The condo slump hasn't taken hold in Texas, where Dallas and Houston have emerged as markets that are bucking the national trend with accelerating sales volume for upper-end residences.

“Two of the strongest markets right now in the entire country for housing are Houston and Dallas/Fort Worth,” says Robert Edelman, president of Dallas-based Drexel Development. The company has completed several Dallas condo projects, including the 48-unit Drexel Highlander, which offers units between $600,000 and $1.2 million.

Through June 2007, Dallas-area sales of homes and condos valued at $600,000 or more increased 21% over the same period in 2006. Meanwhile, sales in the $300,000 to $599,000 range slowed but remained positive with 5% growth, says Edelman. The local trend contrasts with national home sales that dipped more than 19% in September from year-ago totals, reports the National Association of Realtors. Condo sales nationwide dropped 14.7% over the same period.

One reason Dallas sales remain healthy is that luxury homes and condos locally haven't suffered from stagnating pricing, a stark contrast to many other markets saddled with a glut of condos. For the most part, Texas cities missed out on investor-fueled price escalation that swept both coasts and many inland markets from about 2003 through 2006.

“Some investors came to Texas, but our economy was still in a recession in 2003 and only the higher-capitalized developers could build a condominium,” says Michael Puls, a principal at Dallas consulting firm Foley & Puls Inc. “Dallas and Houston didn't have the price appreciation in homes over the last five years that California, Florida and some of the better coastal markets experienced.”

In the Dallas/Fort Worth metro area, single-family home and condo prices have only increased 18.77% in the past five years, compared with a national average of 50.8% for the same period, according to the Office of Federal Housing Enterprise Oversight. By contrast, Miami and Bakersfield, Calif., each saw 125% appreciation since 2002. In recent months, appreciation has slowed or even reversed in the major coastal markets.

That's not the case in Dallas. Over the 12 months ending June 30, the average home appreciated 5% to maintain the market's historical average of 4% to 7% annual price growth, says Cassie Gibson, managing director for market research at Residential Strategies Inc. in Dallas.

On average, Dallas condo projects sell fewer than five units per month, but have maintained that pace consistently in recent years, Gibson says. What's more, many of the area's condo projects are marketed to affluent buyers seeking a place to live, rather than middle-income buyers and investors.

“The bulk of the product is priced about $400,000 and above, with a couple of projects that have targeted the million-dollar-plus market,” Gibson says. “Drexel in particular is going for an extremely high-end buyer. There are only three or four projects trying to capture buyers at that level.”

The tendency in Texas to build for wealthy buyers is another reason condo sales are still healthy. That's because rising mortgage rates aren't a serious consideration for homebuyers in that bracket, says Edelman of Drexel Development.

The typical monthly payment on a $650,000 mortgage has only increased from about $3,980 a year ago to $4,300 today, Edelman says. “That's not going to keep anybody in that price range from making a decision on whether or not to buy.”