Everything’s Bigger in Texas, Including the Real Estate Investment Profits
The Dallas metroplex – comprised of Dallas, Fort Worth, and Arlington, Texas – ranks at the top among U.S. metros with incredible real estate investment opportunities this year, and the housing market is reflecting that.
Dallas, like many of its neighboring suburbs, has witnessed its real estate market catch fire. Housing demand has surged over the past year, with pending sales up 61% from 1,075 in May 2020 to 1,726 in May 2021. As a result, Dallas’ housing inventory has been reduced by more than half. Active listings in Dallas were down almost 30% in July 2021 compared to last year.
With the market so tight, Dallas home prices have risen sharply since last year. The North Texas and Dallas metroplex median home prices have increased nearly 17% YOY, while inventory supply has declined from 2.7 months to 1.6 months.
Key Market Stats for Dallas Real Estate Investors
- Dallas-Fort Worth-Arlington metro home values have gone up 16% YOY, and the current forecast is that they will rise 16% over the next 12 months.
- The average value of SFR homes in Fort Worth is $255,030, up 18% YOY.
- The average value of SFR homes in Arlington is $264,027, up 18% YOY.
Dallas, Texas has plenty of readily available land ready to develop for new construction development, and real estate investors are taking advantage.
New construction in Dallas has been in demand recently. Overall new construction permits have increased 41% YOY. Single-family permits have increased 39%, and multifamily construction has been even more impressive – up 45% after a year of uncommon movement due to the pandemic, and preference for single-family and suburban areas.
The Dallas area has been a magnet for new construction and real estate investors because the area needs more housing to support its growth, which has affected home sale prices to increase substantially. These factors have also impacted rent prices, with the average rent for single-family rentals and multifamily housing rising over the past year as well.
The State of Dallas’ Rental Market
Known to most locals as “DFW,” Dallas is a sprawling, 8,600-square-mile stretch of culture, industry, and education. It’s home to some of the world’s biggest defense manufacturers, big-name players in oil and gas, and several top-notch universities and colleges, including Texas Christian University, Southern Methodist University, and the University of North Texas.
Dallas is a great city for investors who are looking for new markets to add to their real estate investment portfolios. The job market is robust, the cost of living is low, the unemployment rate is lower than the national average, and there’s an amazing cultural scene.
Dallas, TX Rental Market Stats
- Median monthly rent for a 3-bedroom home in Dallas is $2,360
- Dallas rents have increased 17% over the past three years
- Average monthly rents for multifamily housing have increased 11% YOY
- Renter-occupied households in Dallas account for 59% of all households
Rising Home Prices and Rents
The rising home prices in Dallas neighborhoods are creating one of the hottest home markets in north Texas. Low mortgage rates and feverish demand from both in-state buyers and remote real estate investors have pushed home prices up significantly in some of the most popular neighborhoods in Dallas.
Steep price growth in the single-family rental market – which increased sharply across the country in June – may continue to hinder renters from being able to purchase a home because of being unable to save for a down payment.
In June, single-family rents were rising at their fastest pace nationally since 2005, according to analysis from technology and data provider CoreLogic. June 2021 data shows a national rent increase of 8% YOY. According to data released by MetroTex REALTORS, the median list price of homes in Dallas in July was $449,200 – a 9% increase YOY.
The MetroTex REALTORS report indicates other significant changes in the Dallas market:
- The median sales price for homes in Dallas increased by 22% YOY to $330,000.
- The number of closed sales increased by 7% YOY.
- Total active listings declined by 45% YOY.
- Sales volume for single-family homes decreased 4% YOY, from 10,552 to 10,109 transactions.
As home values in Dallas continue to climb, monthly rents are as well. The average rent for Dallas apartments has increased across the board. Currently, the average rent for a 3-bedroom apartment in Dallas is $2,360. This is an 18% increase compared to the previous year.
Home values and monthly rents in Dallas fall under the national trendline for now, but compared to other Texas markets – Austin, for example – Dallas home values and monthly rents are among the most expensive.
