinct perspectives, it was imperative to engage with Alex Doubet, the visionary and often provocative founder of Door. Door stands out as a pioneering, tech-enabled flat-fee real estate brokerage, consistently challenging traditional industry norms. Unsurprisingly, Doubet anticipates a period of profound transformation for the real estate sector, particularly concerning the long-standing commission structure.
Doubet’s forward-looking views are not isolated. Renowned industry pundit Brad Inman, founder of Inman News, has also vocalized bold predictions. Inman forecasts that within a year, Opendoor will ascend to become the second-largest broker in the United States, surpassed only by NRT. This projection is nothing short of monumental. Inman elaborates that based on both unit count and, crucially, revenue generation, Opendoor’s exchange platform is poised to deliver a segment of the market an unprecedented level of certainty. This certainty is often elusive for sellers navigating the traditional complexities of selling a home, offering instead the promise of immediate liquidity and streamlined transactions.
In the coming year, the focus of technologists and venture capitalists will sharpen on home sellers, eyeing the substantial $60 billion commission pie ripe for disruption. Platforms such as Opendoor and Knock, along with the burgeoning trend of transparent bidding features, exemplify this shift. Leveraging advanced technology, an increasing number of companies will innovate solutions designed to provide sellers with enhanced predictability and confidence throughout their home selling journey.
Alex Doubet highlights Dallas’s exceptional market performance, noting, “Numerous studies have consistently ranked Dallas and its surrounding areas among the most vibrant real estate markets nationwide. This remarkable growth is fueled by a robust influx of businesses relocating to the region, an attractive tax structure, and a thriving construction industry that eagerly meets the demand for new housing developments.”
With 2016 now a chapter in the past, the pertinent question arises: Will this significant momentum extend into the new year? Doubet confidently asserts that it will. He identifies several key trends that are poised to dominate the North Texas real estate landscape in the upcoming year.
Millennials Will Continue Their Dominance in Homebuying (Despite Media Narratives)
Comprising over 75 million individuals between the ages of 18 and 35, millennials represent the nation’s largest generational cohort. A pervasive, yet often misleading, narrative suggests that this demographic is either eschewing homeownership in favor of prolonged renting or, more dramatically, retreating to their childhood bedrooms. This perception, however, overlooks crucial data.
Historically, the median age for first-time home buyers in America has remained remarkably stable, hovering around 31 years old. The reality is that while many younger millennials are not yet purchasing homes, this is often due to age and life stage rather than a philosophical rejection of homeownership. They simply haven’t reached the typical age for this significant life investment. Despite this, millennials have consistently constituted the largest percentage of homebuyers for four consecutive years. This trend is not merely sustainable; it is projected to intensify in the coming year, driven by a combination of aging into prime homeownership years and a desire for stability and asset building.
Further reinforcing this perspective, Jonathan Smoke, Chief Economist for the National Association of Realtors (NAR), predicts that the 2017 U.S. real estate market will be profoundly shaped by two massive demographic waves. These waves are expected to power housing demand for at least the next decade: millennials, projected to make up an impressive 33% of buyers in 2017, and baby boomers, who are increasingly downsizing and emptying out larger family homes. These intertwined demographic shifts create a robust and enduring foundation for housing demand.
The Mythical Out-of-State Buyer Remains DFW’s Elusive Unicorn
Tales abound of a mass exodus from coastal cities, with droves of professionals relocating to Dallas-Fort Worth to work for corporate giants like Toyota, Liberty Mutual, or Ameritrade. While DFW undeniably boasts a vibrant economy, creating upwards of 100,000 new jobs annually, the anticipated flood of Los Angelenos or New Yorkers has yet to materialize in the dramatic fashion often discussed. Despite the pervasive, sometimes anxious, talk of their impending arrival threatening our local way of life, the demographic reality tells a different story.
The truth is more nuanced and locally focused. For every Californian who chose to move to Dallas County in 2016, seven other Dallas residents made the shorter move to Denton. Projections indicate that in 2017, approximately one million Texans will relocate from one county to another, yet remain within the vast confines of the state itself. This underscores a critical insight: the largest demographic group moving to new neighborhoods within Texas in the new year will overwhelmingly be fellow Texans. This internal migration, driven by job opportunities, affordability, and evolving lifestyle preferences within the state, is a far more significant factor than widespread out-of-state relocation.
Another Year of “Graywashing” and Evolving Design Aesthetics
No, your eyes are not deceiving you. The dominant, and arguably most frequently utilized, color trend of 2016 – shades of gray – is poised to extend its reign well into the new year. Expect to see persistent “gray on gray on gray” color schemes pervading interior design palettes, often paired with ubiquitous open floor plans. These design staples will likely continue to define modern home aesthetics. Alongside these trends, some enduring observations about the Dallas luxury market are worth noting: the familiar sight of exasperating red wine stains marring otherwise pristine marble countertops, and the uniquely Dallas habit of staging MLS photo shoots with a Bentley or Rolls Royce conspicuously parked in the garage.
