Texas taxes: No easy answersTexas taxes: No easy answersBryan PopePope
​​Few Texas property owners are fans of the property tax, but many local services, including public schools, depend on the revenue. While a number of alternatives have been suggested, they each come with challenges. Center Research Economist Dr. Charlie Gilliland talked about them on yesterday’s Real Estate Red Zone podcast. Here are some highlights from the discussion.

Business income tax
Texas is ranked 49th on business income tax, ahead of only Delaware. Statistical reports that have been generated by the Texas Taxpayers and Research Association show that the Texas tax burden on businesses is already relatively high compared with the rest of the country.

State sales tax
“We rank 37th nationally,” Gilliland said. “When you look at the Texas Taxpayers and Research Association report that came out in February 2015, businesses paid well more than half of all property taxes and somewhere around 42 percent of all sales taxes. So businesses are picking up much of the tab in both of those areas right now.”

“We’re sort of in a noncompetitive stance when it comes to our tax structure relative to business, so piling it on might have a real negative impact,” he said.

Personal income tax
Gilliland said how much a person would benefit from replacing property tax with a personal income tax depends on that person’s situation.

“In any kind of a tax tradeoff situation, there are going to be winners and losers,” he said. “If you’re not a property owner, you’re essentially avoiding paying the property tax. You probably wouldn’t avoid paying an income tax. Meanwhile, property owners who are facing high property tax burdens would see a reduction in their property taxes because an amendment to the Texas constitution requires that two-thirds of any personal income tax has to be used for property tax relief.”

For more on this, listen to this week’s Red Zone podcast. Also, read Gilliland's latest article, "Tex​as Tax Conundrum​."​
I'm dreaming of a highly regulated, HOA-approved ChristmasI'm dreaming of a highly regulated, HOA-approved ChristmasBryan PopePope
​Driving through my neighborhood the other evening, ​​​​I noticed a seven-foot inflatable Will Ferrell "Elf" ornament swaying gently in someone's front yard. A house farther up the street was illuminated by enough Christmas lights to make Clark Griswold jealous.

Ordinarily, our neighborhood, like many these days, is tightly restricted by homeowner association (HOA) rules, so I was pleasantly surprised to see some leeway where holiday decorations are concerned. Perhaps our HOA's heart isn't two sizes too small after all.

If you live in a neighborhood with strict HOA rules, here are a few tips to help you avoid receiving a curtly worded reprimand—or, worse, a fine—because of well-meaning but overly enthusiastic holiday decor.

Obviously, start by reading your neighborhood's governing documents or checking with the HOA or its management company to find out how early decorations can go up and when they must come down.

Be respectful of your neighbors by avoiding displays with loud music, sound effects, or flashing lights.

Speaking of neighbors, you might check with yours before you deck the halls to make sure your plans won't cause any problems.

Use common sense. For example, consider not arranging exterior lights in the shape of an extended middle finger, regardless of how you feel about your HOA's rules.
Texas economy getting back on solid groundTexas economy getting back on solid groundLuis TorresTorres
​Recent job​ gains in both mining and manufacturing could signal the end of the Texas economy's oil-driven slump, according to data from both the Bureau of Labor Statistics and the Texas Workforce Commission.

Employers added 13,700 jobs last month. Mining added 1,000 jobs on a seasonally adjusted monthly basis. The last positive addition was in November 2015 with a gain of a 100 jobs. Before that it was December 2014 with 200 jobs.

Manufacturing added 2,000 jobs last month thanks to an increase in the number of durable goods jobs (300). Th​is marks the second consecutive month that manufacturing jobs have registered growth. Nondurable goods have not registered ​​​job growth since last June.

The service sector continues to be the main driver of growth in the state’s economy, with trade, transportation, and utilities registering the biggest job gains with 8,200 jobs. Other services, such as health care (6,100 jobs) and financial activities (4,400 jobs) contributed to gains last month as well.

The unemployment rate decreased 0.1 percentage point to 4.7 percent.

