PDF Comprehensive Housing Market Analysis for Dallas-Plano-Irving ...

C O M P R E H E N S I V E H O U S I N G M A R K E T A N A LY S I S

Dallas-Plano-Irving, Texas

Wise

U.S. Department of Housing and Urban Development Office of Policy Development and Research As of July 1, 2017

Cooke Denton

Tarrant Johnson

Hill

Grayson

Fannin

Lamar Delta

Collin

Hunt

Hopkins

Housing Market Area

Dallas

Rockwall Kaufman

Ellis Navarro

Rains Van Zandt Henderson

The Dallas-Plano-Irving Housing Market Area (hereafter, Dallas HMA) is coterminous with the Dallas-Plano-Irving, TX Metropolitan Division. For purposes of this analysis, the HMA is divided into three submarkets: the Dallas County submarket; Northern Suburbs submarket, which includes the fast-growing Collin and Denton Counties; and Southeastern Counties submarket, which consists of Ellis, Hunt, Kaufman, and Rockwall Counties.

Summary

Economy

Economic conditions remain strong in the Dallas HMA as an economic expansion that began during 2010 continued during the most recent 12 months. Nonfarm payrolls during the 12 months ending June 2017 increased by 93,300 jobs, or 3.8 percent, from the previous 12 months. Since 2010, nonfarm payroll growth in the HMA has averaged 2.9 percent annually, well above the national rate of 1.4 percent. The unemployment rate in the HMA is currently 3.9

Market Details

Economic Conditions.......................... 2 Population and Households................ 6 Housing Market Trends....................... 8 Data Profiles...................................... 24

percent, up from 3.8 percent 1 year earlier. During the 3-year forecast period, nonfarm payrolls are expected to increase by an average of 2.8 percent annually.

Sales Market

The sales housing market in the HMA has been tight since 2012, with population growth outpacing new home development. The owner vacancy rate is currently estimated at 0.8 percent, down from 2.1 percent during 2010. During June 2017, a 2.7-month supply of inventory was available, up from a 2.3-month supply 1 year earlier (Real Estate Center at Texas A&M University). Demand forecast is for 68,850 new homes during the next 3 years (Table 1).

The 6,575 homes currently under construction will meet part of that demand during the first year.

Rental Market

The rental housing market is currently slightly tight, with a 6.3-percent vacancy rate, down from 11.1 percent during 2010, as strong job growth drives high levels of in?migration, which in turn increases demand for rental units. The apartment market is also slightly tight; although increased apartment production resulted in a 5.6-percent vacancy rate during June 2017, up from 5.0 percent 1 year earlier. Demand forecast is for 53,375 new rental units during the next 3 years (Table 1). The 23,905 rental units currently under construction will meet part of that demand.

Summary Continued

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Table 1. Housing Demand in the Dallas HMA* During the Forecast Period

Dallas HMA*

Dallas County Submarket

Northern Suburbs Submarket

Southeastern Counties Submarket

Total demand

Sales Units

68,850

Rental Units

53,375

Sales Units

13,950

Rental Units

30,850

Sales Units

44,300

Rental Units

19,550

Sales Units

10,600

Rental Units

2,975

Under construction

6,575

23,905

1,075

14,300

4,150

9,275

1,350

330

* Dallas-Plano-Irving HMA.

Notes: Total demand represents estimated production necessary to achieve a balanced market at the end of the forecast period. Units under construction as of July 1, 2017. A portion of the estimated 36,275 other vacant units in the HMA will likely satisfy some of the forecast demand. The forecast period is July 1, 2017, to July 1, 2020.

Source: Estimates by analyst

D a l l a s - P l a n o - I r v i n g , T X ? C O M P R E H E N S I V E H O U S I N G M A R K E T A N A LY S I S

Economic Conditions

The Dallas HMA, part of the Dallas-Fort Worth-Arlington metropolitan statistical area, is the most populous metropolitan area in the American South and home to 19 Fortune 500 companies, including Exxon Mobil Corporation, AT&T Inc., and J.C. Penny Company, Inc. Several notable telecommunication and computer technology firms, such as Affiliated Computer Services, Inc. and Texas Instruments, Inc., are also headquartered in the HMA. The

Table 2. 12-Month Average Nonfarm Payroll Jobs in the Dallas HMA,* by Sector

12 Months Ending

Absolute Percent

June 2016 June 2017 Change Change

Total nonfarm payroll jobs

2,452,400 2,545,700 93,300

3.8

Goods-producing sectors

302,300

309,800

7,500

2.5

Mining, logging, & construction

131,000

137,000

6,000

4.6

Manufacturing

171,300

172,900

1,600

0.9

Service-providing sectors

2,150,100 2,235,800 85,700

4.0

Wholesale & retail trade

392,700

403,500 10,800

2.8

Transportation & utilities

101,400

109,900

8,500

8.4

Information

69,600

70,900

1,300

1.9

Financial activities

220,700

229,700

9,000

4.1

Professional & business services 458,000

482,100 24,100

5.3

Education & health services

295,300

304,000

8,700

2.9

Leisure & hospitality

245,600

258,000 12,400

5.0

Other services

80,700

83,900

3,200

4.0

Government

286,300

294,000

7,700

2.7

* Dallas-Plano-Irving HMA. Notes: Numbers may not add to totals because of rounding. Based on 12-month averages through June 2016 and June 2017. Source: U.S. Bureau of Labor Statistics

