Regardless of your background and expertise, Dallas must be one of the first locations which come to mind when you think about the best places to invest in real estate in the US. Indeed, the Dallas real estate market has outperformed the national one in recent decades and attracted the attention of domestic and foreign residential and commercial property investors. Will this trend continue in the future? How is Dallas expected to do in 2020? Find out the answers to these questions and many others in this Dallas housing market predictions 2020 article.
Main Factors Affecting the Dallas Real Estate Market
In order to fully understand the expected Dallas housing market trends in 2020, it is essential to first comprehend its major drivers, so let’s have a look at them:
The 1.3 million people living in Dallas make it the 3rd most populous city in Texas and the 9th largest in the US. Moreover, the Dallas population grows at a rate equivalent to double the national average as the local economy and labor market depend heavily on in-migration. A major proportion of the local population comprises of young people who come from other states in search of the numerous high-tech jobs which Dallas offers. All in all, the demographic factors lay a sound foundation for the development and growth of the Dallas housing market.
The Dallas economy is characterized by diversity and strong growth. Some of the major industries include healthcare, retail, constriction, services, and manufacturing. These and other economic sectors create multiple employment opportunities which attract qualified young people from other states and pay high wages. Once again, the state and growth of the economy in Dallas point out to strong performance of the local real estate market in the coming years.
Real Estate Laws and Taxes
Generally speaking, Texas is one of the most landlord-friendly states in all of the US, and this definitely affects traditional rental property investments there positively. In terms of property taxes, Texas charges the 6th highest real estate tax rate nationwide, and as a result Dallas real estate taxes amount to a total of 2.72%. This is something investors considering Dallas rental properties should keep in mind when they do investment property analysis. Last but not least, Dallas stands out as one of the last US major cities where Airbnb is fully legal and faces no restrictions. While Dallas Airbnb hosts have to pay a 7% city and a 6% state hotel occupancy rate, the legal environment supports the expansion of the Airbnb Dallas rental industry.
Each year Dallas welcomes over 27 million visitors from the US and abroad, making it one of the most popular tourist destinations across the US. These visitors are attracted by the leisure and entertainment options as well as the business opportunities. They drive the high Airbnb occupancy rate and boost the growth of Airbnb Dallas rentals.
Dallas Housing Market 2019: Key Numbers
Before analyzing how the Dallas housing market 2020 is expected to look, it’s important to see how it is currently performing. Following are the most important stats for Dallas investment properties as derived by Mashvisor’s real estate market analysis based on actual real estate comps:
Dallas Real Estate Market 2019 Figures
- Median Property Price: $411,500
- Price per Square Foot: $202
- Real Estate Listings: 3,674
- Days on Market: 66
- Price to Rent Ratio: 18
- Traditional Rental Income: $1,910
- Traditional Cap Rate: 0.9%
- Airbnb Rental Income: $2,870
- Airbnb Occupancy Rate: 56.8%
- Airbnb Cap Rate: 2.4%
If you’d like to become an expert on the current state of Dallas real estate investments, read our comprehensive Dallas Real Estate Market Report 2019.
Dallas Housing Market 2020 Forecast
Now that you are familiar with the way the current housing market looks in Dallas, Texas, it is time to see what trends will dominate there in 2020. The following overview of the Dallas real estate market predictions for 2020 is based on a review of the forecast by different experts as well as Mashvisor’s own real estate data and predictive analytics.
1. Real Estate Appreciation Will Take Place
Natural appreciation for Dallas real estate properties totals 115% since the beginning of 2000. Comparatively, this exceeds both the state and the national average levels. According to experts, the prices of homes for sale in Dallas, TX will increase by 2-3% in 2020. This ranks Dallas as one of the top real estate markets in the US for appreciation.