Incorporating October's employment growth of 1.1 percent (based on the Dallas Federal ​Reserve early benchmark revisions) and the revised leading index data into the Dallas Fed’s Texas employment forecast leads to a 2016 estimate of 1.5 percent year-over-year growth for December, up from last month’s estimates of 1.2 percent. The forecast suggests that 183,800 jobs will be added in the state this year and that employment next month will reach 12.1 million.

Based on the recent momentum in jobs and the flatness in the Texas leading index, the Federal Reserve Bank of Dallas expects the state to continue growing at a pace of 1.6 percent in the fourth quarter. The general indicators of the Texas economy continue to point toward moderate growth.

​With the improvements in the energy and manufacturing sectors, the Texas economy looks to be on solid ground and will likely advance in 2017.

Under starry skies above: Texas’ largest landownersUnder starry skies above: Texas’ largest landownersDavid JonesJones, D.
In the October issue of Tierra Grande magazine, the Real Estate Center told the behind-the-scenes story of the 535,000-acre W.T. Waggoner Ranch sale. The buyer was Stan Kroenke who owns more than 800,000 acres outside Texas. In state, however, he is only the fourth largest landowner.

According to The Land Report, the Lone Star State’s largest landowner(s) are the King Ranch heirs. Their holdings total 911,215 acres.

The O’Connor Ranch heirs are second with 580,000 acres. The majority of their holdings are along the Coastal Plain in and around Aransas, Goliad, La Salle, McMullen, Refugio, and San Patricio Counties. They moved up in the top ten list with 80,000 acres bought recently in Far West Texas.

The Briscoe family owns the third most sizable chunk of Texas – 560,000 acres. Former Governor Dolph Briscoe Jr. more than doubled the 200,000 acres his dad put together between 1890 and 1954. Family holdings include ranches in South and Far West Texas.

According to The Land Report, the rest of the top ten Texas landowners in 2016 are:

5. Hughes family, 390,000 acres.

6. Malone Mitchell III, 384,000 acres.

7. Nunley Brothers, 301,500 acres.

8. Jeff Bezos, 290,000 acres.

9. Kokernot heirs, 278,000 acres.

10. Anne Marion​, 275,000 acres.

Out of thin airOut of thin airDavid S. JonesJones, D.
Infrastructure & Transportation

​​​Who says they aren't making any more real estate? Dallas did, and it's been an overwhelming success.

I first heard about plans to create a city park out of thin air while attending a National Association of Real Estate Editors meeting in Big D. The idea sounded crazy. They were discussing creating a five-acre park by covering a section of the eight-lane, below-street-level Woodall Rogers Freeway. Simple idea, complicated engineering feat. No one had ever done such a thing.

The idea of piling tons of dirt, trees, grass, restrooms, a restaurant, concert pavilion, and park infrastructure on top of an existing freeway was almost laughable. In fact, when the idea was first proposed to city staff, some did just that.

The idea for the park was "grounded" in the fact that when the freeway was built in the 1960s, it was below grade. Momentum began to build in 2004 when a $1 million grant from the Real Estate Council funded a feasibility study. This incubator stage spawned The Woodall Rodgers Park Foundation, the nonprofit organization that led the project's development and continues to operate it today under a long-term agreement with the city.

Construction on Klyde Warren Park began in 2009, and it opened in 2012.

Hurdles were numerous. Financing was one of the biggest. Public support included $20 million in bond funds from the City of Dallas, which said from the outset it could afford no more. Another $20 million came from state highway funds, and $16.7 million was stimulus funding. Remember "shovel-ready projects?" This was one of them. The balance came from private donors. An expert's initial drive-by assessment put the cost at an estimated $60 million. In fact, it cost $110 million when all the bells and whistles were included.

Engineering/design was another huge hurdle. The park had to be built at street level while preserving clearance for a freeway carrying 300,000 vehicles per day beneath it. The deck includes more than 300 concrete beams arranged in spaced groups. Concrete slabs span the spaces and form trenches, which act as planter boxes, allowing trees to grow to the desired size. A combination of Geofoam and specially designed soil keeps the deck from being too heavy.

