Market Spotlight: Dallas-Fort Worth, TX

Breneman Capital has developed a predictive appreciation model we’ve dubbed our “Market Outlook Model” for multifamily values. The model’s primary purpose was to focus on the fundamentals - understanding how each market has performed historically and why it behaved the way it did. The model references historic multifamily appreciation rates from 2000 to 2022 and is backtested with an array of statistics spanning Economic, Demographic, Affordability, New Supply, Apartment Fundamentals, and Single-Family Home data. Through this analysis, we determined which data points are predictive of multifamily appreciation over the past 22 years and which are not. Moreover, we can precisely pinpoint the specific indicators that are the primary drivers for each market’s performance. Each market is ranked by the sum of its indicators, weighted by their actual correlations and statistical significance with appreciation. 

Our model comprises the 37 largest markets across the country, 16 of which were determined to have had above-average appreciation rates for 2022. In the coming months, we will release new articles profiling our model's results and the benefits of investing in each market.

In this article and in our analysis, “Dallas-Fort Worth” refers to the Dallas-Fort Worth-Arlington Metropolitan Statistical Area (MSA).

In 2022, Dallas-Fort Worth TX landed the #4 overall spot in our Market Outlook Model and even more astoundingly scored above average appreciation in our model every year except for 3 years from 2000-2022. And in the 3 years it was below average it was just a hair under the 37 market average making it the best market for investors looking for growth and stability.

Dallas is the home the Cowboys, Big Tex and a booming real estate market. With its diverse economy, growing population, and excellent infrastructure, investing in DFW is an attractive prospect for multifamily property investors.

The DFW region has close to 8 million residents spread across 13 counties. The area is home to numerous Fortune 500 companies and several major universities such as University of Texas at Arlington and Texas Christian University. This makes it an ideal place to invest in multifamily properties due to its strong job market and highly educated workforce that will fill apartments with quality tenants. 

Below, we'll dive deep and explain the 5 major benefits of investing in DFW multifamily properties. 

1) Core market with a sunbelt growth edge

DFW is a Core Market with a Sunbelt growth edge to it. It's "Core" in the sense that it's the 4th largest MSA in the US in terms of population, has a very robust and diverse economy, and has very stable fundamentals. 

Over the last 15 years, Dallas has had appreciation well beyond the national average and was very resilient in the 2008-2009 Global Financial Crisis and during the 2020 Covid pricing shocks. 

There are other markets that might grow faster when the economy is running hot but you will not find a better market than Dallas-Fort Worth when it comes to high growth when the economy is running well and price stability/resilency when the economy pulls back. This does not mean prices will never drop in DFW, it just means they will decrease less than the national average from our findings.

2) A booming economy

The DFW region is home to a thriving and diverse economy. The area has seen an influx of large companies such as Amazon, Facebook, and Google that are attracted by its low cost of living and business-friendly environment (many of which migrated from high-tax states like California).

This has led to a surge in employment opportunities for both blue-collar and white-collar workers, driving up demand for housing in the area. 

Moreover, the recent economic downturn hasn’t had as much impact on Dallas’ job market since it relied heavily on healthcare services, finance, and insurance — all of which are more resilient against recessions than other industries.  

With unemployment below 3.7%, investing in multifamily properties in this region provides investors with stable rental income over time. 

3) Low vacancy rates and favorable supply/demand picture

The DFW region has a reasonable multifamily vacancy rate of around 5%, which is below the national average. This is due to strong demand from young professionals who are attracted by the job opportunities in the area and looking for affordable housing.

Additionally, DFW’s business-friendly atmosphere makes it an attractive place for entrepreneurs who are looking to start their own businesses. These startups often pull in younger employees who are the exact demographic that rents multifamily properties. 

Dallas-Fort Worth has one of the most favorable new supply and demand outlooks of the entire sunbelt. Our calculations of Q4 2022 CoStar data show 4.60% units under construction as % of existing stock in DFW vs 8.10% Sunblet average vs 6.70% largest 54 market average. Some other sources show different supply/demand numbers, but regardless of the source, Dallas has a favorable future here.

4) Major infrastructure investments

The area has recently seen a surge in major infrastructure projects such as the expansion of the Dallas-Fort Worth International Airport and the construction of new highways. These projects will make it easier for people to travel between different parts of Dallas-Fort Worth and surrounding areas, leading to increased demand for rental properties in strategic locations. 

These investments are also likely to attract more companies who want access to an efficient transportation network. This means that investing in multifamily properties in DFW could become even more lucrative over time with increasing demand from businesses looking for accommodation options near airports or train stations. 

5) Affordable housing leaves room for future growth

Relative to its peers and the cities many residents are moving from and into the Dallas-Fort Worth-Arlington MSA has affordable housing: both for sale single family and multifamily rental rates. 

It’s an ideal place for first-time buyers who are looking for a home without breaking the bank, or investors wanting to take advantage of low property prices and high rental demand. 

We found that chunk rent by itself was more predictive of appreciation than rent-to-income ratios. According to the latest CoStar data, the average market rent in Dallas is about $1,500. Which is 0.44 standard deviations better than average compared to the largest 54 markets. With a Median HH Income of $82,000, that equates to a 22% rent-to-income ratio (also 0.44 standard deviations better than average).

Final thoughts: investing in Dallas-Fort Worth, TX

With its booming economy, low vacancy rates, major infrastructure investments, affordable housing prices, and stable yet high returns on investment, investing in DFW multifamily properties can be a great way to generate income and diversify your portfolio.

So, ready to invest in Dallas-Fort Worth? There's no better time than today.

About Breneman Capital

Breneman Capital is a private real estate investment management firm specializing in the multifamily property sector.  Breneman Capital employs a deliberate investment approach, leveraging data analytics and proprietary technology to generate superior risk-adjusted returns for investors.

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