The Dallas housing market has been heavily impacted by mortgage rates, with the new-home sales rate moving in lockstep in 2023.
The increased cost of borrowing has placed greater pressure on builders to keep prices in check. Despite slower market activity, the near-term outlook remains positive as the local economy remains one of the most dynamic in the nation.
According to the latest Milken Institute report, Dallas was ranked eighth in the nation among best-performing large cities and second only to Austin in the state. With the Fed largely expected to hold off on further rate hikes, home sales are expected to improve this year.
Strengths
Dallas remains one of the hottest housing markets in the nation and the hottest in the state. Strong job growth and favorable demographic trends underlie the metro area's dynamism.
Weaknesses
Declining affordability may be shaping new developments as lot sizes are under pressure. Homes on 50-foot to 70-foot lots dominate the landscape, but they are also the ones seeing the biggest declines in starts. At the same time, smaller lots have seen an increase.
Supply
Quarterly housing starts increased 5.4% over a year ago, while the number of available vacant developed lots sits at 82,545, up 28.7% over the same quarter last year. In terms of supply/demand balance, the market area is 4.56% undersupplied.
Sales
New-home sales in the Dallas-Fort Worth-Arlington metropolitan area increased 10.5% year over year to an annualized rate of 38,798 units in January. Existing-home closings far the 12-month period ending in December posted a year-over-year decline of 22.1% to an annualized rate of 103,645 units.
Economy
Total nonfarm employment in the metropolitan statistical area increased 2.8% from the same period the prior year to 4,309,300 payrolls in December, with approximately 600 fewer jobs in compared with November. The local unemployment rate decreased to 3.8% in December compared with 3.9% in the previous month. December's jobless rate is higher than it was at the same time in 2022 when it stood at 3.5%. Zonda forecasts the region's unemployment rate will finish the year at 3.5%.
Community
The current population for the metropolitan area is approximately 8,209,290 people and is projected to increase by 1.3% this year. There are approximately 3,039,190 households in the region, which is up 1.8% year over year. Forecasts show that current household formation is expected to increase by an annual growth rate of 7.5% for 2028. Incomes increased by 4.3% from the previous year to $92,328.
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