The Good, The Bad, The Predictions

Jay Redford and Keri Redford presented this report at the Real Estate Forecast on Jan. 21 at the Fort Worth Convention Center sponsored by the Real Estate Council of Greater Fort Worth.

Last year continued to be a great year to live in Texas and more particularly in North Texas. The Texas Department of Health Services reported that Tarrant County alone added 31,393 people, a 1.63 percent increase in 2015. Job growth statistics were also positive, with current employment figures improving 2.2 percent from year end 2014 to October 2015.

The Dallas-Fort Worth Metroplex continues to outperform the nation due to its central location, tax climate and diversified employment base. Locally, long-term projects continue to proceed such as the Trinity River Vision, development along Chisolm Trail Parkway, TexRail, and the development of Edwards and Walsh ranches. Southlake continues to grow its retail base with several new projects added in the last year. In addition, major deals such as Facebook, Jetta Tower, the Neiman Marcus-anchored Shops at Clear Fork, the Texas Rangers mixed use development, and the new American Airlines headquarters are all examples of the strength of the Tarrant County market.

The Federal Reserve finally raised the federal funds rate 25 basis points in December after several warnings. Some economists are projecting an increase of 100 to 150 basis points per year through 2017. Currently, the increase in the federal funds rate has had little to no impact on mortgage rates. Integra Realty Resources LLC has seen a continuation of high transaction activity into 2016 as well as activity to secure low fixed rates offered by Fannie and Freddie.

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In terms of market cycles, the office, retail and industrial markets continue to be in the expansion phase. The multifamily sector continues to benefit from population growth but is at or near its peak, with indications of the market in a hypersupply phase. The average price of homes as of November 2015 increased 8.6 percent over 2014 figures with a 2.2-month inventory, about half of the 2012 inventory.

A shadow on these glowing numbers continues to be oil prices. We expect more job losses in this industry over the next year with continued depressed prices. While consumers benefit every time they fill up their car, the low prices have affected the state’s budget with the funding gap widening for long-term transportation needs. Oil and natural gas production tax collections for the last four months were reported 49 percent lower than the same period the prior year.

Although the Fort Worth office market has a lot of oil and gas tenants, the office brokers that we spoke to generally reported no significant changes in the office market due to the strong demand from other business segments. Look for some sublease opportunities to open up for spaces specifically related to production and services. Notably, some of the contraction in this industry already occurred several years ago due to the Barnett Shale slowdown.

Overall, we expect North Texas to continue to outperform the national economy. The federal funds rate increase has not affected mortgage rates and while oil price depression continues to loom, it has not yet had a significant impact on the local real estate market. While a slowdown is inevitable, many market participants we interviewed are carefully watching for changes. However, the volatility of other investments, particularly the international markets, makes real estate opportunities in Texas very appealing to global investors.

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Jay and Keri Redford are managing directors for Integra Realty Resources DFW LLC.