MARKET UPDATE + Is Now a Good Time to Invest in Real Estate in Dallas Fort Worth?
I’m encountering quite a few clients (new and existing) that are interested in investing in real estate in Dallas Fort Worth right now. Many are wondering whether now is the time to jump in to invest in single family residential (SFR) or small unit multifamily products considering the low inventory levels, prices, rents, etc. So let’s unpack what we’re seeing in the market right now based on the latest data.
INVENTORY
SFR inventory levels continue to remain historically low as follows: Collin County is down 67.7%, Dallas County is down 46.5%, and Tarrant County is down 56.3% year-over-year as of the end of March 2021. If you can believe it, we’ve actually seen same good gains in SFR inventory as compared to February which is a promising sign. In the overall multifamily market, the number of active listings or available inventory as of March has declined 22.2% YoY. In the residential lease market, we are seeing the number of closed leases staying mostly flat YoY despite a decline in the number of new listings of 13.6% from a total MLS view.
PRICES
Regarding selling prices for SFR, we’re seeing double digit gains from about 14.0% to 17.0% YoY across counties, which is about on par with the 2020 yield in the S&P 500 which was 16.2% or 18.4% with dividend reinvestment. Either way, short-term investment or long-term investment in SFR real estate continues to pace with the capital markets (and/or outpace them depending on the year and cycle) and continues to show strong economic fundamentals for the savvy investor even in this market. Emphasis is placed on savvy here, because the strength of any real estate investment lies in its ability to generate positive cash flow during the hold period.
RENT
And that brings us to rent. According to RENTCafé, the average apartment rent was up 1% YoY in Dallas, 2% in Plano and up 5% YoY in Fort Worth (4% in Arlington and 6% in Grand Prairie) as of March 2021. This is a good indicator for small multifamily unit owners whose units typically compete up against both low- and high-density multifamily units. Regarding residential lease rates, we are seeing the median rent increase about ($100/mo to $1,800/mo./unit) or 5.5% from a total MLS view.
MARKET OUTLOOK
Ask any real estate economist or futurist and they’ll tell you that there is some expected reckoning on the horizon. Because there is no crystal ball on when or whether this will actually happen, the best advice we are giving clients now is to make sure they buy right. As a buyer in this market, it will require some patience due to inventory levels and market dynamics. Any purchase you make today needs to have strong fundamentals with positive cash flow, including reserves for vacancy and maintenance.
Looking to purchase your first or fifth property? Give me a call today so I can help you meet your investment goals.
