By Chris Sun
After New Year's Day, I'm finally ready to do my 2020 retrospective analysis. I'm going to analyze the long term rental market in four counties (below), which basically represents the overall situation in the DFW area. Many people are reluctant to read research, so I'll start with a conclusion: it's hot! Then I'll use the data to quantify why it's hot.
Data source: NTREIS, which is MLS
Housing type: Single Family House, 2+ bedroom, 1000+ SQFT, monthly rent 1k-5k
The number of listings: Collin ~17000, Denton ~12000, Dallas ~14000, Tarrant ~19000. although the four counties are similar in size and shape, there are many differences in population, industry, infrastructure and so on, so it is not very meaningful to compare the numbers.
Time frame: 2019-2020. 2019 data was chosen to compare with 2020, so you can see the difference.
Here are a few indicators to describe the market situation respectively, including rents, rental rate, comparison of new and rental listings per month, and population.
Rents
The chart below shows the change in median rents over the two years. Rents are closely related to area, Collin>Denton>Dallas>Tarrant, and it is clear that Collin and Denton are very close, while Dallas and Tarrant are in one group. The difference between the two groups is around $100-$200, and the difference within each group is less than $100. In addition, there is a small increase in rent in 2020, so we use a box plot to see how the two-year rent distribution compares.
Using a box plot not only makes it easier to compare medians, but also gives a better visualization of the differences in the overall distribution. The median rent increases for the four counties are Collin 5.14%, Denton 3.59%, Dallas 4.85%, and Tarrant 3.13%.
Rental Rate
The chart below shows the monthly median rental rate change for the last two years. Generally speaking, January and around December are the low season, and it takes about 30 days to rent out the houses. Summer is the peak season, and similar to the selling market for school district properties, the rental speed is shortened to 1 to 2 weeks. the change from January to May 2020 is highly consistent with 2019, but the peak rental period after June continues into December. Collin's was the best rental and Dallas' was slightly worse. But overall they are all very well rented.
We continue to compare the difference between the two years using box plots, and the rental acceleration is unusually pronounced. When we compare the median drop, Collin accelerates 47.92%, Dallas 23.26%, Denton 25.58%, and Tarrant 33.33%. So, is this boost caused by too few listings? Please read on.
Monthly comparison of new listings and rentals
At the end of this article, you can find a chart of monthly new and rented listings for the last two years in the four counties. The trend is consistent for 2019 and 2020, showing a bell-shaped distribution with more new listings in the middle of the year (May-August). But there is still significant variation in the exact number, and here we use the box plot below for direct comparison. In terms of median declines, Collin had 8.28% less, Dallas 13.38%, Denton 8.15%, and Tarrant 15.72%.
The ratio of current month rentals to new listings also increased significantly in 2020, with Collin 10.08%, Dallas 5.89%, Denton 12.04%, and Tarrant 11.83%. 2020, the median ratio for Dallas is 87.32%, and the median ratios for the remaining three counties are in the range of This represents a strong market demand, with new housing stock being consumed quickly each month.
Population
Part of the reason for the hot rental market is that listings are becoming scarce. But as you can see, the decrease in listings is only about 10%, much less than the acceleration in rentals (23.26% - 47.92%). I personally believe that demand based on population increase is the root cause of the rental market boom. The chart below shows a comparison of population growth in the four counties (data source Collin, Dallas, Denton, Tarrant).
Conclusion
If you've read this far, you should have a more quantifiable understanding of how hot the DFW rental market is. Simply put, the more people there are, the better the houses are for rent. So I think that due to the growth in population coupled with the growth in for sale home prices, but an inadequate rental market, the next step will be a substantial increase in DFW rents. Right or wrong, we'll see what happens in 2021.
Appendix
Monthly comparison of new and rented homes in the four counties
Comments