RENTALRATES Real estate investors in the Dallas market have had strong SFR price appreciation over the last five years with an average increase in rent prices of over 26 percent. Sev - eral sub-markets have seen rental prices increase over 40 percent. As of October 2020, the median three-bedroom SFR home in the Dallas MSA is $1,775/mo (an increase of five5 percent from last year). The growing economy and rapid population growth has boosted wage growth in the market, increasing more than three percent year-over-year since 2012. Rent prices how - ever, have accelerated nearly twice as much in the same time causing concern about affordability. The market-level rent-to-income ratio is at 31 percent, which is just below the national average for metro MSAs. South Dallas, Mes -

quite, Hutchins, Arlington, and Fort Worth areas are quickly becoming unaffordable with R/I ratios over 40 percent. High unemployment has affected the renter class signifi - cantly and will continue to be a concern in 2021. Depending on the size and scope of the next federal stimulus package, renters could be in a tough position in 2021. Many landlords may find themselves unable to capture rent with substantial back-rent owed by tenants which they may never pay. To assist with rent payments, the city of Dallas launched the $6 million Emergency Short Term Rental Assistance program using coronavirus rescue package funds, in part - nership with DHA Housing Solutions for North Texas and several nonprofits. The program will issue payments for up to two months of past-due unpaid rent directly to landlords (not to exceed $1,500 per month).




 Rent affordability concerns pre-pandemic  High unemployment rates in lower-wage industries (renters)   Rental price appreciation is unsustainable  Eviction moratorium ending, causing high vacancy rates and lower “qualified” renter pool   Limited government stimulus or no extension of unemployment benefits DALLAS RENTAL RATES PREDICTION 2021 Demand will stay elevated for SFR rentals as families relocate from cramped multifamily structures. The main drivers for rental prices in 2021 are the expired eviction moratorium, limited job recovery for T&E sector, rising unemployment, and the timing and condi - tions for a new federal stimulus package. Risks outweigh the upside potential in the rent- al market. For lower-income jobs affected by the high unemployment, a new stimulus package may be the only answer for some tenants to keep up with payments. Increased evictions will add to vacancies and lower overall demand. Depending how quickly the courts can process evictions, this could add a significant amount of vacant rental inventory in a short amount of time.

 High demand for SFR

 New government stimulus and unemployment benefit extension   Extension of eviction moratorium will limit inventory  Population growth driving demand

Once the eviction moratorium ends, a new challenge will be the reduced pool of “qualified” renters without eviction or recent job loss. Landlords will likely have to lower their requirements and reduce prices to fill vacan - cies. At the same time, some areas are less expensive to own than rent. Previous renters in a good financial posi - tion are converting to buyers, further reducing rental demand. SFR rentals will continue to have a demand advantage over multifamily. Due to the high unemployment rates, rental values may stagnate or drop lower until employ - ment and wages recover. For the market to support high - er rents, wages need to increase above current levels, which could take several years. 2021 SFR Rent Price Forecast: -8 percent to -3 percent

72 | think realty magazine :: january 2021

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