Growth in Dallas, Texas Attracts Investors
Dallas-Fort Worth ranked No. 1 in the nation in raw population growth as of July 1, 2020 – adding almost 120,000 residents – according to U.S. Census data released in May. Over the past five years, DFW’s population has grown by more than 650,000. The flood of people moving to the Dallas area is putting a strain on apartment occupancy and housing supply. In 2020, Dallas-area builders added about 30,000 apartments and 45,000 single-family homes. Between now and 2030, the Dallas metro area is projected to add 700,000 residents – taking the current population from 6.4 million residents to 7.1 million in 2030.
Recent data from CoreLogic ranks the DFW metroplex at No. 10 among the 15 hottest markets for homebuyers based on the number of people who relocated to the area between April and December 2021. CoreLogic’s report indicates that many homebuyers traded in states with high taxes and expensive housing for states like Texas, Florida, Georgia, North Carolina, South Carolina, and Tennessee that are generally more affordable in those markets.
The survey echoes recent reports about the strong DFW market:
- Dallas has ranked at the top for housing growth over the last decade.
- Housing demand has caused home prices to skyrocket.
- DFW has been a hot destination for California transplants.
Dallas’ growth has been spurred largely because of job opportunities in the areas. The top industries in Dallas are technology, financial services, and defense. The city is a who’s who of Fortune 500 companies – AT&T, Exxon Mobil, Southwest Airlines, and American Airlines just to name a few.
Not only does Dallas play host to some of the country’s most popular companies, but it also boasts an average annual salary higher than the national average; The average annual salary in Dallas-Fort Worth is $56,181 a year while the national average is $51,480
The unemployment rate in Dallas is also an attractive selling point. In June, the Dallas metro area’s unemployment rate had fallen to 5.8% – a significant decrease from June 2020 when the city’s rate topped 9.8%. Dallas’ unemployment rate came in under the national average of 5.9%.
Investing in Dallas’s Booming New Construction Market
For investors looking to expand or break into the Dallas rental market, new construction is the way to do it. Construction permits overall have increased 41%, with nearly 5% of the new home construction in Dallas being built for SFR and multifamily rentals.
Single-family home construction permits have increased, but new construction in the multifamily housing market has shown tremendous growth – especially considering the number of people who traded in the apartment life for suburban living amid the pandemic.
Investments in the multifamily market shot up to $3.2 billion from January to May of 2021– far beyond the $1.8 billion invested during the same period in 2020. Currently, Dallas ranks 1st out of 98 markets nationwide in multifamily development activity. Nearly 49,000 multifamily units were under construction as of May, the largest pipeline in the U.S.
A study by Yardi Matrix ranks Dallas-Fort Worth fifth in the U.S. for rental home construction. The Dallas area has more than 550 build-to-rent homes under construction, according to the study. With demand for rental homes rising, the costs of single-family rentals are also up. Yardi Systems estimates that average single-family rental prices around the U.S. have grown by more than 24% in the last five years to $1,691.
To capitalize on rising rents and home prices, real estate investors have been pouring f investment dollars into the build to rent industry. Nationally, build to rent single-family property development has increased 27%. Build to rent is currently the most popular national real estate housing investment recommendation for 2021. An increasing number of build to rent housing developers are establishing neighborhoods of single-family homes in Dallas to rent rather than sell to homebuyers.
Dallas Construction Loans for Real Estate Investors
There’s never been a better time for real estate investing in Dallas. The city’s housing inventory is tight, but there are still plenty of investment opportunities for investors interested in the city.
Dallas’ potential for growth has attracted major institutional players in the single-family, multifamily, and new construction markets. Because there are so many investors looking to invest capital in those markets and secure Texas investment properties, the demand for rentals is rising – a great sign for investors who own rental property.
While inventory might be harder to find, investors with strong real estate investment strategies can still profit. It’s now more important than ever to have a lender capable of helping you:
- Secure a loan with the best price and maximum leverage for your next new construction project or rental investment
- Close properties quickly and certainly
- Run your construction and rehab projects smoothly
If you’re interested in obtaining new construction loans for investment properties in Dallas, Texas, contact us to learn more. Lima One Capital is the premier lender for real estate investors, and our robust product suite allows us to help investors who are looking for fix and flip funding, new construction financing, multifamily bridge financing, rental portfolio loans, and hard money lenders in Texas.
Get started today and scale your investment portfolio with Lima One, the nation’s premier lender for real estate investors.