Despite challenging headwinds like rising interest rates and diminishing demand, the North Texas multifamily housing market continues to enjoy several positive trends.
Apartment developers are now looking beyond Dallas-Fort Worth, building in surrounding North Texas towns like Sherman, Aubrey, Waxahachie, and Ennis.
Jörg Mast, executive vice president of capital markets at Colliers International, leads the company’s National Multifamily Investment Sales Team in Dallas-Fort Worth.
Writing for D Magazine, he explained that developers are currently seeing “excellent” results from their spec projects, claiming:
“Ten years ago, no multifamily developer or investor would have even contemplated building in these locations. This proves that Dallas-Fort Worth has, yet again, reached another growth stage.”
Apartments in the region reached an average value of $172,200 per unit in June of this year, a 40% rise since 2019. While the Federal Reserve’s policy of tightening credit continues to apply downward pressure on the sector, “[rapid] appreciation, solid apartment fundamentals and a promising economic outlook in Dallas-Fort Worth should bolster investment activity” in 2022, according to Marcus & Millichap’s third-quarter Multifamily Market Report.
Texas experienced an influx of migration during the COVID-19 pandemic, receiving 64,000 people from California alone during the first 18 months, and individuals and businesses still continue to move in droves to the Lone Star State.
Over the past six months, Dallas-Fort Worth added nearly 150,000 jobs, one of the biggest job increases in the country. Rental growth in the region has also skyrocketed, rising 17.3% in 2021, a record-high increase.
The 12 months preceding the third quarter of 2022 saw the second fastest annual multifamily growth rates in Dallas-Forth Worth in the last 20 years, with average rents reaching $1,540 per month.
Mast wrote, “More people than ever are moving to Dallas-Fort Worth to take advantage of this booming economic machine. And with new people comes more money, new talent, and new consumer behavior, one of which is a much higher housing spending tolerance.”
While the region is growing as a whole, some of the suburban growth has been driven by tens of thousands of people leaving Dallas’ city limits. Even with this steady exodus, housing prices continued to climb higher over the past few years, in part due to the City’s antiquated building permit process.
Despite evidence that the sector may be softening, North Texas continues to enjoy the hallmarks of a resilient multifamily market. While rental rate growth is expected to slow at some point, it is currently sticking around 15% higher than pre-pandemic levels. Still, according to some in the industry, the multifamily market could temporarily retract.
“Over the next three or four months, I think we’ll see some discount on rents. I don’t think it’d be a dramatic rent cut but I do think there’ll be better deals out there that you’ll see,” stated Jay Parsons, head of economics and industry principals for RealPage Inc.
The environment in the near term could be challenging for the multifamily market, but experts in the sector are still optimistic about the future. “Hopefully, inflationary pressures will subside soon, interest rates will settle down, and Dallas/Fort Worth will continue to claim its place as one of the busiest multifamily markets in the country,” said Mast.