However, some analysts are warning about affordability already becoming an issue in Dallas real estate, and this trend is expected to last throughout 202o. In specific, PwC highlights this upcoming challenge in its annual Emerging Trends in Real Estate: United States and Canada 2020 report. Relatedly, the Dallas/Fort Worth real estate market declined significantly in ranking from position #1 in 2019 to #6 in 2020. Nevertheless, the drop in the Dallas ranking is more so the result of improvements in the overall real estate perspectives in other markets, mostly Austin (#1), Raleigh/Durham (#2), Nashville (#3), Charlotte (#4), and Boston (#5), than a deterioration in Dallas.
2. The Dallas Housing Market Is Expected to Become a Buyer’s Market
Similar to the rest of the US housing market, the Dallas real estate market is a seller’s market in 2020. Home values are on the rise, and inventory is low. Currently there are 3,674 houses for sale in Dallas, TX on Mashvisor’s platform. However, Dallas is forecast to follow suit with the majority of other US real estate market and make a shift to a buyer’s market in 2020. This means that 2020 will be the right time to buy an investment property in Dallas as there will be more properties to choose from and bidding wars will be an exception.
Related: Will the 2020 US Housing Market Be a Seller’s Market or a Buyer’s Market?
3. Single Family Homes Will Prevail in the Dallas Housing Market
Just like the vast majority of top US housing markets, the Dallas real estate market is dominated by single family homes. This property type constitutes as much as 69% of all Dallas homes for sale at the moment. One of the most certain Dallas housing market predictions 2020 is that this trend will continue. Condos for sale in Dallas comprise 22% of all real estate listings. The fact that single family homes for sale in Dallas prevail is good news for investors as they are the most profitable property type for traditional rental property investments. While multi family homes bring the highest return as Airbnb Dallas rentals, single family homes still generate high profitability.
4. Dallas Rental Properties Will Benefit from Strong Demand
With over 767,000 renters, Dallas real estate investors in traditional rentals can rely on high rental demand. Vacancy rates for long term rental properties are expected to be low in the Dallas housing market 2020 due to the fact that 59% of the large population rents rather than owns a home. This is at least partially driven by the moderate price to rent ratio of 18, which means that in most cases renting is relatively cheaper compared to buying a home.
The situation is similar with Airbnb Dallas rentals. The numerous attractions in Dallas attract both domestic and foreign tourists, while the business and commercial opportunities bring in even more visitors. All this translates into strong demand for Dallas vacation rentals, pushing up the Dallas Airbnbn occupancy rate in 2020.
Related: Where Can You Find Airbnb Occupancy Rate Data for Real Estate Investing?
5. Airbnb Dallas Is Expected to Remain Fully Legal
Since we mentioned short term rental properties, it is crucially important to look at the Airbnb rules and regulations in the Dallas housing market. Currently Dallas remains one of the very few major US cities which do not limit short term rentals in any way. Both owner-occupied and non-owner occupied vacation rentals of all property types including single family homes, duplexes, triplexes, condos, townhouses, and multi family homes are legal and allowed in the Dallas real estate market 2019. What is even more important is that Airbnb Dallas is expected to remain legal in 2020 and beyond. Indeed, this is one of the key Dallas housing market predictions 2020 as it means that this profitable real estate investment strategy will remain a viable option. Actually, the Airbnb Dallas rental property investments are expected to continue attracting out of state real estate investors interested in this particular rental strategy as many other top locations in the US housing market discourage or prohibit short term rentals. Some of the cities with the worst Airbnb regulations include Chicago, Los Angeles, and Anaheim and even cities in the Texas real estate market such as Austin, where non-owner occupied single family homes and duplexes in residential neighborhoods cannot be rented out on Airbnb and similar short term rental properties.
6. Return on Investment Will Be High for Residential Rental Properties
Now that we’ve established that Airbnb remaining legal is one of the crucial Dallas housing market forecast 2020 trends, let’s have a look at the return on investment which rental properties are expected to generate. A traditional Dallas investment property brings a rental income of $1,910 per month on average, which results in a cap rate of 0.9%. Meanwhile, an Airbnb Dallas rental generates an average of $2,870 per month due to a high Airbnb occupancy rate and good nightly rates. The return on investment for this rental strategy is a cap rate of 2.4%. According to the current Dallas housing market predictions, these numbers are expected to remain relatively unchanged in 2020.
