M&D Property Management

Dallas-Fort Worth Rental Property Market Report | May 2024

High Demand Expected to Bring on a Rebound

The Dallas-Fort Worth (DFW) rental market has been experiencing dynamic changes over the past year.

Despite a slight dip in rental prices and a marginal increase in vacancy rates, demand remains strong, positioning DFW just behind New York City in terms of multifamily demand.

Experts expect demand and prices to increase throughout 2024 and then begin to rise again in 2025.

Current Rental Prices in DFW

According to Zillow, the median rental price in Dallas is currently $2,000, reflecting a year-over-year decrease of $99. There are 2,185 rental units available in Dallas as of now.

Rental Price Breakdown

According to Rent.com:

Studio Apartments: Average rent is $1,347, down 4%.
One-Bedroom Apartments: Average rent is $1,340, down 1%.
Two-Bedroom Apartments: Average rent is $1,805, down 8%.

Rental Market Activity in DFW

Units Leased: Over 5,000 units were filled in the first quarter of 2024, making it the busiest first quarter since 2019 (Source: CoStar).
Positive Rent Gains: Although rent growth remains negative annually at -1.4%, there have been positive monthly rent gains in the past four months consecutively.
Future Rent Growth: Experts predict rents will continue to rise through the end of the year, potentially rebounding to over 3% growth in 2025.

Demand and Employment

High Demand: DFW is second only to New York in demand, with DFW filling around 19,000 units in Q1 of 2024, and New York filling 20,800.
Employment Growth: DFW is now within 150,000 jobs of Los Angeles, making it the third-largest employment base in the country. The business and professional sector in DFW grew by 160,000 jobs from 2020-2023. To put this into perspective, there was a much wider gap of 750,000 jobs prior to COVID and all the migration to Dallas and new jobs added. (Source: Institutional Property Advisors).

Construction and Development

New Units: Frisco, Allen, and McKinney are expected to complete 18,800 units between 2024-2026. Other markets, including Kaufman, Ellis, and South Fort Worth, are expected to see a 25% growth in inventory over the next three years.
Peak Construction: The area is currently experiencing peak construction levels, according to most experts.
Investor Insights: Areas like Carrollton-Farmers Branch, Grapevine-Southlake, Southeast Dallas, and West Plano have mild development relative to recent demand. Conversely, Rockwall-Rowlett-Wylie and Kaufman County have above-average vacancy and significant new supply incoming.

DFW Vacancy Rate for Rent Properties

Current Vacancy Rates: The vacancy rate in DFW is 10.7%, expected to peak at around 11.5% in Q4 of 2024 (Source: CoStar).
Units Delivered: Over the last 12 months, 38,000 units have been delivered, with more than 19,300 units leased this year so far.
Stabilization Expected: Rising demand and tapering construction should stabilize the vacancy rate and return rent growth.

Rental Property Performance in DFW

Current Vacancy Rates: The vacancy rate in DFW is 10.7%, expected to peak at around 11.5% in Q4 of 2024 (Source: CoStar).
Units Delivered: Over the last 12 months, 38,000 units have been delivered, with more than 19,300 units leased this year so far.
Stabilization Expected: Rising demand and tapering construction should stabilize the vacancy rate and return rent growth.

DFW Multifamily Sales and Transactions

Average Price per Unit: Multifamily units have averaged $194,000 per unit over the past 12 months in DFW.
Vacancy Rate at Sale: The average vacancy rate at the time of sale was 11.3%.
Sales Volume: Sales volume was $6 billion in the last year, down from $26 billion in 2021 when 19% of the market’s stock traded.

Snapshot of DFW Residential Real Estate Market

We’re going into the busy buying and selling season right now.

From April to August is the prime season for our area. But, right now, we’re still in the “locked-in” phase where inventories are still low, and buyers are increasingly fatigued with home prices and interest rates.

Yet, there is still strong demand out there for homes in this popular DFW area.

HOUSING AFFORDABILITY IN DFW

Our biggest and main issue in the housing market today is that prices are not correcting.

Ultimately, either a price correction or falling interest rates is what it’s going to take to get this market moving back to normal condition.

And, I really don’t believe interest rates are going to be falling anytime soon.

That’s my personal opinion.

It’s what I’ve been saying since we started going through this shifting environment. And so far, it’s held true.

I really believe the seller is ultimately going to have to be the one to come in with a sales price correction for affordability to come back into the DFW market, at least relative affordability, to get more transactions to start happening again at a more normal pace.

Honestly, it will never be as affordable again here in DFW as it was pre-COVID, before everybody started moving here to the DFW Metroplex. And, you’re talking people moving in at a rate of 100,000+ people a year. It’s just never going to be like that again unfortunately, as far as affordability goes.

SUMMARY OF HOUSING MARKET UPDATE

In general, prices are flat to moderately down year over year. In Rockwall County, prices are down 4%, Kaufman County’s down 4%, Dallas County is up 6%, and Collin County is up 2%.

So, your home price really just depends on exactly where you’re at in the metroplex and what market you’re in. But overall, prices are basically flat year over year to down.

Raising interest rates is to supposed to do this typically. It’s supposed to bring affordability back into the market.

But the good news is that inflation is slowly coming down. Prices at the grocery store are a little less outrageous than what they were at one point. Same thing, used cars are coming back down, too. You can actually buy a used vehicle at a reasonable price now. And if you haven’t noticed, there’s some 0% financing incentives out there on vehicles because inventories are rising.

Check out the rest of the residential real estate market update here.

Conclusion: State of the Rental Market in DFW

The DFW multifamily rental market is navigating through a period of adjustment with slight rent decreases and higher vacancy rates. However, strong demand and employment growth, coupled with moderated construction activity, are expected to stabilize the market and set the stage for future rent growth leading into next year.

Sources:

Zillow
Rent.com
CoStar
Institutional Property Advisors

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