The intent of this article is to analyze the expensive single-family rental market in Collin, Denton, and Dallas counties in terms of rental rates and demand in 2020. If you are unfamiliar with the locations, I have circled all three of them in the map below.
First let's take a brief look at how the median rent (Sale Price) and rent rate (Days to Sell) for the general rental market has changed over the past two years. The sample size is about 35000, with rents within the range between $1000 and $10000 in 2019 and 2020. Rents are shown as a line graph and the rental rate is shown as a bar graph. As you can see, the monthly rents remain largely stable at $1,700 to $1,900 with a slight increase. The rental rate accelerated significantly in 2020, with the median rental rate dropping to 20 days from April and staying below 15 days from June to December. Is such a hot rental market the result of fewer available properties? After all, you can't evict a tenant for not paying rent now. I will explain the overall rental market in detail in a separate report at the end of the year, so today I will simply talk about the expensive rental market.
I chose the high rent market to analyze because I have recently received many inquiries from friends and clients. My friends are curious whether there are people renting such expensive properties. The clients are considering investing in high rent properties because these high quality tenants have better jobs and stable income to reduce the risk of rent default.
I selected a sample of $2800-$10,000 a month single family homes for 2019-2020. The analysis uses box plots to show the distribution of the data, so if you are not familiar with box plots, please take a look at Wikipedia. The Q1, Q2, and Q3 distributions described below represent the sample sorted from smallest to largest, at the 25%, 50%, and 75% values. 50% is what we often refer to as the median.
The chart above shows the distribution of rents, Q1, Q2, Q3 are $2995, $3250, $3900. The high rent mass models are all under $3900.
This graph above shows the distribution of the rental rate of the rental properties listed in different months. The horizontal coordinate is the month of Listing Date, the vertical coordinate is the rental speed, and the calculation method is Close Date - Listing Date days. The rental speed has remained stable and accelerated slightly in 2019, with Q1, Q2 and Q3 in January at 14, 30 and 55 days respectively. In December, the triple value drops to 12, 25, 47. In 2020, the rental rate remains relatively stable and accelerates from January to August, with the triple value dropping from 12, 25, 45.75 to 9, 20, 35. September starts to accelerate significantly, dropping to 7, 12.5, 21 in November. In December, it further decreases to 4, 6, 8.5 (Data is exported on 19th, without data in the remaining days).
This shows that the trend in the high-rent market is in line with the overall market change. So back to the question we asked at the beginning of the article, is this acceleration in rentals due to a decrease in inventory? Below we analyze the new listings and the corresponding rentals for each month.
The red line above is the median monthly rent, the single red bar is the monthly new listings, and the stacked bar immediately after that is the number of rentals for the month, which I have carefully colored in for you, with the rental rate under 30 days (30-) in green, 30-60 days in blue, and more than 60 days in orange. Looking at the monthly supply of new listings, the change in values from January to September is similar for 2019 and 2020, with a range of roughly 100 to 230, with a mid-year spike. there is still a steady output of listings from October to December 2019. In contrast, from October 2020 onwards, there are significantly fewer new listings and the demand market has started to eat up more of the previous listings. What amazes me is that we don't see the impact of COVID on the selected markets from March onwards at all from here.
The chart above shows the distribution of rental housing as a percentage of total rental housing for the month for three different time periods over two years. It can be seen that there is a significant increase in the percentage of homes rented for less than 30 days in 2020. the distribution of the three values in 2019 is 31.13%, 42.91%, and 50.83%, while in 2020 it increases to 49.02%, 55.79%, and 58.52%. Accordingly, there is a significant decrease in the percentage of houses rented for longer periods of time. In short, the expensive houses are very good to rent, and they are sold very quickly when they are listed. Our company is responsible for a property with a monthly rent of $3000, 3 days to close, amazed the landlord.
In addition, the cash flow that you are concerned about most, depending on the investment method, there is a big difference. In order to give you a better understanding of the properties in my market. I developed my own algorithm to estimate the value of houses, the two distributions below are the ratio of home price to rent and the ratio of rent to home price, you can choose the indicator you like to measure the investment situation. You are all connoisseurs in investing.
Conclusion: The expensive rental market in the three counties is very well rented. Although the volume of new listings has decreased a bit since October, the listings from January to September are on par with 2019. Personally, I believe that the growth in demand is driven more by population growth. From 2018 to 2020, the average annual population growth in Dallas is 0.57%, Collin and Denton is 3.36% and 2.76% respectively. The median household income is around $100,000 in Frisco, Allen, McKinney, Little Elm, and Plano, and $110,000 and $140,000 in Melissa and Prosper, respectively. These high income households may support a high rent long term rental market.
Thank you for your patience in reading to the end and I hope you enjoy the report. The interpretations in the text may not be comprehensive and in-depth, and your corrections are welcome. The information here is more useful for your investment in the Dallas neighborhood than the nationwide report. If you have more investment ideas, please contact me and we can customize the report according to your ideas.
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