Sales of existing DFW (Dallas – Fort Worth, Texas) single-family homes in August were up 24% from a year ago (aug 2010 to aug 2011), according to the most recent MLS data compiled by the Real Estate Center at Texas A&M University. Sales in DFW (Dallas County) are up 31%. Year over year median price is unchanged.
Increase in sales velocity is a leading indicator. Increase in prices is a trailing indicator. (NOTE: we are seeing a leading indicator of potential price increases).
The population of the Dallas – Fort Worth ( DFW ) metro is booming.
People are buying houses. People are consuming houses faster than builders are adding houses. Restricted land resources near job centers (yes there is lots of land, but not near where the jobs are), tight construction financing, and stringent home buyer lending requirements are causing a major constriction in construction (say that 10 times fast!).
What happens when demand increases faster than supply? Economics 101 = prices go up assuming there is capacity to pay more.
Homes are still very affordable in DFW with about 25% of household income being used for housing.
40% is about the maximum healthy allocation for housing. This means residents of Dallas have an additional 15% of their income to use towards discretionary housing expenses. This discretionary income allowance makes it possible for housing prices to go up. Historically low interest rates are making housing even more affordable. The majority of non-homeowners cannot get a mortgage because of tighter lending standards and credit challenges. If lender underwriting gets looser or credit begins to heal with time, more home owners will qualify thus causing an increase in demand.
In the interim, high population growth combined with housing supply restrictions combined with strict lending guidelines is a recipe for RENT INCREASES.
Buy a new construction house in DFW and rent it out for positive cashflow.
1) If home buyer demand increases because of looser lending, PRICES will go up and you’ll make a capital gain profit.
2) If home buyer demand decreases because of continued tight lending practices, RENTS will go up as the population increase puts further demand on the already limited supply of rental housing.
You win either way.
The team at Hassle-free Cashflow Investing would be happy to help you acquire a portfolio of positive cash flow single family homes in the the strongest rental market in the country – Dallas – Fort Worth, Texas.
Send an email to Invest@hasslefreecashflowinvesting.com to learn more about how cash flowing houses in DFW could fit into your personal investment strategy.
Part of our series of articles on investing in Dallas