The park is owned by the city and operated and managed by the private foundation. The park has changed the landscape of Dallas, literally and figuratively. The park attracts 1.2 million visitors annually, many of whom participate in the 1,200 free events held there each year.

Park features include an outdoor reading room, children's garden, botanical garden, five water features, bocce and badminton courts, a putting green, and a game cart with equipment. As many as nine food trucks can be found there each day.

Klyde Warren Park has had a significant impact on surrounding real estate properties. The pre-park sales price for an adjacent office tower was $220 per square foot. After the park was built, that same office building sold for $450 per square foot. That's more than a 100 percent increase in just four years. Another nearby office tower went from $300 to $508 per square foot, up nearly 70 percent. Staggering.

Rental rates in an office building adjacent to the park went from a triple-net, pre-park rate of $22 per square foot to $40. Another premiere property jumped from $25 to $40. Speakers at the recent Urban Land Institute meeting in Dallas estimated the park had a $1 billion impact on the city economy, not including a recently announced $250 million, 200,000-square-foot, twin-tower project overlooking the park. They called the influence of the park "unprecedented."

By all accounts, Klyde Warren Park has exceeded all expectations. Now, many of the park visitors are officials from other cities and countries eager to learn how they, too, can create real estate out of thin air.

The park at a glance:

  • Size: 5.2 acres.
  • Hours of operation: 6 a.m. to 11 p.m.
  • Location: 2012 Woodall Rodgers Freeway, Dallas, TX 75201, between Uptown and Downtown Dallas over Woodall Rodgers Freeway between Pearl Street and St. Paul​
Big smiles mean big deals around Big DBig smiles mean big deals around Big DDavid S. JonesJones, D.

​​Texans pride themselves on being friendly. In North Texas, that friendly attitude has paid big dividends for real estate developers. In the last two years, several major corporations decided to locate their corporate or regional headquarters in the Dallas area.

At the recent fall meeting of the Urban Land Institute, former Dallas Cowboy quarterback Roger Stauba​ch, executive chairman of JLL Americas, asked three corporate decision-makers what attributes attracted them to North Texas.

Executives for Toyota, JPMorgan Chase, and State Farm Insurance agreed that making their employees "feel welcome" played a major role in the decisions to occupy a total of five million square feet of mixed-use projects in Plano and Richardson.

Toyota and JP Morgan Chase selected sites in Plano's 250-acre, $3 billion Legacy West at the southwest corner of the Dallas North Tollway and SH 121. State Farm chose to consolidate workers in CityLine, a 186-acre, $1.5 billion, mixed-use development in Richardson at the southeast corner of North Central Expy. and President George Bush Turnpike.

Toyota's North American headquarters includes a seven-building, 2.1 million-square-foot campus. JPMorgan Chase has consolidated its North Texas operations into a 1.4-million-square-foot, six-building office complex.

When Toyota began its search for a new headquarters, they evaluated locations on ten to 12 factors. These included affordable housing, a moderate cost of living, a diverse population, and an existing educated, talented workforce.

Toyota wanted to be where a number of other companies had headquarters. With 4,000 employees (1,000 of which are new hires) moving to new digs, the company sought to help spouses and other family members find high-caliber employment opportunities.

"The welcome we received from the cities, the people, and the business leaders has been phenomenal," said Cheryl Hughes, group vice president, corporate resources, Toyota Motor Sales U.S.A.

"For Toyota, it was all about our people. How do we help them through this big move? Our team members have felt so welcomed here. As the head of HR, my biggest concern was, 'Are our team members going to do OK here? Will they get involved in the community?' It has been tremendous to see how welcoming the community and business leaders are. We wanted a place where team members can thrive professionally and personally."

David Arena, co-head of corporate real estate for JPMorgan Chase, added that workers in large metropolitan hubs, such as DFW, get the best of two worlds. "They have a modern workplace with an urban feel in a suburban context."

JPMorgan Chase will consolidate 6,000 workers into its new North Texas home.

State Farm Vice President of Operations Rod Hoff said transportation access was key to their site selection for 8,000 employees. Amenities such as a direct flight to Bloomington, Ill. (State Farm's headquarters) and Dallas Area Rapid Transit's rail station were key.

