By Phil Crone
Executive Officer, Dallas Builders Association
The Dallas-Fort Worth (DFW) housing market in 2019 presents a captivating shift from the rapid expansion of previous years. Rather than a straightforward trajectory, we anticipate a nuanced return to normalcy, moving away from the frenetic pace that has defined our region for so long. While many analysts might attempt to paint this market with a broad brush, its true character is far more intricate and dynamic. This evolving landscape, though more complex than before, is brimming with opportunities, and there’s every reason to believe DFW will sustain its reputation as one of the nation’s most vibrant and desirable places to live and work. For stakeholders, potential homeowners, and investors alike, understanding the underlying currents of this market is paramount. As we navigate the coming year, here are four critical areas to monitor and why they hold significant implications for the future of our robust housing sector.
1. Debunking the Myths: Why Dallas’s Housing Market is Not in Decline
Despite the sensational headlines and “clickbait” articles that may emerge, prophecies regarding the imminent collapse of the Dallas housing market are, unequivocally, greatly exaggerated. What we are truly witnessing is a natural and necessary transition from an overheated, frenzied market environment to one that is more balanced, sustainable, and fundamentally healthy. This adjustment is not a cause for alarm but rather a sign of maturation.
For years, Dallas-Fort Worth has consistently added over 100,000 jobs annually, creating an immense demand for housing. Yet, builders have grappled with a multifaceted array of challenges in their efforts to keep pace. A persistent labor shortage, estimated at more than 20,000 skilled workers, coupled with the impact of tariffs on crucial building materials and increasingly complex local regulations, has driven construction costs upward. Data from Metrostudy reveals a staggering 56.2 percent increase in the median new home price, soaring from $197,800 in 2010 to $331,000 by 2017. The median resale price mirrored this upward trajectory. In stark contrast, median household income grew by a mere 23.8 percent during the same period. This significant divergence underscores the growing affordability crisis.
When these figures are coupled with the recent trend of rising interest rates, it becomes abundantly clear that affordability stands as the single most pressing challenge confronting our market. Consequently, expect to see numerous reports in the coming months highlighting “price declines” and a “cooling” job market. It’s crucial to interpret these developments accurately. Price adjustments are not only anticipated but also essential for long-term market stability and accessibility. Builders are already proactively responding to this need, exploring innovative strategies to deliver more attainable housing options. Furthermore, a “cooling” job market simply signifies a return to a more typical growth rate, potentially falling just below the remarkable 100,000 new jobs per year benchmark. Even at this adjusted pace, DFW will comfortably remain one of the nation’s premier job markets. Since a strong job market directly translates to robust housing demand, this bodes exceptionally well for the real estate sector. Therefore, resist the urge to succumb to unwarranted negativity; the underlying fundamentals of the Dallas-Fort Worth economy remain incredibly strong.
2. The Rise of New Housing Hot Spots Across DFW
The vast Dallas-Fort Worth metroplex encompasses more than 200 distinct municipalities, each possessing its own unique set of codes, ordinances, and zoning regulations that profoundly influence housing development. City leaders meticulously craft these policies to shape the character of their communities and attract specific types of new residents. This localized approach leads to a highly diverse housing landscape across the region.
Some municipalities openly express a desire to maintain home values above a certain threshold, often exceeding $500,000, and may have an implicit aim of deterring those who cannot afford such prices from residing within their borders. Others actively implement measures to restrict or outright prohibit multifamily construction, driven by concerns often attributed to traffic congestion but frequently masking deeper, sometimes unfounded, anxieties related to school ratings, crime rates, or perceived demographic shifts. These restrictive policies, while sometimes well-intentioned, can inadvertently stifle growth and limit housing diversity.
In 2019 and beyond, cities that proactively embrace principles of density, diversity, and affordability in their planning will undoubtedly outperform those clinging to more restrictive stances. We anticipate significant variations in market performance from city to city. Jurisdictions exhibiting high inventories of existing homes coupled with remarkably low inventories of available building lots signal a disconnect between local policy and market demand. Unfortunately, some publications may erroneously present these localized indicators as reflective of the entire DFW market, leading to misinterpretations.
