North Texas homebuyers shouldn’t expect much price relief in 2022.
While economists are calling for smaller year-over-year home price gains in the year ahead, the increases in Dallas-Fort Worth are expected to continue at higher than normal rates.
“It probably is going to slow down because the prices have gotten so high,” said James Gaines, an economist with the Texas Real Estate Research Center at Texas A&M. “It’s tough to envision home prices will go up another 18% to 20% over the course of 2022.
“But if it went down to 9% or 10%, it would still be a high rate of increase.”
Gaines predicts that home sales activity in the metro area may level off in the year ahead.
“The prices have gotten so high we expect some of the demand to slack off next year,” he said. “But it’s still going to be a strong year.”
And there’s no sign the tight housing market will get more inventory in 2022, Gaines said.
“In theory, we should see it. But in practice I don’t think we are going to,” he said. “Where’s this inventory going to come from?”
Don’t look for D-FW homebuilders to solve the housing shortage as they’ve done in previous periods of high home demand, Gaines said.
“The homebuilders are not building as many speculative homes because they don’t have to,” he said. “They are selling them faster than they can build them.”
D-FW builders have never started as many single-family homes as they did in 2021.
“We are at 58,000 starts,” said Ted Wilson, principal with Dallas-based housing analyst Residential Strategies. “We’ve grown starts over 60% in the last two years. The labor and supply chain capacity has not been able to keep up.”
Homebuilders have ramped up construction to meet unprecedented demand – surpassing previous building booms.
“We were a little over 51,000 starts at the peak of the last cycle in 2006,” Wilson said.
Residential Strategies is forecasting 54,000 D-FW single-family starts for 2022, but Wilson said builders could start more.
“We thought builders would tap the brakes a bit,” he said. “But it could be another year that matches this year. Demand is still strong. Until we hit a tolerance threshold with respect to price or mortgage rates going up, we are just not seeing a slowdown in home sales.”
Median sales prices for North Texas single-family homes sold by real estate agents have risen by about 50% in the last five years. The National Association of Realtors has identified D-FW as one of 10 U.S. markets likely to see higher than average home price gains next year.
Realtors’ chief economist Lawrence Yun credited the area’s strong job growth with pushing up home costs in 2022 and a lack of attractive building sites for new houses.
“I understand developments can keep expanding outward, but such a big growing city is bound to face competition for desirable locations,” Yun said.
Apartment residents might see smaller rent increases from their landlords. But the D-FW apartment market has already seen a record run-up in rents.
In November, apartment rents were higher by an average of more than 16% from a year ago – the largest such jump on record, according to apartment analysts at RealPage.
“We forecast rent growth next year to be about half of what it is right now,” said RealPage chief economist Greg Willett. “Half of what it is right now would still be second-best performance ever. We are expecting robust leasing activity again.”
More than 38,500 apartments are under construction in North Texas, and builders are scrambling to start more rental communities.
“Starts are beginning to move up again,” Willett said. “But it’s hard to get the deals to pencil out even with the big rent growth we have had.”