By Kayla Matthews:
The Dallas-Fort Worth metro area offers both tranquil suburban living and bustling city excitement. Hundreds of people flock to this stunning metropolitan region every year to attend school, enjoy a low cost of living and experience the unique atmosphere of close-knit communities coupled with the anonymity of city life.
Of course, a location that offers the best of both worlds comes with a price — one that's seen some fluctuation in recent years.
Currently, the DFW rental market is experiencing a boom, and the housing market is undergoing a low. However, this may all change in the coming months and years.
Who Drives the Demand for Rentals?
In the second quarter of 2019 alone, net apartment leasing in the DFW area added 10,400 rental units, showcasing a rapid growth in demand that's higher than any other metropolitan area in the U.S. This demand is the highest it's been in 20 years. Meanwhile, the number of renters lost to housing purchases remains relatively the same compared to previous years — so where is this increased need coming from?
For the most part, millennials and single families are leading the way in rentals. Many high school graduates are drawn to Texas to attend college since the cost of living is relatively cheap compared to other states. Overall, the cost of living index is 90, making it easier for students to make ends meet each month. Although Texas' minimum wage is lower than the U.S. average, the state's absence of personal income tax offsets this factor.
Rental Price Trends
The average rent for a two-bedroom apartment in the DFW area is $1,168, a 5.48% decrease from the previous year, and the lowest it's been since 2015. This year, one-bedroom apartment prices decreased by 5.11% compared to last year, and two-bedroom apartment prices fell by 5.3%. These low rates continue to establish DFW as an incredibly affordable place to live compared to the national average of nearly $1,500.
As demand continues to increase, the competition will inevitably drive the DFW rental market up. Historically, studio apartments in the south suffered the most significant jump in price, rising 8.1% from 2017 to 2018. Meanwhile, two-bedroom apartments saw a 1.7% increase. In 2020, experts predict a rise in rates later in the year. However, it will likely remain relatively small since experts anticipate DFW will have the lowest apartment vacancies among other Texas metro areas.
Is It Better to Buy?
While the decision to rent or buy ultimately depends on the general public and what they value, renting and reinvesting in DFW may be the smarter decision for the time being. Currently, DFW has an overheated residential real estate market with a current index of .888. At this level, the chances of acquiring wealth from buying are low. Plus, such an index suggests that the DFW housing market is listing homes at too high prices.
That said, if renters plan to stay in the same apartment for more than a few years, it may be wiser to buy. For example, millennials could use the money they're spending on rent on a monthly mortgage instead. That way, they build some equity for only $100 or $200 extra per month. Over time, this small price increase is worth the investment. If they decide to move, later on, they can sell their property and regain their capital.
DFW Neighborhood Samples
Using Rentometer Pro’s Neighborhood report analysis tool, we examined three popular neighborhoods in the Dallas/Fort Worth area.
Far North (View Rent Comp Report)
The Far North neighborhood boasts moderate rent prices that are lower than the DFW area average of $1,168. The typical cost of a one-bedroom apartment in this area is $1,010 per month and still offers an average of 752 square feet.
In regards to two-bedroom apartments with an extra bathroom and 200 to 300 more square feet, rent goes up to around $300. While this neighborhood is a good 50 minutes away from Fort Worth, a commute to Dallas’ inner-city would only take 25 to 30 minutes.
Oak Lawn (View Rent Comp Report)
In the heart of Dallas rests the Oak Lawn neighborhood, an upscale district with lively bars and plenty of green space. Here, a one-bedroom apartment costs, on average, $1,491. However, the area may offer as much as 960 square feet.
Meanwhile, two- and three-bedroom apartments are around $2,200 and $3,200, respectively. Rentometer still classifies these prices as moderate, just as with the Far North community.
M Streets (View Rent Comp Report)
To the east of Oak Lawn is the neighborhood of M Streets, which sits just outside Dallas’ city hub. The area offers lively nightlife and quiet residential communities with tree-lined streets. The typical rent for a one-bedroom apartment is $1,392, about $100 less than Oak Lawn.
In addition to being further away from the city, the interior space is smaller, averaging 761 square feet. Rentometer also considers these dimensions and prices moderate.
DFW Market Forecast
Reviews are mixed, but most experts agree that the DFW housing market is cooling off. While home prices rise, potential buyers opt to rent, leaving 20% more homes on the market compared to last year. In the coming years, however, prices will inevitably decrease again. Most realtors don't see this shift resulting in a housing bubble, as they expect the strong local economy to protect against a pricing free-fall.
Meanwhile, the DFW rental market continues to heat up as millennials and recent college graduates flock to the area and take advantage of the low cost of living. Demand will continue to increase as long as rental prices don't experience a spike or rise above the national average.
Of course, these predictions are all dependent on the housing market, which will inevitably fluctuate with time.