A Hot Market Means Institutional Investors Are Buying up Almost Half North Texas Homes

By Mike Albanese
Special Contributor

Dallas led the nation with the most investment volume of any real estate market in Q1 2022, bringing in $12.6 billion — increasing 119 percent year-over-year — according to a capital markets report from Newmark. Dallas’ volume for institutional investors outpaced all the top international markets, including London, Shanghai, Beijing, and Paris. 

Additional data from the National Association of Realtors found institutional investors bought 52 percent of homes in Tarrant County and 43 homes of homes in Dallas County. NAR also found investors purchased 48 percent of homes in Johnson County, 45 percent in Rockwall County, 39 percent in Denton County, and 38 percent in Kaufman County. 

“The Dallas-Fort Worth metro area is an extremely vibrant and robust market. The population and job growth trends continue to make it a place where people want to live and companies want to expand,” said David Howard, Single-Family Rental Industry Association Head of Innovation Homes. “These are factors strongly correlated to demand for rental housing. This is really just about the Dallas-Fort Worth housing market accommodating a growing and expanding economy.”

He added that all forms of housing — homeownership, single-family rental, and apartment living — remain in high demand, saying the influx of investment capital is “clearly a positive for the market.” 

“More investment in housing generates more housing. We’re dealing with a market in need of more supply, and supply is enabled through greater investment,” Howard said. 

Common Dwelling Founder Ty Lee said Dallas’ business-friendly climate and central location are keys to its success in the investment space. 

“Our economy is diversified, the cost of living is low compared to three of the four cities larger than us,” Lee said. “All of this attracts companies and creates jobs, and in turn attracts people. Once that momentum starts, it’s hard to stop it.”

Echoing Howard’s sentiments, Lee said the investment volume is positive, adding the cities that “stop evolving and innovating” lose people. 

“That means less tax revenue for that city, which leads to less investment into the community. That creates a downward spiral that is problematic,” he said. 

Both Howard and Lee said rising interest could be a cause for concern, noting the imbalance in supply and demand. 

Lee added, “There simply aren’t enough homes to meet the demand.” 

“A general rise in interest rates will pinch demand somewhat, but as long as the imbalance persists, I would expect the housing market to remain healthy, not ‘on fire’ like it has been over the past couple years, but healthy,” he said. 

Howard cautions that investors who “play” the housing market need to be careful, as rising interest rates create unpredictability. 

“In this market, single-family rental home providers should adopt a long-term horizon and be committed to the local communities and neighborhoods where they want to add value,” Howard said. 

Lee said the market may see consumers pull back if wage growth and inflation do not balance. 

“The risk here is that supply outpaces demand. Once that happens, you’ll see the value of everything start to drop,” Lee said. “I don’t see that occurring in 2022, however. Labor shortage and logistic issues are still causing problems as well. These are things affecting Dallas and the nation as a whole.”

In the first quarter of 2022, investment volume increased 55.6 percent annually across the nation to $170.8 billion — the largest first-quarter volume on record.