Property Management Blog

Dallas/Fort Worth Real estate market

System - Monday, July 30, 2018

Located in Northern Texas, the Dallas/Ft. Worth Metroplex (“DFW”) is the fourth most populous metropolitan area in the nation. In the past, this Metroplex was one of the most important centers for the oil, cattle and cotton industries due to its strategic position along numerous railroad lines. 

In the last five years, many companies from cities around the country have started exploring the nation to find the most business-friendly cities, and many of them have targeted DFW as their preferred headquarters or regional center of business. In terms of raw numbers, Texas blows away the competition, adding more than 352,000 jobs in the past year.  Like much of the nation, Texas saw solid job growth in construction and health care. The biggest growth came in the mining sector

However, there are many reasons for Texas being the number one preferred state to locate a business, including Texas’ business-friendly environment (ie: lower cost of doing business, lower taxes, and fewer business regulations) and also the lower cost of living for employees. In fact, the unemployment rate is a low 4.1 percent. which includes oil drilling — posting a 13 percent increase in employment over the year.

The DFW unemployment rate is a low 4.1 percent. In terms of raw numbers, Texas is ranked number one in many survey and statistics in 2018.

Home values are rising more quickly than the most other cities across the nation, even as housing costs were already among the lowest in the nation. As long as job growth and the affordable cost of living continue to attract people to move here, this trend will likely continue.  

Over the last five years (Jan. 2012 to Jan. 2017), three bedroom homes in Dallas have appreciated by more than 50%. During the same period, three bedroom home values appreciated by only 29% nationwide.

D-FW home prices are now at record levels — up more than 40 percent in the last four years. And yet, they are still well below the national average home pricing.  

So far in 2018, North Texas median home sale prices are about 5 percent higher than in the first five months of 2017. That's half the year-over-year price increase a year ago.

"Housing affordability concerns have been building within the housing market for several years," said Nationwide in its latest housing review and forecast. "For the first time since the recovery started, our affordability measures deteriorated enough to drop the national market outlook out of 'positive' and into 'neutral' territory."

The most recent reports assigns “neutral” rating to the DFW Metroplex as it overall reports that the US housing market is slowing down.  The primary concern again being affordability.

And yet, among those who purchased a home within the past few years, a recent study was released showing 68%, between the ages of 21 and 34, are feeling buyer's remorse with their home purchase. According to a survey of 600 millennials, 42% are homeowners, with majority regretting their decision to buy. Here are the reasons they give:

  1. Overspending on the down payment. One in three millennials admitted to dipping into their retirement to pay for their homes. A sure sign the home is out of their price range. 

  2. Underestimating ongoing costs. Owners should be aware of the potential maintenance costs associated with purchasing the home. There's no more calling the landlord for repairs and fixes. 

  3. Settling for something that's not what they want. Finding a home in the right budget is just as important as finding one that is the right fit. Make a list of must-haves to ensure the home layout and features meet your family needs.

Single family homes and condos make up over 35% of the rental market, with more and more people choosing to rent rather than buy.  In addition to recent employee relocations, recent college graduates are coming into the job market with more student debt than ever before.  They are more mobile and less inclined to think they will stay in one job for very long and many have pets that they would prefer to have a yard to run around in, rather than stay cooped up in an apartment all day. Lastly, they are unwilling to drop all their savings on a down payment, and risk another housing downturn that would wipe out those savings.  The result is more and more renters.

In January 2017, the median monthly rent for three bedroom homes in DFW was just under $1,500, which is 0.85% of the purchase price of $176,000. This is higher than the national average of 0.74%. In the past five years, the median rent for three bedroom homes in the DFW metro area increased by 23%. Nationally, rents only increased by 14% during this period.

As a result of all of these factors, the DFW metro area has become a popular place to invest in (buy and hold) real estate. This is especially true for investors looking to purchase cash flowing property in a rapidly growing market; housing costs per square foot are materially lower than many other states and cities with similar populations. In the past five years, the median rent for three bedroom homes in the Dallas metro area increased by 23%. Nationally, rents only increased by 14% during this period. So, rents are rising more quickly in DFW than most other U.S. cities today. This trend is likely to continue as long as people and corporations continue moving to the DFW metroplex.

Although many people would like to own real estate, most are deterred by the thought of dealing with screening tenants, marketing, late night phone calls and the intrusion they perceive (and fear) into their day to day lives.  In short, how are they going to manage it? From an investor’s perspective, there is a need for someone to properly screen tenants, maintain the properties, enforce rules and regulations to protect the investment, and reliably and consistently collect rent payment on time from residents. 

As more properties come on the market to meet rental demand, tenants are beginning to expect more from their landlords. In order to stay competitive and keep properties leased, property owners need to understand the market, have experience with all sorts of tenants and situations and reply promptly and appropriately to tenant requests, making sure the properties are in working order at all times, and stay on top of repairs and maintenance.  There are few owners with the requisite experience to handle all of these issues efficiently, professionally and effectively.  

Reedy Creek Realty offers an investor oriented, professional management solution to those challenges. Let us be your property manager.  Call us for more information on how you can take advantage of this growing trend to rent instead of buying – without the hassle of self management!