Will the real estate market in Dallas, Texas keep going up in 2020, as it has been in recent years? Or will there be a housing downturn or “crash” in the coming months?
These questions are top-of-mind for many home buyers in the Dallas-Fort Worth metroplex. Here’s what you should know, as we move into the fall of 2019.
A Housing Market Crash Not Likely for Dallas
Let’s start with the big question: Will the Dallas-area real estate market crash in 2020?
At present, that’s highly unlikely. Home prices across the DFW metro area will probably continue going up through the end of 2019 and into 2020, as they have been for the past few years.
A housing market downturn or crash in Dallas doesn’t seem likely at this stage. What’s more likely is that home prices in the metro area will rise more slowly in 2020 than they did over the past few years. In fact, one recent forecast predicted this very thing.
In September 2019, the housing research team at Zillow wrote:
“Dallas home values have gone up 8.7% over the past year and Zillow predicts they will rise 3.9% within the next year.”
That’s just one of several sources predicting a slowdown in price growth for this real estate market. But it’s not necessarily a “downturn,” so much as a return to normalcy.
If you look at annual home-price appreciation in the U.S. going back several decades (and filter out the anomalies), you’ll see that house values have risen by about 4% annually. That’s a fairly average rate of growth, from a historical standpoint.
In Dallas, prices have been rising at an above-average pace for several years. That kind of trend can eventually create affordability issues for a large segment of the population. So it’s actually good to see a bit of a market cool-down in the Dallas area. It could help prevent a real estate bubble from developing. And a bubble can’t burst if it doesn’t form in the first place.
Dallas at ‘Medium’ Risk of a Downturn in Next Recession
There has been a lot of talk about economic recessions lately. This is largely due to the economic uncertainty surrounding Trump’s trade war with China and global unrest in general.
People read the headlines and they want to know: “What would a recession do to the Dallas real estate market?”
According to one recent study, Dallas is only at “medium” risk of a housing downturn if a recession occurs. That study was conducted by the research team at Redfin. They analyzed real estate conditions in 50 of the nation’s largest metro areas, in order to “identify the local housing markets most likely to feel adverse effects from the next recession.”
To accomplish that, they looked at seven factors relating to local housing and economic conditions, and then assigned each metro area an overall “risk score.” In theory, a higher score means that a local real estate market is more likely to experience a downturn (and price declines) in the next recession. A lower score suggests that a market is less at risk of a downturn.
The Dallas-Fort Worth metro area had a score of 45.9%, which put it near the middle of the “pack” in terms of overall risk. That means it would take a severe recession to shake home prices in the Dallas area — according to this particular study, at least.
The housing markets most at risk of a downturn were Riverside, CA; Phoenix, AZ; and Miami, FL. Those with the lowest risk were all located in New England (Rochester and Buffalo, New York; along with Hartford, Connecticut).
According to Daryl Fairweather, chief economist at Redfin:
“If the U.S. enters a recession in the next two years, it will likely be caused by the global trade war … That could cause declines in home prices in markets whose economy depends on global trade, but home prices nationwide are likely to hold steady.”
The bottom line to all of this is that a housing market downturn or crash in the Dallas-Fort Worth real estate market appears unlikely at this stage. But home prices are expected to rise more slowly next year, following several years of rapid growth.
Home Prices Expected to Continue Going Up, for Now
The chart below, created by Zillow, shows their proprietary “Home Value Index” for the Dallas-Fort Worth-Arlington metropolitan area.
A couple of things will jump at you, when looking at this chart. For one thing, you’ll notice how home prices dipped slightly in the wake of the last recession (left side of chart). “Slightly” is the key word in that sentence. The last recession was pretty severe, yet it only caused a modest decline in home prices within the Dallas housing market.
That’s an important point. House values in some U.S. cities and metro areas fell hard and fast during the last recession. (I’m looking at you, Phoenix, Las Vegas, and most of California.) But the major cities in Texas, such as Austin and Dallas, experienced a relatively minor drop in prices by comparison.
You’ll also notice how prices in the area began a steady climb starting in late 2013. In fact, the Home Value Index for this housing market has nearly doubled over the past seven years. That upward trend continues to this day, but to a lesser degree.
Lastly, you can see Zillow’s forecast for the Dallas-Fort Worth real estate market, shown in the green shaded area. As mentioned earlier, they expect the median home price for this area to rise by around 4% over the next year or so.
Summary and Conclusion
We’ve covered a lot in this report. Here’s a recap of the key points:
- As of now, it seems highly unlikely that the Dallas, Texas housing market will experience a major downturn or crash anytime in the near future.
- This market will probably continue going up for the foreseeable future.
- But forecasters are predicting smaller home-price gains in 2020, compared to the past few years.
- When the next recession comes along, the Dallas real estate market could be at “medium” risk of a downturn. And it would likely be mild compared to some other major cities in the U.S.
- Will 2020 be a good time to buy a home in the Dallas-Fort Worth area? Most signs point to yes.
Disclaimer: This article contains forecasts relating to home prices and other economic conditions. They are the equivalent of an educated guess and should be treated as such. No one can predict future real estate trends with complete accuracy.