We see the headlines every day: Housing demand is high, inventory is low, and builders are facing post-pandemic delays in materials. And with multiple cash offers—often significantly above asking price—the middle class has been virtually priced out of the Dallas-Fort Worth housing market.
The most recent S&P CoreLogic Case-Shiller Indices shows Dallas’ home prices surged 15.9 percent in April—the region’s all-time highest 12-month gain. This has led some potential buyers to forfeit the idea of buying a home altogether and opt instead for the flexibility and convenience of renting. Here are six reasons why they’re choosing multifamily renting over single-family homebuying.
Rental housing provides a solution for those who want to form their own households for the first time but can’t attain homeownership
Cortland research shows move-outs to own have been backfilled by what we call “first-time renters.” These are the estimated 20 percent to 25 percent of residents aged 21-39 who report in our surveys they are living independently for the first time.
Comparing this to the increasing rates at which adults aged 25-34 live with a parent–a legacy of the Great Recession and our underbuilt housing market–we see the unmitigated upside that rental housing provides to those seeking to form their own household.
For those seeking their first taste of living independently, renting is the option that just makes more financial sense in the current market. Renters find the freedom they seek, but at a price they can afford.
Apartment communities offer more amenities and features
Features and amenities have become par for the course across the living experience for people throughout DFW. Virtually every new neighborhood, particularly in North Texas, now has a pool, gym, bar/restaurant, or café as single-family neighborhoods are trying to catch up with the multifamily approach to amenities. But, the great thing about multifamily is residents can come in with much less requirement upfront, including security deposit alternatives that lower move-in costs.
A multifamily resident can get a similar experience with multiple pools, gyms, and elevated levels of service while avoiding a pricey down payment, costly HOA fees or surprise maintenance expenses. All the fun lifestyles and services they want are included with their monthly rent payment, which frees up more cash for their monthly entertainment budgets or another discretionary spending.
Millennials and Gen Zers don’t necessarily want to buy a home
They tend to change jobs more frequently than the older generations and therefore seek greater flexibility in their living situations. Buying and owning a home hampers that flexibility. For those who want to change jobs more often or potentially move from city to city, renting in a multifamily community makes that lifestyle easier and much more advantageous.
The younger generations also tend to favor spending their money on experiences rather than high-priced material things, as a popular Harris study revealed. In fact, nearly 80 percent said they’d choose experiences like travel or events over fancy cars or houses.
A high monthly mortgage payment prevents them from living the lives they desire that focus on creating happiness and memories and sharing those experiences on social media. Renting gives them more control over their monthly living budget, which allows them to spend on the experiences they crave.
The housing supply won’t improve any time soon
A colleague recently bought a home, and the builder came back to her a couple of weeks after they’d agreed on the price and told her the spike in lumber prices had raised the cost of her home by another $15,000. That sort of thing pushes people out of the market, and it’s become common.
There’s a labor shortage, a lumber shortage, supply delays related to the COVID-19 pandemic, and surging demand, all of which have created intense competition in the DFW market. Some are afraid to sell because they don’t want to enter a bidding war on another home. And builders can’t get the materials they need or the workers to boost housing inventory.
It’s a simple issue of supply vs. demand. Prices are high, and it’s common in the Dallas market to see potential buyers make large cash offers on the spot.
The influx of people moving from high-tax states like California and New York who are flush with cash after selling their $1 million homes can buy twice the home in the Dallas market in the $700,000 range, and they can make higher cash offers. They drive the market’s housing prices higher, and buyers putting down the customary 20 percent now have to save even more for a down payment.
Convenience and price are big factors
Renting is simply easier, more affordable, and removes the cost and maintenance burdens of homeownership. Multifamily renters can better plan their monthly budgets because they know exactly how much they need to spend, except for utility bills that fluctuate. When the HVAC breaks down, a freeze causes a pipe to burst and flood your home, or the carpet needs replacement – homeowners foot the bill. Multifamily renters can rely on their landlords to cover these repair costs and more.
While multifamily rents have also increased, the rates aren’t nearly as prohibitive as mortgage payments for a majority of homes in the area, especially for younger buyers. And renters don’t have to pay property tax, which in Texas cancels out the average 7 percent bump one gets from moving here and not having to pay state income tax.
Markets ebb and flow, and the red-hot Dallas housing market will eventually cool when labor and materials issues subside and builders get back to adding significant housing inventory. But renting has solidified its place as an attractive status quo for those who want independence, amenities and services, more disposable income, less stressful lifestyles, and conveniences.
Trey Lopez is the managing director of DFW for Cortland.