Housing market: ‘Millennials are all the ones making moves’ in Dallas, realtor says

The Rogers Healy Companies Owner and CEO Rogers Healy sits down with Yahoo Finance Live to explain the trajectory of the Dallas housing market, millennials' role in homebuying, and commercial property trends.

Video Transcript

RACHELLE AKUFFO: Welcome back, everyone. As a record, 28.8%. The Dallas Fort Worth area is seeing one of the highest year over year increases in home costs in the history of the monthly Case-Shiller Index. So let's find out what's driving everyone down there. Let's bring in our guest now, Rodgers Healy, the Rogers Healy Company's owner and CEO. Welcome to the show. So first of all, in terms of the appeal, what-- which areas are seeing the most demand there and why?

ROGERS HEALY: Yeah, I mean, short answer is, everywhere. And I think that the short answer, number two, is that it just kind of makes sense. And Dallas wasn't really on anybody's radar for a forever city until the places that they always wanted to live in, you know, maybe they got hit during the pandemic, or they just really couldn't afford it. And when you look at Dallas on a map, literally, we're centrally located.

But when you think about the logistics of Dallas and why it makes sense, it's affordable compared to cities like Chicago, LA, Atlanta, New York City, Miami, and all these cities that people tend to really want to move to, especially the millennials. And, you know, we've got the momentum on our side. And with that, too, we have companies moving to Texas, but especially Dallas in Grove. So the opportunity here to make a living and to stay here, it makes sense.

RACHELLE AKUFFO: And it's interesting. You mentioned millennials, and you said that they're actually your largest buying pool now. So how much of a change is that? And what sort of trends or sort of houses are they looking for?

ROGERS HEALY: Sure, yeah. It's a trend that we've been waiting for, you know, and I think that I'm 42 years old, and I've been in real estate half of my life. And for the first half of my real estate life, millennials were the enemy. They were the ones that were driving rent prices, and they weren't able to go and afford property. And next thing you know, you know, whether it was pandemic fueled or not, millennials are the driving force, where we have almost 50% of buyers nationwide, especially in a city like Dallas, they're the ones that are making the decisions.

And because of that, we see an influx, and we're just really dealing with a really classic case of supply and demand, with supply being the lowest it's ever been. And millennials really are the ones driving this market, on the rental market, too. But really, all across Dallas, we're growing at a rapid pace because we can literally grow all four corners. And millennials are the ones making the moves.

RACHELLE AKUFFO: Now it's interesting because you also mentioned some of these corporations and these large investors. And some of the realtors that we've spoken to are saying, look, they're coming in, they're buying up the less expensive houses. But that can also sometimes perhaps throw off the character of an area or perhaps disrupt business, and then obviously, if you're a local renter or a buyer, driving up prices for you. What are you seeing there in terms of that?

ROGERS HEALY: Yeah, this is going to sound insensitive, but just black and white, you can't stop change, and you can't stop people that are in the business of making money. And when somebody sees an opportunity, and they're going to be Pied Piper, maybe financially, that's going to lead to other opportunities. And because of that, you're going to see these shifts in neighborhoods, not just in places like Dallas. We saw this in Austin 20 years ago. We've seen it in Nashville the last 15 years. We've seen it in Atlanta the last 10 years as well.

But it's going to keep pushing people out from the, quote unquote, "affordable" parts of towns like Dallas. But because of that, generations are going to go and uproot and go to different neighborhoods, are going to give them more sustainability power. So, yeah, it's happened. And again, Dallas, when you put it on the index against the top real estate markets in the country, we're always in the blue collar indexes with Oklahoma City, with Pittsburgh, places like in Nebraska. And all of a sudden, you know, the little engine that could has caught up with these people. And everybody wants to be a part of it in the Dallas real estate market.

RACHELLE AKUFFO: So obviously, the pandemic fueled a lot of these shifts that we're seeing, whether it was the great resignation or people sort of taking a look at their lives and saying, look, I want to live somewhere more affordable, perhaps with better weather or better tax options. But how long do you expect the market to be this hot, given that we're seeing mortgage rates rising and, obviously, the Fed also increasing rates as well?

ROGERS HEALY: There's no end in sight. Bold statement alert, but there is no end in sight for people in Dallas, for people in Texas, and really, for people that have a city that makes sense. And the thing with Dallas, it's a hard sell if you have to be by the water, you have to be in the mountains. But once you get over that and you realize you're a two-hour flight from anywhere, it makes sense.

So, interest rates, obviously, are higher than they were a month ago, higher than they were a week ago. But we still have rising rental rates as well. So if people want to go and get in to the American dream, and they want to go own real estate, they're going to have shift their mindset and realize that you might not live there for 10 years. You might be there for two years. And that makes the life of a realtor that much more sustainable as far as success is concerned. So I think that we have a long road ahead of us at being substantially busy at least 10 years.

RACHELLE AKUFFO: So then when you look at what's happening with commercial real estate there versus residential real estate, what are some of the highlights that you're noticing?

ROGERS HEALY: It's the same difference. You know, I think commercial usually is two to three years behind the trends of residential, and we do a lot of commercial deals here in DFW. But there are no deals to be had. And I think, again, whether it's expanding our office space here, where 2 and 1/2 years ago, you would have thought, if someone would have told me we were going to 5x our space in two years, I would have said, you're crazy, but now we're literally busting at the seams because people want to come back to the office.

But on top of that as well, the experience we missed out on with retail, with going to dinner, going to get frozen yogurt, to a coffee, whatever, those things are starting to catch up as well. So we see a significant shortage of office space, retail, but especially industrial. The warehouse market in Texas, especially in North Texas, has gone insane. And there's a shortage unlike any other. And people are buying at cap rates at historically they wouldn't be purchased for. We're talking, like, 2% to 4% cap rate versus 8%, 9%, or 10%. So I think that, you know, we don't see a slowdown on the commercial side as well, especially on the investment front.

RACHELLE AKUFFO: And I understand that you initially got into real estate because you were trying to help your fellow students at SMU find housing, and they were struggling with that. In terms of where you've gone from there to now, and even what you're seeing with the student housing market, what are some of the trends you're looking at there?

ROGERS HEALY: I think that's the safest bet in real estate. I think that student housing, if I could go do it all over again, I would have taken what I learned pretty early on as a college student about helping find my friends an apartment. And I would have parlayed that into doing some development deals. But I think it's as guaranteed as-- guaranteed money as you can get, whether the school is paying for it, the parents are paying for it, or they have some kind of scholarship or stipend.

You know, it's easy money. I know that right now, college applications are at an all-time low. But I think those trends are going to shift here in the next few years as well, because people my age who went to college want their kids to go to college because we're getting older. So, yeah, student housing is what got me where I'm at. I wish I would have stayed with it a little bit more. But I do think that's the safest investment in real estate, is finding properties you can rent out to undergraduate college students.

RACHELLE AKUFFO: Certainly one we don't hear much about, so I'm glad you brought that up. Thank you so much. Rogers Healy there, the Rogers Healy Company's owner and CEO. Thank you so much.