A recently updated forecast for the Dallas, Texas housing market in 2020 suggested that home prices in the DFW area could drop through the rest of 2020 and into early 2021. That forecast was issued by Zillow and is largely influenced by the coronavirus (COVID-19) pandemic and resulting economic slowdown.
Our forecast: Before the coronavirus pandemic came along, the Dallas, Texas real estate market was on track for another year of steady price gains. But that has changed. Due to double-digit unemployment and a broader slowdown in the economy, our revised Dallas housing market forecast predicts that home prices could dip slightly over the next year or so. But that will probably be a short-term trend, after which home values turn north again.
Here are the latest trends and predictions for the Dallas-Fort Worth real estate market through 2020 and into 2021.
Dallas-Fort Worth Housing Forecast Into 2021
According to the real estate information company Zillow, the median home value for the Dallas-Fort Worth metro area rose to around $256,000 as of June 2020. That was an increase of 2.4% from the same month a year earlier, by their estimation.
The chart below, created by Zillow, shows the median home value for the DFW area over the past year or so. As you can see, prices began to climb steadily in 2014 and followed that trajectory for several years. The company’s forecast for Dallas home prices is shown in the green shaded area.
The annual home-price gains for the DFW area over the past year were lower than the national average during the same timeframe. So we’re talking about a real estate market where house values have been climbing at a slow but steady pace.
Zillow’s long-range housing forecast for the Dallas-Forth Worth-Arlington metro area predicts that home prices will decline by -1.9% over the next 12 months. That forecast was issued in June 2020, so it stretches into early summer of 2021.
In June, Zillow’s research team stated: “Dallas-Fort Worth-Arlington Metro home values have gone up 2.4% over the past year and Zillow predicts they will fall -1.9% within the next year.”
Granted, that’s just one prediction for the DFW housing market, extending into early 2021. Other forecasters may have a different outlook. So we shouldn’t get too wrapped up in the exact numbers being forecasted here.
The key takeaway is that home prices within the Dallas-Fort Worth real estate market will likely level off over the coming months, and they could dip slightly over the next year. That’s largely due to the coronavirus (COVID-19) situation we are still grappling with.
A Temporary Downturn for Home Prices?
The prediction above mirrors those being issued for many cities and metro areas across the country. In a lot of real estate markets, home prices are expected to either slow down or dip slightly through the second half of 2020 and into 2021. This is largely the result of the ongoing health crisis and economic downturn.
If Zillow’s housing market forecast for Dallas proves accurate — that is, if home prices in the area do decline over the next year or so — it will probably be a short-term downturn. Beyond that, the supply-and-demand situation will likely push prices north again.
And speaking of supply, let’s talk about the inventory situation within the Dallas-area real estate market.
Tight Inventory Affecting Dallas Real Estate Scene
Residential real estate inventory remains low in many major cities across the nation, and Dallas is no exception to that.
According to a report from the Real Estate Center at Texas A&M University, the Dallas-area real estate market had about a 2.5-month supply of homes for sale in March 2020. Note the decimal there; that’s two and a half months. That is well below what’s considered to be a balanced housing market.
So from an inventory standpoint, at least, the Dallas-Forth-Worth housing market still favors sellers over buyers. But that’s a metro-wide assessment. Conditions can vary quite a bit from one neighborhood or area to the next. Supply levels vary as well.
According to a May 2020 article from The Dallas Morning News:
“And in the Dallas-Fort Worth area, property listings with real estate agents are down more than 18% from this time in 2019, according to a new report from Realtor.com based on data as of May 23.”
In other words, home buyers have fewer properties to choose from this year when compared to last. That’s something to bear in mind, if you’re planning to venture into the housing market later in 2020.
Competition Is Highest for ‘Starter’ Homes
Last year, a report published by a housing research group showed that supply is tightest at the lower end of the pricing spectrum. That’s partly because there are more house hunters and buyers on the more affordable end. As you up the pricing spectrum, the number of eligible buyers drops off.
The 2019 report was published by Harvard University’s Joint Center for Housing Studies (JCHS). Among other things, it revealed that construction of moderately priced “starter homes” has lagged over the past few years.
To quote that report:
“…construction of modest-sized single-family homes has been particularly weak. Despite increases in 2017, small homes under 1,800 square feet represented just 22 percent of single- family completions [in 2018], down from 32 percent on average in 1999 – 2011.”
While that report is a bit dated, the conditions it outlined are still occurring to this day.
Land prices are one reason for the construction lag in lower-priced homes. According to Ted Wilson of Dallas-based Residential Strategies, “developers cannot get cheap enough land and lots to get the house price down enough.”
Not the Fastest Market, But Still Competitive
As of May 2020, homes listed for sale in the Dallas area spent a median of 37 days on the market, before going under contract. That was close to the national median for the same period. This means homes in the DFW housing market are selling at a more-or-less average pace in 2020, despite the tight inventory conditions mentioned above.
But home sales have slowed over the past couple of months, due to ongoing issues related to the coronavirus (COVID-19) pandemic. The same is true for many housing markets across the country.
In May 2020, the number of homes sold within Dallas County were down almost 35% from a year earlier. That’s based on statistics reported by the MetroTex Association of Realtors.
Our forecast: Home sales within the Dallas housing market will remain below historical averages for the foreseeable future. Sales are likely to decline over the coming months as well, as the metro area continues to struggle with a sharp rise in coronavirus cases.
Disclaimer: This article includes third-party predictions for the Dallas-area real estate market extending into spring and summer of 2021. Those forecasts were compiled and presented here as an educational service to our readers. They are the equivalent of an educated guess. MetroDepth makes no claims or assertions regarding future housing conditions.