It is difficult to miss the headlines lately about soaring prices in both the residential real estate and apartment rental markets. Realtor.com reports that the apartment rental market has seen double-digit rental price growth for the first time in recorded history:
For the first time on record, rental price growth rose by double digits, increasing 11.5% year over year to a median $1,633 in August, according to a recent Realtor.com® report. That’s three times the growth seen before COVID-19 struck in March 2020.
This fact comes as people of all generations and young people, in particular, look for apartment accommodations in some of the most popular cities in America. One of those cities is the Dallas/Fort Worth (DFW) area, and it will be the focus of our discussion today. The facts and trends that exist in Dallas/Fort Worth can be extrapolated to some extent to other major metropolitan areas in the United States, but most importantly, they show that there is an ever-increasing appetite for apartment rentals in cities coast-to-coast.
The Surging Number Of New Apartments In Dallas/Fort Worth
Dallas/Fort Worth is expected to lead the nation in new apartments opening for tenants in 2021. We do not have complete data for 2021 yet as the year is still ongoing as of the time of this writing, but data from 2020 points to a continuing trend of domination in new apartment openings in the city. Statista reports that 19,318 new apartments opened in the Dallas/Fort Worth area in 2020. The second closest city was New York City, but it was far behind at just 15,952 new apartments in 2020. It seems that apartment dwellers are interested in living in a metro area, but they also want to live in a state that is affordable.
A breakdown of some of the top markets for apartment openings and how many they opened in 2020 is as follows:
- Dallas/Fort Worth, TX: 19,318
- New York, NY: 15,952
- Houston, TX: 10,404
- Atlanta, GA: 10,208
- Austin, TX: 9,342
- Los Angeles, CA: 9,125
- Washington, DC: 8,827
The state of Texas has no state income tax, and that makes it highly attractive to young professionals looking to raise their families in an area where they can grow and prosper. They don’t want to give up the nightlife and other accommodations that a city can offer, but they also cannot necessarily afford to live in some of the more expensive states. You will notice from the list above that 3 of the top 5 cities for new apartments are all located in the state of Texas. The state’s favorable tax structure as well as its openness to business is surely helping to promote this surge.
The tax situation in Texas is one thing to note, but it is not the only factor driving all of the excitement for apartments in the DFW area. There is also the fact that today’s consumer is extremely prices sensitive. The average person or family is interested in an apartment that feels safe and affordable. Those are two of the attributes that most would rate extremely highly when asked what they are giving consideration to.
How does the Dallas/Fort Worth market stack up against other areas in terms of the average rental price per month? It turns out that it is slightly better than average. Zumper.com, a website that tracks apartment listings and prices, among other things, posts that the median rental cost per month for an apartment in the DFW area right now stands at $1,425 per month. This is nearly 13% below the median price for the average one-bedroom apartment in the country right now. This is extremely enticing to people who are looking for a place to live that fits into their budget.
Reasons Why So Many Are Considering Apartments At This Time
There are a whole host of reasons why people move into apartments, and each individual case is unique for the reasons given why someone wants to live in an apartment. That said, there are certain reasons that come up in conversation time and time again when speaking with millennials seeking apartments. These reasons include:
- The Inability To Get A Home Loan – It is challenging for many millennials (ages 25 to 41) to get a home loan at this time. There appears to be some progress being made to get more home loans out to this age group which is good news, but many still say that their poor credit scores and other challenges make it extremely hard for them to qualify for a home loan at all. These individuals are forced to live in an apartment even if the mortgage that they would pay would be less than the rent that they must fork over each month. It is an extremely frustrating situation for many millennials, but it is just where the market is at this time.
- A Desire For Flexibility – Taking on a mortgage means taking on a 15 to 30-year responsibility in most cases. Many millennials are not prepared to commit to something on that time scale. They prefer the flexibility that renting an apartment provides to them. They can decide to move to another apartment or even another area once their contract with that apartment is finished. Most apartments have terms of no longer than 12 months, so millennials can decide to move on to another place if they choose to, or if their job demands it.
- Allowing Maintenance To Be Someone Else’s Problem – Maintenance costs on a home are often overlooked when considering the full expense of owning a home. People either have to be handy themselves and take care of the issues as they arise, or they have to hire someone to do the work. Either way, maintenance costs can quickly add up for those who own a home. Thus, it makes sense to many millennials to simply live in an apartment where they know that this work will be handled for them.
It is very likely that the demand for new apartments will be with us for some time. Wages remain pretty flat, so the ability or even the desire to take on a mortgage will remain elusive for many. Fox Business reports that the vast majority of millennials are actively saving up to buy a home at some point, but in the meantime, you can expect the demand for apartments to remain elevated.
For all of the latest insights into the DFW apartment market as well as any other apartment data you could ever want, please contact us and we can provide you with those valuable insights.