"I'll just wait until lease prices drop in 2021!" Er, maybe not the best strategy.

August 10, 2020 by Ted Bauer

One thing that's been confusing about the pandemic economically is that, on face, you might assume if 340,000 people are laid off or furloughed (rough DFW number), the housing market would not be hot, because people would be stalling bigger buy decisions. Instead, the housing market is hot. What gives? It's mostly a supply and demand issue, with a few other factors tossed in. Supply/demand comes down to sellers pulling their homes off the market in March and April because they didn't want physical visitors in the home. That was less supply. If you remember from Economics back in HS, less supply can spike demand, which can in turn drive up price. Then, simultaneously, you had issues of people wanting more space, rural/suburban areas becoming more attractive, an inequality gap in who can easily buy houses or uproot, and much more. The housing market, paradoxically perhaps, got hot. 

Now, at the same time, you might be thinking "Well, apartment rents have to be coming down, because who wants to live in tighter environments with an airborne pandemic situation in the world?" Good question. The problem is, broadly, that apartment rents are not coming down.

On March 31, an average DFW rent was about $1,176. It's gone down somewhat -- $1,161 -- but it's now starting to creep back up. Even when rents did fall in bigger areas (Dallas and Plano), they fell by about 0.2 to 0.5%. On a $1,200/month lease, that's about $6. And in eight of the 10 biggest markets in DFW in terms of individual cities, rents are back to rising

It is true that we don't know what's going to happen, how long we're going to be with COVID, impacts of a vaccine (or multiple), and whether white-collar employees will need to return to an office model. All those things are going to impact housing prices, both rent/buy. We don't have all the answers. But should we expect rents to drop? Should that be our strategy to wait out where we live currently? Not necessarily. 

An important note on suburbs vs. urban in the coming 12-18 months

This has been covered a lot. We've talked about people maybe moving to the 'burbs at an earlier age, as well as a potential density shift (urban moving to rural).

But you also need to remember some of these stats:

  • Over the past 10 years, DFW had 32.3 million square feet of suburban office development, which is the most in America.
  • {About 33% of all of that is between Frisco/Colony, Quorum/Bent Tree, and Upper Tollway/West Plano.}
  • A lot of companies have been active in discussing a "hub and spoke model," with a small downtown office core, maybe for external client visits, and then the bulk of an in-person workforce being in the suburban area. That model would probably also include an "A/B" schedule for visiting the office. 
  • Well, right now, Uptown Dallas office rents are over $40 per square foot. Richardson? It has mixed-use and corporate office for $24.76 per square foot. 
  • Where do you think CEOs and CFOs will want to put the "spoke" in that model? Probably not in Uptown Dallas.

All those economic factors might change where people flock to in terms of proximity to an office they attend 2-4 days/week. But will they necessarily drop rents? No, not necessarily. And remember, many of these complexes are owned or work closely with big banks, whereby they (the complex) is a part of a portfolio and needs to perform accordingly. Dropping rents drastically usually is not the play, as much as we sometimes may want it to be. 

If you're hesitating on a move to see the bottom fall out of lease prices, you may be waiting a while. Take action now.

 

About the Author

Ted Bauer

Ted Bauer is a writer/editor for White Rock Locators focused on as much cool content about the DFW Metroplex rental scene as he can possibly find week-to-week.