DFW Property Values: The Impact of the Population Boom
No matter how you look at it, the DFW metroplex continues to experience a dramatic population boom, and this is largely responsible for high home prices.
Have you wondered why your property value in DFW has remained high for so long? Home prices, like the prices of stocks, bonds, cars, groceries, and just about everything else, are mostly determined by supply and demand. When demand exceeds supply, prices tend to rise, and when supply exceeds demand, prices tend to decline.
Over the last 10+ years, home prices in DFW have risen dramatically (See the chart below). According to the Case-Shiller Dallas Home Price Index, starting around 2012, prices started going up, and they only slowed down two years ago when the Fed began raising interest rates. As you can see, even with the "slowdown", home prices in DFW really have not declined much.
A huge reason for this (and perhaps the primary reason for this) is that DFW continues to see its population count (and, thus, housing demand) soar.
Recent DFW Population Growth
According to the Texas Demographic Center, the population of the entire DFW metroplex grew by 423,141 between 2020 and 2023. That is nearly 12,000 people per month! The TDC estimates that DFW now has over 8 million people that call it home. Obviously, some of this growth is simply new births occuring in the area. However, most of this growth is migrant growth.
Helen You, who is the associate director and lead demographer of the TDC, says, "three-fourths of the state's [population] increase is driven by migration from either inside the U.S. or from immigration...." You says that roughly 50% of Texas' population growth (most of which is happening in DFW, Houston, and Austin/San Antonio) is due to people moving here from other states, while 25% is due to people moving here from other countries.
In fact, a study done last year by the moving website moveBuddha projects that DFW could be home to nearly 34 million people by 2100! If this prediction holds up, it would make DFW the number one most populous metro area in the entire country - even ahead of New York City and Los Angeles.
DFW Housing Shortage
This begs the question, are there enough homes for all of these people moving here? The short answer is no. According to a study done by Bank of America last year, Dallas/Ft. Worth is among the three areas nationwide with the worst housing shortage. The reason for this is severalfold, but they all relate back to homebuilder costs rising:
- The cost of land has increased - As the overall cost of real estate in DFW has gone up, land has gone up as well. Just purchasing acreage on which to build new home developments has become more challenging for homebuilders.
- The cost of materials has increased - The overall cost of construction materials looks similar to that of housing. There was a large increase in prices through mid-2022 when the Fed started raising rates. Then the costs just kind of levelled off. In other words, the cost of acquiring the materials to build housing has increased dramatically in the last 10 years, and it doesn't appear to be headed down any time soon.
- The cost of labor has increased - As if the cost of land and materials weren't enough to hamper homebuilders, the cost of labor has increased for them as well, just as it has for almost all other businesses.
You put all that together, and you get a housing shortage that's being driven by a mass influx of new residents combined with economic restraints on homebuilders. With all these people moving to DFW, building new housing (and, this includes apartments and other rental units as well as single family homes) is a must, and we simply currently don't have enough building taking place to keep supply and demand in balance.
Conclusion
With DFW migration trends expected to continue as they are, and with the housing shortage remaining an issue for the foreseeable future, home prices in Dallas/Ft. Worth really have nowhere to go but up. Certainly, we could have some kind of "black swan" event that cuts the current trends down, but if that were to happen, housing might be the least of our concerns.
As a real estate investor or homeowner in DFW, the good news is that there is little chance of you losing money on your investment. You're not likely to become rich overnight dealing in real estate, but real estate in DFW is certainly a safe investment long term, both as a home as well as an asset class for your investment portfolio.
And, for those of you who have been pondering buying or making a move, there really isn't going to be a better time as far as the housing market is concerned. Homes in DFW are not going to get less expensive than they already are. I recognize that factors other than money come into play when buying a home, and there may be very good reasons for you to sit tight. However, if you are sitting tight simply to "wait out the market", you may be waiting well past your lifetime!