Before you decide to invest in any real estate market at any point in time, you should ask yourself whether this market is a buyer’s or a seller’s one. Well, currently the Dallas real estate market is a seller’s market.
In general terms, this is a market which favors sellers:
- Few listed and/or available properties
- Low inventories
- Listings spending little time on the market
- Rising prices
- Higher closing percentage
This is exactly what is happening in the Dallas real estate market at the moment – overwhelming demand unmatched by low supply. About 1,200 persons move to Texas every day, and half of them – to the Dallas-Fort Worth complex. In June this year, 2,500 new listings in the Dallas Metroplex showed up over the course of seven days, while 2,300 listings were sold. Any home offered for up to $2,000,000 is sold almost immediately. This is despite the fact that prices have been on the rise in recent years. Trulia has recently reported a 3% rise week over week in home listing prices in the Dallas real estate market. The website offers about 2,900 listings in Dallas with an average price of $750,000. According to other sources, the sales of condos and townhouses in the Dallas area increased by 3.8% and 8.2%, respectively, in the first five months of 2016 compared to the first five months of 2015. In January-May 2016, a total of 1,541 condos (an average of 308 condos per month) and 1,019 townhomes (an average of 204 townhomes per month) were sold in the Dallas real estate market. Meanwhile, the median sales prices for condos and townhouses went up by 10.3% and 7.8% over the same period. In May 2016 the median price of a condo was $164,000, while the average price of a townhouse was $260,000. There is a shortage of inventory for condos and townhouses in the real estate market of Dallas.
Population and Economy
The reasons for the recent expansion of the Dallas real estate market are related to both the population and the economy. Millennials and newly retired baby boomers are the major clients for the Dallas real estate market at the moment. They both are directing demand towards the purchases of condos as a more affordable alternative to single-family houses and townhomes. The population, with median age of 33 years, is growing at twice the national rate at the moment. This drives both demand and prices up.
The Dallas economy is a mixture of old sectors (telecommunications, aerospace, computer chips, etc.) and new ones (transport, energy, healthcare, etc.) with recent concentration on finance and business services. The high-tech nature of the prevalent jobs required in the local labor market determines the high average wages, which create a strong real estate market in Dallas.
In spite of the fact that it is a seller’s market, NOW IS THE TIME FOR REAL ESTATE INVESTING IN DALLAS. Real estate prices are expected to rise in the future, which means that current prices are as affordable as they will get, at least in the medium term. The expected further price increases in the Dallas real estate market will also provide protection against losses. Since in Dallas prices are generally matched with incomes, mortgages exhibit average risk levels. As loan interests have gone down in recent years, now is good time for investing in Dallas real estate.
The time is also good to become a landlord in Dallas. Rents are relatively high compared to home prices, bringing good positive returns for real estate investors. This is especially true for single-family homes. Currently half of Dallas County households are renters. The number of people seeking to rent a property in Dallas will continue to increase as the local population is not enough to cover all newly created job places and as millennials (the major group of immigrants into Dallas) prefer to rent first before buying their own home.
The Dallas-Fort Worth complex is among the top five homebuilding markets in the US. Texas is currently the homebuilding capital of the world. In 2015 Dallas-Fort Worth built more new homes than 19 states including California. And these still do not suffice to satisfy the expanding demand. In the next three years, another 50,000 new homes and 50,000 new apartments are expected to be added to Dallas County.
Airbnb Dallas – A “Silent City”
Investing in real estate in Dallas offers good opportunities for gains not only in the traditional form but also in Airbnb. This year RoomScore published a report on short-term rentals in 59 US cities, evaluating how favorable the conditions there are for such rentals. Dallas Airbnb was scored A- (grades ranging from A+ to F). This means that Dallas offers a relatively friendly environment for short-term rentals with minimum requirements for licensing, taxation, and enforcement. The report classifies Dallas, together with ten more cities (Cleveland, Columbus, Detroit, El Paso, Indianapolis, Mesa, Milwaukee, Omaha, Phoenix, and San Antonio) as a “silent city” as they have no legal framework either allowing or prohibiting Airbnb, i.e., their legislation is completely silent on the matter. To be precise, while Dallas does not have explicit laws on Airbnb, short-term rentals are considered legal. Dallas Airbnb operators should be taxed like hotels, which means that in theory the state and the city take 13% (hotel-occupancy tax) of the charge for any Airbnb stay in Dallas. But the reality is that most Airbnb hosts in Dallas fail to pay due taxes. In September 2015, there were a total of 700 listings in the city proper on Airbnb (offered for an average of $105 per night), and from them, only three were registered with the city, and only two paid taxes. Airbnb hosts are subject to $500 penalty for failing to collect taxes or file reports, but there is virtually no tax collection implementation, making gains from short-term rentals even higher.
Hot Spots, Cool Streets
Whether you are thinking about investing in the Dallas real estate market for traditional renting or for Airbnb, you will definitely want to know the hot spots in the city. While new homes, suburbs, infrastructure, and the population have all been growing north over the past 20 years, things have changed in the last 5 years. Simply, there is no more room to go north, so expansion has been internal, meaning that buildings have been going up in Downtown, Uptown, State Thomas, Harwood, Oak Lawn, M Streets, Bishop Arts, Oak Cliff, Lakewood, and anywhere else within a 2-5-mile radius from Downtown.
Recently, two Dallas locations have entered Top 100 “Cool Streets” in the US and Canada list. These are Bishop Arts District and Lower Greenville. Bishop Arts District has a population of 65,000 persons, 25% of whom are 20-34 years of age, 34% college educated with an average household income of $56,000, and 47% are renting. Lower Greenville, meanwhile, has a population of 91,000; 31% are 20-34 years of age; 74% are college educated; and 53% are renting. The emergence of these “cool streets” has been pushed by millennials turning streets characterized by walkability, access to public transportation, and locally owned or unique apparel, accessories, and home stores into cool districts. Social media has been an additional push to these longstanding bohemian enclaves.
So, if you think ultimately a Dallas real estate investment might be the right thing for you, don’t forget to check out Mashvisor for listings and analytics in the area.
Related: 7 Steps to Buying a Rental Property