Is it better to rent as home prices soar? Why that’s a tough choice in Dallas-Fort Worth

Dallas-Fort Worth home-buying prices have reached staggering heights, leaving many prospective buyers wondering if they should wait for the market to cool off and rent a home instead.

But renting a single-family home is no trip to the bargain bin either.

The median price of renting in Dallas-Fort Worth has increased 7.2% during the past year, according to Realtor.com. But that figure, which includes rent costs for apartments, single-family homes and other types of rental housing combined, only tells part of the story.

Anecdotally, many single-family homes are listed for rent for hundreds of dollars per month more than in previous years.

For example, in Watauga, a three-bedroom, 1,338-square-foot house built in 1981 is being advertised for rent at $2,100 a month. That price is more than $500 a month higher than the real estate listing firm Zillow says should be the typical price (or “Rent Zestimate”) for that type of property.

The median cost of renting a three-bedroom home in Dallas-Fort Worth is now $1,783 a month, up 6% from $1,683 a year ago, according to Attom Data Solutions. At the same time, the median price of buying that same home is $267,188, up from $241,875 last year, a 10% increase.

Seeking help for housing prices

On social media, many North Texans have sought help for loved ones being forced out of their homes because of rising monthly rental rates.

On NextDoor, many residents in far north Fort Worth have complained of landlords raising rates as much as $150 to $300 in annual renewals. One resident of the Summerfields South neighborhood lamented that her landlord explained a $125 rent increase by saying his accountant had directed him to “go up on rent or sell the house.”

But those high rental rates, while spooking some residents, are showing no signs of leveling off. For all the stories about rent increases, there are just as many tales of people overpaying by $30,000 to $100,000 for purchased homes.

The case for renting v. owning

Home prices are so inflated in Dallas-Fort Worth that prospective buyers would be better off renting for a year or two and investing their savings for the future, according to a study by Florida International University and Florida Atlantic University.

That study contradicts what many hold as a fundamental truth about the American Dream: that buying a home is the best way for upstart families to build wealth.

“Most people used to believe that renting was throwing your money down the drain every month without getting anything for it,” Eli Beracha, co-author of the report and director of Florida International’s Hollo School of Real Estate, said in an email. “But research has shown that renting and investing the money that would otherwise be spent on ownership can build a nest egg superior to owning and building equity.”

Some builders are even designing entire neighborhoods of single-family homes as rental areas. One Hurst builder recently announced plans to create a community of 67 rental homes, with monthly payments as high as $2,400 for three-bedroom units. The planned Eden Town Square development on Bedford-Euless Road in Hurst aims to use technology features to lure young professionals who rent by choice, rather than by necessity.

Lack of housing supply

And don’t expect North Texas rental rates to level off anytime soon.

A nationwide lack of housing supply caused by years of slow construction is likely to continue pushing up the cost of both renting or buying for years, National Association of Realtors chief economist Lawrence Yun said.

Another 5.5 million to 6.8 million housing units would need to be built to fix the shortage, but only 3.3 million are expected to be built during the next two years, he said.

“That would represent the best two-year performance in 15 years, yet it would still be inadequate,” Yun said in an email. “Therefore, expect both rents and home prices to outpace overall consumer price inflation in the upcoming years.”

The North Texas region has only a 1.3-month supply of available homes, far less than the 6-month supply that would be considered a balanced housing market, according to the Texas Real Estate Research Center at Texas A&M University.

Whether renting or buying a home is the right move depends upon each resident’s situation, said Alex Hemani, who founded ALNA Companies in Dallas and provides property management services for more than 300 single-family homes in the Dallas-Fort Worth region.

Many families prefer to rent rather than own while they are in their early earning years, so they can remain flexible and move if necessary. Yet many of those families prefer the lifestyle of a single-family home — especially the space and privacy — rather than living in an apartment or townhome.

“If your mindset is, hey, we’re in a bubble and this thing is about to burst, you might rent for a year or two until it gets cheaper,” he said.

‘Thankful we did it’

Macy Tatum and her husband searched for a home in southwest Fort Worth for more than a year. They were resigned to the likelihood that they would need to rent for at least another year when in May 2020 they finally found a home in the low- to mid-$200,000s price range.

That purchase saved the Tatums — who are recent Lamar University graduates, with a toddler son — from at least a year of paying escalating rent.

“We were concerned that purchasing a home two months into a pandemic might be unwise,” said Macy Tatum, 28, director of operations for Craftwork Hospitality Co., a Fort Worth company that provides coffee shop services for apartments. “But we’re really thankful we went ahead and did it.”