Homebuying has gotten more difficult in the suburban counties that surround Dallas, at a far greater rate than the worsening homebuying conditions in Dallas County itself. That would be a welcome change, because recent trends indicate a significant reversal in the housing market. Suburbs like Frisco, McKinney, and Grand Prairie are experiencing a radical increase in rental households.
2018 was a tough year to purchase a home in Dallas County. In comparison, the suburban areas surrounding those cities presented all together a far simpler process for prospective homebuyers. Here at the beginning of 2023, that landscape has radically shifted. The ranks of renters in these ‘burbs have exploded. As a result, they are now some of the most popular and fastest-growing rental communities in the region.
George Ratiu is vice president of research with the National Apartment Association. He’s quick to note that the affordability crisis drove the suburban rental development boom. If we look at mortgage rates, average interest rates on 30-year fixed home loans are about 6.88%. That’s the highest level we’ve seen since just prior to the 2008 financial crisis, forcing many would-be homebuyers out of the market entirely.
The number of renters in the Dallas suburbs grew by 17.6% over the same period. Dallas County allowed an increase of only 7.9%. Perhaps most striking, suburbs like Frisco, McKinney, and Grand Prairie all added more than 5,000 new renter households from 2018 to 2023. This trend is indicative of the overall pattern occurring in other fast-growing Sun Belt metros such as Dallas and Houston. It is just as relevant to Northeastern cities, including Boston and Philadelphia.
And this wave of renters isn’t unique to just Dallas. In five of the top 20 metro areas, it’s suburbs that are quickly drawing new renters. Yet this trend is most acute in Dallas and other major metros. The impacts of this turn have turned 15 suburbs from majority homeowner to majority-renter communities.
Jay Parsons, a housing economist, notes the emergence of “suburban downtowns,” a trend partly fueled by a pandemic-induced shift towards remote work. He argues that residents have the opportunity to live near their work and convenient amenities. They benefit from lower rents, presenting a better value than downtown living.
“You can still be close to your job. You can be close to nice restaurants and shops but live in a suburban area where you’re still using a car, and you still have probably a rent that’s more affordable than living in most downtowns.” – Jay Parsons
The new such economic and social realities of this changing landscape are starkly visible in the resulting pain felt by broke residents like Andrew Decker. He indicated he hoped to buy their present home, which is already on the market at $340,000.
“We would like to make it our forever home if we could afford it, but it’s just so expensive.” – Andrew Decker
Decker still wants to believe in the dream of homeownership.
“If they were to come at me and tell me that, ‘Hey, you can buy this house for 200 grand today,’ I’d pull the trigger tomorrow. I wouldn’t even hesitate. But 340’s crazy.” – Andrew Decker
Tara Raghuveer, director of the national Tenant Union Federation, explains how the lack of affordability is driving people out of urban cores. The farther people get from their city cores, the worse it gets. For them, transportation troubles and lack of access to jobs are huge barriers.
“As people are moved out of the city, they’re further from transportation, they might be further from employment, they might be living in homes that are not necessarily connected to other people like them.” – Tara Raghuveer
Ratiu highlights the growing attractiveness of renting, especially in light of skyrocketing interest rates. The simplicity of having one payment that covers various expenses, including mortgage payments and maintenance, makes renting an attractive option for many.
“The ability to have one payment that covers all your expenses generally — you don’t have to deal with the mortgage payment and the home insurance and maybe the HOA and then a lot of maintenance expense — has been something that for a lot of people has been worth it.” – George Ratiu
The implications of these shifts go well beyond the numbers. They impact neighborhoods and ways of life. Urban economist N. Edward Coulson points out that as families grow, they want more land to raise children or in retirement to accommodate pets.
“You have your own land, you have kids or you have a dog, and you want that space.” – N. Edward Coulson
According to several experts, the politics and economics of the suburban-urban housing divide are changing. In doing so, they call for more analysis as this trend grows.
“That’s a dynamic that’s going to have to work itself out a little bit more before we know the final impact on suburban versus downtown pricing.” – Jay Parsons