Blog From Shan Zaidi
When looking at demographic trends in Dallas-Fort Worth housing, there are several lenses through which we can make examinations. We can focus on what is happening locally, or we can approach from a wider lense and analyze national trends. Additionally, we can focus on short-term activity or we can analyze trends from a longer term perspective. The varying approaches will produce different insights. Ultimately, the question investors seek to answer is how to utilize these trends to make successful investment decisions? To guide the process, it is prudent to utilize data to make an educated guess on future performance of the DFW market. In this article, we will analyze three pieces of demographic data to formulate a hypothesis on what the future holds for DFW housing demand. In the above graph we see projected job growth over the next three years in the United States. DFW is expected to continue to be among the strongest job producing markets. Using this data we can combine a wide and narrow approach to assess how the DFW market is performing in the context of the national real estate market. The data indicates a national trend towards urbanization. In most major US metropolitan areas job growth is expected to be robust. In conjunction with the increased demand for jobs in big cities both multifamily and single family developers will need to produce additional housing stock to provide residences for these new workers. As one the strongest growing markets we would expect DFW to be among the leaders in housing starts going forward simply to keep up with the influx of jobs and people into the market
In the second piece of data, we see the projected DFW population as determined by the Texas Department of State Health Services. Within five years, DFW is expected to eclipse 8 million people. The agency has determined this population trend will persist for the foreseeable future. This information is in line with our earlier job growth projection data. This lends additional credence to the theory that an increased supply of new housing will be needed to keep up with demand. On a national scale, between 2010 and 2050, the US Census Bureau estimates the population will increase by 93 million people to 403 million, and, with it, housing demand will proportionally increase. The largest gaining state in that timeframe will be Texas. We would expect to see a divergence between housing starts throughout the United States and housing starts in Texas as the state population continues to grow at a rate far higher than the national average.
From the data above we can see that nationally housing starts came to a virtual standstill during the 2008-2009 Recession. The cessation of building activity over that period has created a shortage of housing in many markets. Builders have been struggling to catch up with demand. This has been particularly problematic in DFW, where the volume of people moving to the region has overwhelmed supply. This has created dramatic housing price and rental appreciation.
Construction has picked up around the country and DFW is among the leaders in single family and multifamily housing starts. However, given that job growth is expected to persist, the current pipeline of production will be needed just to satisfy future demand. As our earlier data projected we have begun to see a divergence between the quantity of construction in Texas and the United States. Still, given the demographic data we have on job and population growth this is more of a necessity than indicator of excess production.
DFW and Texas are growing and as we have seen in a number of the major coastal markets: population growth leads to appreciation. DFW is still far cheaper than a number of other major markets for both rentals and purchases. Nevertheless, the data indicates that the gap will continue to close. This should be a clear indicator that increased production is necessary to combat appreciation. For investors, the demographic data should provide confidence that in the short term and for the foreseeable future DFW will continue to grow. This bares out that property acquired will continue to add value in conjunction with that growth.
Shan Zaidi (BIO) is an advisor with Greystone Investment Sales Group in Dallas, TX. If you want to learn more about our Multi-Family Listings, Single-Family Rental Portfolios, Land Sale Listings, or Property Valuations with Greystone Investment Sales Group, contact our office:
Greystone Investment Sales Group
6320 LBJ Frwy Suite 228
Dallas, TX 75240
P | 972-405-5595
C | 214-663-8498
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