Tip: If you’ve like to boost your return on investment with investment properties in Dallas or elsewhere, one of the easiest ways to do that is to invest in a foreclosure or off market properties.
Many experienced real estate investors and other experts will claim that such rate of return is too low as a good cap rate is usually considered to be a value of 8% or above. However, beginner real estate investors should keep in mind that these are just the city-level averages, while some Dallas neighborhoods and individual Dallas investment properties offer a much higher profitability. Moreover, these cap rates are expected to exceed the values offered by the majority of other best places to invest in real estate in 2020.
7. Airbnb Properties Will Be the Most Profitable Rental Strategy
More and more cities imposing strict regulations on short term rentals is one of the natural US housing market predictions 2020 and beyond. This has important repercussions on the Dallas real estate market which is not forecast to regulate Airbnb rentals in any new way other than the already existing hotel occupancy tax which Dallas Airbnb hosts have to pay. This means that Dallas vacation rentals are expected to remain the more profitable real estate investment strategy in this Texas city in 2020 and even afterwards. Both local and out of state, long distance real estate investors can go for this option as long as they hire a good professional rental property manager.
If you think that a Dallas Airbnb rental might be your new investment property in 2020, read The Ultimate Guide to Buying an Airbnb Property with Ease.
Best Neighborhoods in Dallas for Investment Properties in 2020
As real estate prices are expected to continue rising in 2020, investors should consider buying one of the 3,674 homes for sale in Dallas, TX listed on Mashvisor sooner rather than later. To facilitate their neighborhood analysis and property search, we’ve prepared a list of the best Dallas neighborhoods for real estate investing in rental properties in 2020:
Top Dallas Neighborhoods for Buying a Traditional Rental Property
1. Near East
- Median Property Price: $299,000
- Price per Square Foot: $238
- Average Monthly Traditional Rental Income: $2,360
- Average Traditional Cap Rate: 6.8%
- Median Property Price: $311,000
- Price per Square Foot: $119
- Average Monthly Traditional Rental Income: $2,670
- Average Traditional Cap Rate: 5.6%
3. Reunion District
- Median Property Price: $409,500
- Price per Square Foot: $162
- Average Monthly Traditional Rental Income: $2,760
- Average Traditional Cap Rate: 4.9%
Top Dallas Neighborhoods for Buying an Airbnb Rental Property
1. Southeast Dallas
- Median Property Price: $178,200
- Price per Square Foot: $119
- Average Monthly Airbnb Rental Income: $2,710
- Average Airbnb Cap Rate: 7.7%
- Average Airbnb Occupancy Rate: 54.1%
2. Five Mile Creek
- Median Property Price: $211,500
- Price per Square Foot: $133
- Average Monthly Airbnb Rental Income: $2,730
- Average Airbnb Cap Rate: 7.4%
- Average Airbnb Occupancy Rate: 51.8%
3. Farmers Market District
- Median Property Price: $429,000
- Price per Square Foot: $197
- Average Monthly Airbnb Rental Income: $3,390
- Average Airbnb Cap Rate: 5.8%
- Average Airbnb Occupancy Rate: 60.1%
The Dallas housing market predictions 2020 all point out to a strong, stable, growing real estate market with high return on investment for both rental strategies. These expected trends will definitely attract both local and out of state real estate investors in search of good cap rate and good cash on cash return. All the necessary conditions are in place in Dallas to assure profitable investment properties, provided that investors – especially first-time ones – are equipped with the necessary real estate investment tools. One of the prerequisites for buying a profitable real estate investment property in 2020 in Dallas or another US market is signing up for Mashvisor. You can do that now for free for 14 days and enjoy a 20% discount after.