HMA also has a large number of jobs in the finance and insurance industries and has always played a role in financing the oil industry. The city of Dallas and surrounding areas first began to develop as a trade location for cotton, with many railroad lines in the metropolitan area. With the expansion of the interstate highway system, the HMA remained an important center for logistics and trade due to its location in the middle of the country along interstates that run from Mexico to Canada.

Economic conditions in the HMA remained strong during the most recent 12 months, but the rate of job growth slowed from the previous 12 months. During the 12 months ending June 2017, nonfarm payrolls totaled 2.54 million, an increase of 93,300 jobs, or 3.8 percent (Table 2). The rate of growth was slightly lower than the previous 12 months when nonfarm payrolls increased by 94,600 jobs, or 4.0 percent. By comparison, from 2010, the start of the most recent expansion, through 2015, nonfarm payrolls increased by an average of 59,000, or 2.7 percent, annually, which

Economic Conditions Continued

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Labor force and resident employment Unemployment rate

was nearly double the 1.4-p ercent average rate of annual job growth nationally during this period. During the 12 months ending June 2017, all 11 employment sectors in the HMA added jobs, with 6 of the 11 employment sectors expanding 4 percent or more. The unemployment rate in the HMA was 3.9 percent during the 12 months ending June 2017, up from 3.8 percent during the 12 months ending June 2016 but well below the 2010 level of 8.0 percent. Figure 1 shows trends in labor force, resident employment, and unemployment rate in the HMA from 2000 through 2016.

During the 12 months ending June 2017, the professional and business services sector, which increased by 24,100, or 5.3 percent, from 1 year

Figure 1. T rends in Labor Force, Resident Employment, and Unemployment Rate in the Dallas HMA,* 2000 Through 2016

2,500,000

9.0

2,400,000

8.0

7.0 2,300,000

6.0

2,200,000

5.0

2,100,000

4.0

3.0 2,000,000

2.0

1,900,000

1.0

1,800,000

0.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Labor force

Resident employment

Unemployment rate

* Dallas-Plano-Irving HMA. Source: U.S. Bureau of Labor Statistics

Figure 2. Current Nonfarm Payroll Jobs in the Dallas HMA,* by Sector

Government 11.5% Other services 3.3%

Mining, logging, & construction 5.4% Manufacturing 6.8%

Leisure & hospitality 10.1%

Wholesale & retail trade 15.9%

Education & health services 11.9%

Transportation & utilities 4.3% Information 2.8%

Professional & business services 18.9%

Financial activities 9.0%

* Dallas-Plano-Irving HMA. Note: Based on 12-month averages through June 2017. Source: U.S. Bureau of Labor Statistics

earlier, led job growth. The professional and business services sector is also the largest employment sector in the HMA, with 482,100, or 18.9 percent, of all nonfarm payroll jobs (Figure 2). Job growth was the result of numerous company expansions, including Toyota Motor Sales, U.S.A., Inc., which officially opened its North American corporate headquarters in the city of Plano in July 2017 and will have 4,000 employees. Some employees started working in this location ahead of final completion of the campus. Most of the jobs at this location are management or engineering, and no actual manufacturing of automobiles will occur. In addition to the jobs at Toyota's North American headquarters, Toyota Connected, a global data hub for the company, opened in the city of Dallas, with 55 employees currently and will expand to 200 by the end of 2018. The professional and business services sector experienced another large expansion with the relocation of Jacobs Engineer ing Group Inc. corporate headquarters from Pasadena, California to new office space in downtown Dallas, bringing 700 jobs.

The HMA benefits significantly from its location along major trade routes running north and south from Mexico to Canada that make it an attractive location for transportation and logistics firms such as FedEx Corporation and , Inc., which have major employment centers in the HMA. During the 12 months ending June 2017, the transportation and utilities sector had the largest percentage gain in nonfarm payrolls, increasing 8.4 percent, or 8,500 jobs. Many of the job gains in this sector were additions related to Dallas Fort Worth Inter national (DFW) Airport, the fourth

Economic Conditions Continued

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D a l l a s - P l a n o - I r v i n g , T X ? C O M P R E H E N S I V E H O U S I N G M A R K E T A N A LY S I S

busiest airport in the United States with 30.8 million passengers and more than 600,000 tons of cargo passing through during 2014 (most recent data available). Amazon recently opened its third fulfillment center in the city of Coppell, which is across Interstate 635 from DFW Airport, and added 1,200 jobs during the most recent 12 months. Southwest Airlines Co., headquartered at the HMA's other major airport Dallas Love Field, was another contributor to growth in this sector. In the city of Dallas, this airport is the 41st largest in the United States. Since 2015, with the expiration of the Wright Amendment, which restricted flights out of Dallas Love Field and required them to land in one of the states bordering Texas before continuing on, and an expansion of the number of gates at Dallas Love Field, Southwest Airlines has increased flights and added employees.

