January 2022 Market Update: Looking Back at 2021 & What's Coming in 2022

MONTHLY MARKET UPDATE: LOOKING BACK AT 2021, & WHAT TO EXPECT IN 2022

Our Founder and Managing Director at M&D Real Estate, Danny Perez, has put together highlights and a snapshot of what happened in the real estate markets in 2021 and what we can expect to come in 2022 in the always-moving Dallas Fort-Worth Market, including the residential market, as well as a brief account of what is happening in the DFW and local commercial markets right now.

BE SURE TO LISTEN AND/OR READ TO THE END FOR WHAT TO EXPECT IN 2022, AND WHAT THE WINDFALL WILL BE FOR REAL ESTATE THIS COMING YEAR...

RESIDENTIAL MARKET UPDATE:

Mind blowing numbers for price appreciation, new construction & More!

DFW HOME INVENTORY: There are just mind blowing numbers to report for last year in the DFW area. We saw 20 percent more homes built last year, year over year, coming off of a record year in 2020. However, home sales overall were down 4 percent. The reason home sales were down is because of a lack of inventory. An interesting point to note in what we saw towards the end of 2021, was that builders were hitting the breaks on building homes (despite the huge demand). This year, we are already seeing a pull back, too. Again, it is not because of demand. It is simply because of back-log in home deliveries.

North Texas had 3,323 permits filed to build new homes in December 2021, which is down a whopping 27 percent from the year before. So new homes coming to the market are slowing down. Why? Because of the supply chain issues. Getting product is an issue, and then you also have labor shortages. So keeping customers happy is complicated right now because of the severe back-orders on new homes. Hopefully supply chain issues will get back to normal this year. That will help a lot of what we are seeing in the real estate market.

PRICE APPRECIATION: Most of the DFW Metroplex saw 20 percent growth in price appreciation last year. Two-thirds of the DFW Metroplex saw 20 percent plus while the other one-third of areas were at about 10 to 20 percent price appreciation. Those areas were where it was 10 percent instead of 20, is mainly because this is where more new construction was occurring, like in Kaufman County, South of Dallas area. This means there was a little more inventory there, which is why you see a little less price appreciation.

But for most of DFW, we are talking around 100K in price appreciation on average throughout the Metroplex. Those numbers are hard to wrap your head around. They are just astronomical.

NEW CONSTRUCTION: Builders started $16.9 Billion in Residential Construction last year in DFW (a 14 percent increase in home and apartment building from 2020). As for which market is top in construction in the whole country, DFW leads there. But still, the number of homes for sale was actually 42 percent below pre-pandemic levels last year. And that inventory is still 5 to 10 percent lower than the last year before that.

This means, obviously, homes are going fast and over-asking price. Less homes on the market has meant a huge seller’s market.

RENTAL PRICES: Rental prices have also increased tremendously. Not as much as price appreciation, but it’s around a good 15 percent increase. So, the cost of living in DFW Metroplex is going up.

But the good news, we also have the lowest foreclosure rate in decades. This is most likely due to our job opportunities in this area and people going back to work sooner than in a lot of other areas post-COVID closures. So again, for residential, the market was down due to low inventory and low number of transactions, but price appreciation was up significantly.

COMMERCIAL MARKET UPDATE:

Investment in DFW Area Unprecedented!

NEW CONSTRUCTION: Over $28 billion dollars was invested into the DFW Metroplex (starts) this past year. This was huge, and the only market surpassing this was New York. This was a record-setting year for DFW. We had the fastest-growing industrial building market, including 50 million square feet of construction on the way. Why? Well, we are quickly becoming the mecca for distribution and Cloud/IT type warehouse space. It is all coming here. We have also are seeing tons of company headquarters relocating here to our area. DFW soared 45 percent in total construction last year, only second to New York. DFW is the biggest real estate investment area, period, in the country.

RECORD SALES: There were $47 billion in sales last year. Right now, we are at 77 percent higher than last year’s amount of transactions at this same time. DFW is also the top multi-family investment market, with $28 billion in sales. It’s unbelievable the growth in commercial markets and investment in this area. Warehouse sales were also up a total of 72 percent. So, leading our growth is multi-family sales along with warehouse space. Those are the two #1 hot items in the DFW market. As you can see, these numbers are mind blowing in both the residential and commercial markets here. Vacancy rates on rentals and on multi-family are at all-time lows.

All of this is really great news for everyone that is currently invested in the area, and looking to sell — because people are looking to put their money to work in the DFW area.

LOOKING AHEAD TO 2022, WHAT'S COMING?

INTEREST RATES: The windfall this year is going to be interest rates… What will these do to our market? Interest rates right now are up three quarters of a point to 3.6 percent for the 30-year fixed mortgage, as of today. That is still very low, but we are seeing an increase… The Fed is planning to increase Fed Funds Rate three times this year because we are dealing with 7 percent inflation, so they have to get that under control.

The biggest headwind for the real estate market is definitely interest rates. Now, I do not think this will affect commercial investment as much as residential home sales. I also do not think we will see another 20 percent price appreciation year. But being the #1 in so many metrics in sales in DFW does insulate us to any corrections to a certain extent that we would normally see in a rising-rate environment.

PENDULUM SHIFT: They raise the rate to suppress asset prices. But we have something different in the DFW metroplex. We have a pendulum shift, from where for many years we couldn’t get talent and business here because there was not a talent pool. To now, everyone is moving here and covid accelerated that. So we are known now for having a talent pool and that has shifted the pendulum to bringing in one company headquarter after another.

INSULATION: So, looking at all of this, we might expect to see a slowdown from 20 percent price appreciation to a more normalized price appreciation. But personally, I do not even see a correction. My opinion and a lot of others, is we are insulated to a correction here because of the dynamics and all the business and people moving and relocating to this area.

I think we are going to have a great year in real estate. I hope we will see some more inventory to give a little movement in actual transactions being transacted. But everyone wants to know about interest rates and how it will affect everything — and my main point is, we are insulated. If the supply chain situation gets under control, it would also keep the Fed from having to raise rates too quickly and further keep the market from a correction.

That’s the big news for last year, and this coming year as of right now.

As always, if we can be of any assistance, whether in your residential real estate needs or commercial real estate needs, please give us a call. We also offer property management solutions for both residential and commercial clients.