How did Dallas’s rent growth stack up to the rest of the major metros in the state? Are we in a bubble? We look at this and more in this week’s roundup of real estate news.
RENTS PREDICTED TO GROW IN DALLAS IN 2019
Most of the apartments in Dallas are occupied, and rent growth continues according to the Yardi Matrix Multifamily National Report for 2018.
Nearly 95 percent of Dallas apartments were occupied in October, with yearly rent growth hitting 2.1 percent last month. It is expected to grow 4.4 percent next year.
Austin grew by 3.5 percent year over year, while occupancy was also almost 95 percent. It is forecast to grow 2.1 percent next year. Rents in Houston grew 1.3 percent YOY in November, with a forecast of 2.4 percent growth in 2019. Occupancy was at a little more than 93 percent.
Nationally, U.S. multifamily rents fell by $2 in November, dropping to $1,419, while year-over-year growth fell to 3.1 percent. Rents are down $3 from the peak of $1,422 in September.
DALLAS OVERHEATED, NEW INDEX SAYS
Dallas is one of two metro areas that are “significantly overheated,” according to an index created by professors at Florida Atlantic University and Florida International University
The Beracha, Hardin & Johnson Buy vs. Rent (BH&J) Index estimates wealth creation by way of homeownership and equity appreciation versus renting and reinvesting in more traditional financial assets.
The index also measures the pressure on the demand for homeownership. Scores approaching one indicate strong downward pressure on the demand for ownership.
Dallas scored a .92 on the index, while Denver scored a .77, and both are approaching the index score of one.
“Both Dallas and Denver are significantly overheated,” Ken Johnson, Ph.D., one of the index’s creators and associate dean and professor in FAU’s College of Business, said in a press release. “Residential real estate prices in Dallas are significantly above their long-term pricing trend, and I anticipate pricing corrections in the near future.”
The professors said that the strength of Dallas’s economy has buoyed property prices for a sustained period.
“Prices are still appreciating in both metros but at a decreasing rate, suggesting that the current upward pattern in property appreciation is nearing an end,” said Eli Beracha, Ph.D., co-creator of the index and director of the Hollo School of Real Estate at FIU.
“This does not mean that these markets are exhibiting clear buy signal but rather they appear to be pulling back from the brink as buyers begin to negotiate more aggressively in these areas,” said William G. Hardin, Ph.D., director of FIU’s Jerome Bain Real Estate Institute and associate dean of the Chapman Graduate School of Business.
SIX MONTH INDICES DECLINE IN TEXAS, REALTORS MARKET SURVEY SAYS
With interest rates on the rise, REALTORS® expect the housing market to slightly weaken over the next six months, according to NAR’s October 2018 REALTORS® Confidence Index Survey.
Texas was among the states where six-month confidence outlook indices had declined from a year ago.
“With employment still growing strongly and housing construction increasing, albeit modestly, rising interest rates appear to be the primary driving force behind the slowdown in home closings,” The National Association of Realtors said. “Higher interest rates negatively affect both would-be home buyers and sellers, as homebuyers have to shell out more for the monthly mortgage and to bring a bigger down payment to the table, while current homeowners who are considering selling their home may find their current mortgage payment more affordable unless they make a bigger down payment.”