Our game right now is rentals, but …
We have helped with the purchase of over 1,000 homes going back to the mid-2000s for homebuyers and investors of all kinds. We’re not saying we have a crystal ball, but we think the DFW market is about to be more friendly for buyers than it has been in close to a decade. So while most of our focus today is about renting apartments, that’s going to evolve a bit in the next year and beyond. Think of this as maybe a first small step.
We’re going to use some Zillow research and an interview with a Zillow economist about the state of the DFW buyers’ market from 2010 to 2019, which you can find here. We don’t 100% love Zillow as a tool, but it has a lot of good data.
The main takeaway
In the 2010-19 period, the DFW housing market doubled in value, reaching about $589 billion. That’s the 10th-highest aggregate value in the country, and the largest single market in Texas. In that period, an average (remember: average) house in DFW increased in value by $100,000, or 78%. Good time to be an owner, right?
The bottom of the market on a “typical” house in 2010 was $141,000. Now it’s $251,000. That’s part of the rental vs. buying dance, but more on that in a second.
Here’s what Zillow’s economist is saying about individual DFW markets:
Looking at year-over-year price changes, Dallas itself is seeing about 3 percent price growth over the past year. It’s higher than that in Fort Worth at 4.4 percent. Arlington is 5 percent in price appreciation over the year. Grand Prairie is showing up as 5.2 percent year-over-year growth. Those are some of the hottest.
This is the other big takeaway to consider:
It’s not just more and more people competing for a fairly fixed number of homes, but actually we know the population in Dallas at least through 2018 grew 17 percent in the decade (final decade population numbers are not yet available). That’s a lot for such a big metropolitan area.
In terms of welcoming new people to the metropolitan area, it grew much faster than some of these bigger areas like New York, L.A. and Chicago, which, by comparison, barely grew at all. Dallas was able to welcome a lot more people living there as well as provide a lot more homes for arriving people.
OK, so how are renting and buying intersecting right now?
Go back to what Zillow said about a “typical home.” They have different definitions for different things, but essentially that’s the value of a home in the 65th to 95th percentile for a region -- a single-family dwelling.
Above, you see the value is about $251,000 DFW-wide. In many places, it will be way higher than that; most people you’d casually talk with about buying a home will say it’s hard to find something under $300,000 in areas you’re targeting.
Alright, let’s use the $251,000 number though. If that was the exact price of a home you wanted to buy, and you were going to put 20% down, you’d need to find $50,200 for the down payment. Look up some median savings by age statistics, and most will show you that people in the “traditional” homebuyer bucket have about $45,000 in savings, give or take. In early 2015, the average savings rate for Americans was (sadly) negative 1.8%.
Now factor in student loan debt, which is delaying a lot of what we used to call “adult decision-making” until later ages. We cannot give you a macro look at what age ranges have access to $50,200 for a down payment -- plus we ain’t trying to be ageist! -- but the percentage is not high, in all likelihood.
That’s why you are seeing more renters, and more apartments being built. The other interesting development you’re seeing is that renters are now older and richer. Why is that? Because if they sell in X-neighborhood for Y-price, they might not be able to immediately get back into that neighborhood with the gains off that sale. Instead, if they want to stay in a certain area, renting makes a lot of sense for them.
Marketwatch had a good article on some of these trends recently, and this part stood out:
“Households with incomes of at least $75,000 accounted for more than three-quarters of the growth in renters (3.2 million) from 2010 to 2018, the study found.
As a result, construction activity has concentrated on the upper end of the market, with builders focusing on building amenity-rich apartment buildings in popular neighborhoods designed to appeal to this higher-income renter — and fetch a higher rent. Institutional investors have also bought up a larger share of the country’s rental housing stock, renovating many of these units in order to convert them into properties that can charge a higher rent.”
Call this downsizing or familiarity with an area or whatever you want. But if you sell a home in, say, a particular section of Arlington … and you grew to like that section and want to stay in it (and around a familiar supermarket, etc.), why wouldn’t you just go grab a luxury rental as opposed to immediately entering another home purchase logistical cycle?
We covered some of these themes when we looked at affordable housing, too.
What’s next in the buyer’s market in DFW, then?
Population is expected to increase between now and 2030, probably moving the DFW area to No. 3 nationally in population, ahead of ChicagoLand. While we cannot predict every macro input of the economy, house prices will probably rise in this period. Will wages and income rise at the same levels? If the past is prologue, probably not. So who’s going to buy these houses north of $251,000 as prices rise? (“OK Boomer, who’s going to buy your 21M homes?”)
You are. With our help! And with the help of the “Great Wealth Transfer.” It’s actually going to be the biggest wealth transfer in human history, quite likely. It will shift the $33.6 trillion U.S. housing market -- and $589B DFW housing market -- into a new level. And that is starting to happen, and will only happen more and more between now and 2030.
So, if you are a renter for a few years and looking to buy, come talk to us. We’re moving there just like you are.