The HMA is also an important hub for healthcare and education and is home to numerous hospitals, medical research facilities, and universities. Two of the largest employers in the HMA, Baylor Scott and White Health and Texas Health Resources are in the education and health services sector, each with more than 10,000 employees. Table 3 lists the largest employers

Table 3. Major Employers in the Dallas HMA*

Name of Employer

Nonfarm Payroll Sector

Number of Employees

AT&T Inc. Bank of America Corp

Information Financial activities

10,000+ 10,000+

Baylor Scott and White Health

Education & health services

10,000+

JPMorgan Chase & Co.

Financial activities

10,000+

Texas Health Resources

Education & health services

10,000+

Texas Instruments, Inc.

Professional & business services

10,000+

UT Southwestern Medical Center

Government

10,000+

Citigroup Inc

Financial activities

5,001?10,000

Southwest Airlines Co.

Transportation & utilities 5,001?10,000

State Farm Life Insurance Company Financial activities

5,001?10,000

* Dallas-Plano-Irving HMA. Note: Excludes local school districts. Source: Dallas Regional Chamber of Commerce

in the HMA. With an expanding population base in the HMA, this sector has expanded steadily to meet the needs of the population. The education and health services sector has been the fastest growing sector in the HMA, in percentage terms, since 2000. From 2001 to the most recent 12 months, job growth in this sector averaged 8,400, or 3.8 percent, annually. Figure 3 shows percentage changes by sector since 2000. During the 12 months ending June 2017, nonfarm payrolls in this sector increased by 8,700, or 2.9 percent, to 304,000. During the past year, Medical City Dallas hospital recently completed an $85 million expansion. The rate of job growth in this sector slowed significantly during the past year. Nonfarm payrolls in the education and health services sector increased by 12,500, or 4.4 percent, during the 12 months ending June 2016 and by 10,900, or 4.1 percent, during the 12 months ending June 2015. A signifi cant number of hospitals completed construction in late 2014 and 2015 that boosted jobs in this sector, and these recent completions continue to provide jobs, contributing to growth. Many medical facility construction projects are still ongoing in the HMA. Medical City Dallas in the past year broke ground on a $125 million woman's hospital, and the North Campus of Texas Scottish Rite Hosp ital for Children in the city of Frisco is currently under construction and expected to open in 2018 and to contribute to future growth in this sector.

With the numerous corporate expan sions and influx of people moving into the HMA creating strong demand for new housing, employment growth in the mining, logging, and construction sector has been high since 2012.

Economic Conditions Continued

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Figure 3. Sector Growth in the Dallas HMA,* Percentage Change, 2000 to Current

Total nonfarm payroll jobs Goods-producing sectors Mining, logging, & construction Manufacturing Service-providing sectors Wholesale & retail trade Transportation & utilities Information Financial activities Professional & business services Education & health services Leisure & hospitality Other services Government

? 40 ? 30 ? 20 ? 10 0 10 20 30 40 50 60 70 80 90 * Dallas-Plano-Irving HMA. Note: Current is based on 12-month averages through June 2017. Source: U.S. Bureau of Labor Statistics

During the 12 months ending June 2017, nonfarm payrolls in this sector totaled 137,000, an increase of 6,000, or 4.6 percent, from 1 year earlier. Large-scale projects contributed sig nificantly to recent gains in the sector. The new $300 million JPMorgan Chase & Co. campus in the Legacy West development in the city of Plano is scheduled for completion in the fall of 2017 and will consolidate 6,000 jobs into one campus. Also, several new highrise office buildings are under construction in downtown Dallas, including the 25-story 1900 Pearl tower and the 20-story Park District tower.

The HMA has not always experienced such robust economic growth. After strong growth during the 1990s that carried through 2001, Dallas experienced an economic downturn due, in part, to the telecoms bust. From 2002 through 2003, nonfarm payrolls declined by an average of 47,300, or 2.4 percent, and the unemployment rate increased from

4.8 to 6.8 percent. Job losses were most severe, on a percentage basis, in the information sector, which declined 10.5 percent annually, or an average of 10,100 jobs during the same period. From 2004 through 2008, nonfarm payrolls in the HMA recovered and increased by an average of 44,900, or 2.2 percent, annually, led by growth in the professional and business services sector, which increased by an average of 16,300 jobs, or 5.3 percent, annually. During the same period, population growth in the HMA contributed to increased demand for healthcare services, which led to the education and health services sector increasing by an average of 8,400 jobs, or 4.2 percent, annually. During 2009, the local economy declined due to the national economic downturn, with nonfarm payrolls down by 83,000, or 3.9 percent, to 2.05 million jobs. The hardest hit employment sector was the professional and business services sector, which declined by 25,200 jobs, or 7.0 percent, to

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