Watch for the emergence of new, vibrant communities in cities you might previously have barely noticed. Builders are actively seeking opportunities in these areas to deliver the sub-$350,000 homes that our market desperately requires to address the critical affordability gap. This strategic shift will broaden the geographical scope of development. Furthermore, we expect a notable transition in single-family redevelopment efforts. While traditionally concentrated in a handful of affluent North and East Dallas neighborhoods, this trend will likely expand into cities such as Farmers Branch. These forward-thinking cities are offering generous grants and substantial tax incentives to property owners who commit to tearing down older structures and rebuilding new, modern homes. This incentivized redevelopment is a powerful tool for revitalizing communities and expanding housing options.
3. The City of Dallas: A Pivotal Moment for Affordability
Affordability is an overarching theme throughout this analysis, serving as the central axis around which many of our region’s most significant opportunities and challenges revolve. Nowhere is this more pronounced than within the City of Dallas itself. A prevalent narrative in leading publications often suggests a grand conspiracy among the housing industry and the development community to systematically remove affordable housing options from Dallas. This perspective, however, fundamentally misunderstands the economic realities of homebuilding.
The truth is, like any other industry, home builders strive to reach the widest possible market for their products. Their ultimate goal is to connect with as many potential buyers as they can. Crucially, like any manufactured good, the costs incurred during the production of a home – including land acquisition, labor, materials, infrastructure, and regulatory compliance – are inextricably factored into its final price. If city leaders were to grasp this fundamental economic premise, they would unlock a transformative solution to a pressing housing need that many surrounding cities are either unable or unwilling to address.
While former Mayor Rawlings genuinely championed the vision of Dallas “growing south,” wishing the industry and community leaders toward this objective, and highlighting minor successes, proved insufficient. When it comes to housing affordability, the City of Dallas frequently takes two steps backward for every single step forward. Its labyrinthine development processes are notorious for offering zero certainty regarding both cost and duration, creating significant risk and discouraging potential projects. Furthermore, regulations such as the newly revised tree ordinance, largely driven by special interests in North Dallas, have added hundreds of thousands of dollars to residential projects in other parts of the city. Many developments that would otherwise have been viable have been rendered economically unfeasible, particularly due to the ordinance’s punitive measures for removing common hackberry trees.
Dallas desperately needs a mayor and a city council with a profound understanding of these broken processes and the political courage and determination to systematically fix them. Solutions must be methodical, long-term, and comprehensive, rather than myopic or piecemeal. The City of Dallas possesses a unique and extraordinary opportunity to provide a significant portion of our area’s much-needed housing stock, particularly for underserved income brackets. This can be achieved by reforming its fundamental processes, dismantling unnecessary regulatory hurdles, and empowering builders to construct homes for all segments of the market. If these critical changes are implemented, we can expect to see development occurring without the detrimental side effect of displacement, fostering equitable growth and prosperity for all residents.
4. DFW’s Enduring Appeal: A Wonderful Place to Call Home
Our market’s transition from a period of intense frenzy to a more normalized state is a reason for informed awareness, not undue alarm. Since 2010, the Dallas-Fort Worth area has experienced an impressive influx of over 1 million new residents, a testament to its compelling appeal. Our unemployment rate hovers around a remarkable 3.2 percent, which effectively signifies full employment – meaning nearly everyone who desires a job has one. This robust economic health underpins continued demand for housing.
DFW’s magnetic pull extends to businesses as well. Out of the 123 corporate headquarters that have relocated to Dallas since 2010, a significant 43 have migrated from California, a clear indication of our region’s competitive advantages. The trend is even more striking when looking at broader corporate movements: in 2016 alone, nearly 300 of the 1,800 companies that exited California chose the Dallas area as their new home, according to the Dallas Business Journal. These relocations bring not only jobs but also a vibrant, diverse talent pool that further fuels our economy and housing market.
Ironically, DFW’s exceptionally strong job market played a role in our region losing out on the highly coveted Amazon HQ2. Despite Dallas-Fort Worth boasting the fifth-largest tech labor force in North America, Amazon was reportedly deterred by the perception of an already tight talent pool, with numerous other major companies fiercely competing for skilled employees. While a temporary disappointment, this situation is, in fact, a powerful indicator of our region’s economic strength and the high demand for talent. This robust competition for skilled labor bodes exceptionally well for continued housing demand and sustained wage growth in 2019 and the foreseeable future. DFW remains an attractive hub for individuals seeking career opportunities, a high quality of life, and diverse communities, ensuring its status as a premier destination for years to come.
Phil Crone is the executive officer of the Dallas Builders Association, the leading trade association and extensive network for builders and industry professionals in Dallas. Discover more about the Dallas Builders Association and its vital role in the community by visiting their official website at dallasbuilders.com.