"We wanted to locate where our employees could be engaged in a community, feel comfortable, and feel welcomed," said Hoff. "It is difficult to attract talent to smaller communities," he said. "We looked for a location where we can grow, achieve scale, and leverage available local talent."​

WSJ Calls Texas 'a Drag,' but Facts Tell Different StoryWSJ Calls Texas 'a Drag,' but Facts Tell Different StoryLuis TorresTorres

​​​An Oct. 12 headline​ in The Wall Street Journal made me chuckle. For a serious newspaper, the WSJ headline was almost comical. It read: "Texas, once a star, becomes a drag on the U.S. economy."

The subhead adds, "Since the collapse in oil prices, jobs are lost and growth stagnant; leaving Houston for Atlanta."

The fall in oil-related jobs is undeniable, but the Texas economy continues to grow. If you look at the most current data for the state when this article was published, it’s obvious the writers didn’t see the same numbers I did.

The writers should have recognized the distinction between Houston and Texas, as Houston has felt the pain from the oil bust with employment growth probably being negative in 2016 or flat with zero growth.

Second-quarter Texas employment growth was higher than the U.S. ​In fact, the numbers show Texas moving on with the worst of the oil bust in its rear-view mirror.

If this is a drag, there are a lot of states that would love to be one.

When the Dallas Fed incorporated September’s employment growth of 2.1 percent with revised leading index data, they were forecasting that Texas employment will grow 1.2 percent in 2016 (December/December), unchanged from their August forecast.

The forecast suggests that 142,300 jobs will be added in the state this year and that employment in December 2016 will be 12 million.

The recent momentum in jobs and the slight gains in the Texas leading index suggest Texas will continue to grow at a pace of 2.1 percent in the fourth quarter, based on estimates from the Dallas Fed.

Overall, broad indicators of the Texas economy continue to point toward moderate growth, while Texas employment is growing faster than U.S. employment.

With the stabilization of the energy sector in the second and third quarters and continued growth in the service sectors, such as health care and leisure and hospitality, jobs in Texas are likely to continue to increase at a moderate pace in the months ahead.

Texas will continue contributing to the U.S. economy and not be an anchor dragging growth down.

Do Election Cycles Affect Home Sales and Prices?Do Election Cycles Affect Home Sales and Prices?Bryan PopePope

​​​​​With the third and final presidential debate over and done with, we can all step back for a moment and collectively take a deep breath. We survived it.

​Great. Now then, ​let's talk politics some more.

​We recently polled RECON subscribers and our Facebook, LinkedIn, and Twitter followers, asking whether they have fewer, more, or about the same number of homebuyers before a presidential election.

The response wasn't huge—only 20. But of those, exactly half said ​​​​they have few​​​​er. The remaining ten respondents were split between more and about the same.

How tight an election matters "a great deal," said Dr. Brandice Canes-Wrone​, an economist with Princeton University. Two years ago, she co-authored a paper where data from Zillow.com were used to compare home sales in 73 U.S. gubernatorial elections from 35 states from 1999 to 2006.

In races where the winner won less than 55 percent of the vote, Canes-Wrone said home sales fell between a third and a half of a percentage point.

​Meanwhile, Seattle-based economic analysis firm Greenfield Advisors published an article earlier this year discussing how and why an election year has historically affected home prices.

The author compared U.S. home price increases during presidential election years with increases during non-election years going back to 1978. The numbers show prices during off years increased an average of 0.22 percent more than prices during election years.

Why might an election season mean a slowdown in sales and home price increases? In a word: uncertainty.

"People are less likely to make large purchases, such as a house, in very uncertain times," according to the Greenfield article. "Different presidents in their respective parties may have different housing and mortgage policies that may affect buyers in various ways. These risks are concerning to potential homebuyers, and many may choose to wait and buy during a time that appears to be more politically stable."

If you listen to our Real Estate Red Zone podcast, be on the lookout in the coming weeks for an interview with Real Estate Center Chief Economist Dr. Jim Gaines. We'll ask for his perspective on how a change in administrations can affect the housing market.​


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