One might even ponder, does that Bentley belong to the agent showcasing the property? Such playful observations aside, another constant amidst change is the trend in property dimensions. Lot sizes are projected to remain largely static, even as the square footage of new homes continues to expand, inevitably leading to increasingly smaller, more compact yards. In 2017, the market will be significantly driven by price per square foot metrics, a factor that will further necessitate the construction of even larger, more opulent luxury homes on these increasingly constrained and valuable parcels of land, highlighting a persistent tension between desire for space and available footprint.
Price Increases Will Downshift From Cheetah to Hare
Looking back at the trajectory of the North Texas housing market, we observe a significant upward trend in property values. At the beginning of the previous year, the average price for single-family homes, condos, and townhomes in the region stood at $242,108. By late November, this figure had climbed impressively to $281,628. This represents a robust 6.6% increase in home prices throughout 2016, building upon an already strong 7.6% surge experienced in 2015. While the market has demonstrated exceptional vitality, a subtle moderation is anticipated. In 2017, sustained growth will undoubtedly remain the dominant theme, but the pace of price appreciation is expected to temper slightly. Instead of the rapid acceleration akin to a cheetah, the market will likely move forward with the steady, consistent speed of a hare. This means buyers and sellers can still anticipate appreciation, but perhaps with less volatility than in previous years, fostering a more stable environment for investment and homeownership.
Million-Dollar Listings: Fascination Over Market Impact
The allure of seven-figure properties in Dallas-Fort Worth’s most affluent neighborhoods is undeniable, captivating audiences and dominating real estate conversations. These stunning residences, often featured prominently in media, certainly spark considerable fascination. However, for all the attention they garner, their actual impact on the broader market remains relatively contained. A persistent lack of inventory in the ultra-luxury segment means that these expansive Texas palaces do not, in fact, significantly move the needle for the industry as a whole. To put this into perspective: of the more than 100,000 homes sold across North Texas in 2016, barely more than one percent constituted million-dollar listings. This statistical reality indicates that, despite their visual appeal and perceived glamour, these high-end properties represent a very niche segment. Little change is anticipated in this regard in the coming year, meaning while they will continue to be a source of aspiration and admiration, their direct influence on overall market trends will remain limited.
Nevertheless, this statistical reality certainly doesn’t mean we need to cease our collective “oohing and ahhing” over their exquisite photographs anytime soon; their aspirational value remains high.
The 20% Down Payment Mentality Persists, But Alternatives Emerge
As 2017 unfolds, a significant portion of the population will continue to choose renting over buying, often influenced by the psychological and practical hurdle of accumulating a substantial down payment. The traditional ideal of a 20% down payment remains deeply ingrained in the public consciousness, serving as a formidable barrier for many prospective homeowners. However, for those determined to break into homeownership, a burgeoning landscape of creative financial options is becoming increasingly accessible. These innovative solutions challenge the long-held 20% rule, making homebuying a more attainable goal for a wider demographic.
For instance, there are specific areas where buyers can secure a home with only a 3% down payment and without the added burden of Private Mortgage Insurance (PMI)—remarkably, some of these opportunities exist within a mile of vibrant Uptown Dallas. The challenge, however, lies in identifying and navigating these often less-publicized pathways independently. This underscores the need for greater awareness and guidance on diverse financing models, including FHA, VA, and various conventional loan programs that offer lower down payment requirements. As the market evolves, educating consumers about these flexible financial instruments will be crucial in empowering more renters to transition into homeownership.
Consumers Are Beginning to Question Overpaying Their Real Estate Agent
The mathematical reality surrounding real estate agent commissions is steadily revealing a picture that many within the established industry may find unsettling. In 2015, the average agent commission nationwide stood at 5.3%. A mere year later, this figure had subtly, yet significantly, decreased to 5.2%. This incremental decline signals a growing awareness among consumers: the long-held belief in a non-negotiable, traditional 6% agent fee model is increasingly being challenged. Buyers and sellers are becoming more informed, recognizing that commission structures are, in fact, entirely negotiable and subject to market dynamics.
By now, a significant portion of the North Texas real estate community is well-acquainted with the innovative model employed by Door. We offer a comprehensive, full-service brokerage experience at a transparent, flat fee of just $5,000. Our agents operate on a salaried basis, complete with benefits, ensuring they are incentivized by client satisfaction rather than commission percentages. Crucially, Door leverages cutting-edge technology that dramatically enhances efficiency, making our agents seven times (and growing!) more effective than their counterparts in traditional brokerages. Beyond these operational advantages, what many may not fully grasp, even a year into our operations, is the unprecedented growth and resounding success Door has achieved. In our inaugural year, we successfully transacted nearly 100 homes, representing an impressive volume of almost $50 Million. Door is not merely functional in Dallas; it is unequivocally thriving. As we look towards 2017, the potential for expansion and continued disruption truly feels limitless, promising a more equitable and efficient real estate experience for all.
Alex Doubet is the visionary founder and CEO of Door, a pioneering, tech-enabled real estate brokerage based in the Dallas-Fort Worth area. We eagerly welcome and invite your insightful 2017 predictions as the market continues its dynamic evolution!