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By Giulia Carbonaro
Senior Reporter
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With an explosion in housing inventory and dwindling sales, Dallas—one of the hottest housing markets during the pandemic—is now beginning to crash back to earth, according to the latest data.
A recent report by Redfin found that the Texas city was one of only 10 metros across the country where home prices fell in the four weeks ending on May 18, reporting a year-over-year drop of 3.4 percent—the second-biggest in the country after Oakland, California.
Why It Matters
Many of the markets that became the most overheated during the pandemic homebuying frenzy are now experiencing the most dramatic corrections in the country. These reversals come with a surge in inventory as buyers still bogged down by sky-high prices and rising housing costs slowly gain the upper hand over sellers.
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While home prices in Dallas are still higher than they were before the pandemic, price drops may soon be accelerated by cooling buyer demand as economic uncertainty grows across the country and experts say mortgage rates won't fall much further this year or the next.
What To Know
Dallas was a hot homebuyer market during the pandemic because it was a relatively affordable metro area with a thriving job market, economist Amy Nixon told Newsweek.
"The tech industry experienced a massive hiring boom in 2020 and 2021, so we also had huge numbers of foreign homebuyers coming to Dallas on H-1B work visas," she said. "With average salaries of $167,000, these buyers were able to outbid locals and drive regional home prices up."
Many of these newcomers, including those driven to the city by the rise of remote work, came from coastal areas and had high incomes, "so they were able to aggressively bid up property prices as well," Nixon said.
"Due to record low interest rates, investors crowded the market too and seized the opportunity to buy single-family homes to turn them into rental properties. There simply weren't enough available properties to meet demand, so most homes for sale went into bidding wars—and many rental properties did too," she added.
The result was that the median price of a home in Dallas jumped from less than $340,000 in 2019 to a peak of $485,000 in May 2022.
In April, home prices in Dallas were still rising despite sales taking a hit. According to Redfin, the median sale price of a home in the city in April was $467,500, up 5.7 percent year over year. That was despite sales being down by 8.8 percent and listings spending seven more days on the market compared to a year earlier before going under contract.
But things are starting to change as inventory in the city continues to grow.
A Turning Point for Dallas
"Over the past four years, Dallas experienced record levels of new housing starts and deliveries," Nixon said. "This is occurring alongside a huge increase in mortgage rates, a slowdown in domestic migration, and widespread tech layoffs."
What is happening, then, is that supply is steadily growing while demand is slowly receding.
According to data from ResiClub, there are five times more active listings in Dallas today than they were in 2021, when the pandemic homebuying frenzy depleted the inventory of homes available for sale in the city and brought prices up.
In Dallas-Fort Worth-Arlington, there were 29,084 homes listed for sale last month. In May 2021, there were 6,010. Inventory in the area now is also higher than it was in May 2019, at 22,293, and it is the highest on record going back to May 2017.
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Inventory has risen in part because Texas has been building more new homes than almost every other state in the country over the past few years. Also, homeowners who were locked into their homes by high mortgage rates have now stopped waiting for rates to come down.
In a market that suffered greatly from the pandemic supply shortage, new inventory should be welcomed by buyers, but that isn't what is happening in Dallas. Buyers who have been pushed to the sidelines of the market since 2019 are still being kept there by elevated mortgage rates and sky-high prices, which remain much higher than pre-pandemic levels.
Property taxes have also risen massively over the past few years, contributing to buyers' affordability struggles. As of 2024, Dallas homeowners were paying about 41 percent more in property taxes than they did five years before, according to Redfin.
"As the prices of homes shot up over the last four years, high property taxes and insurance costs began to eat away at the 'relative affordability advantage' Dallas experienced prior to the pandemic," Nixon said.
"Many existing homeowners are putting their houses up for sale, looking to move to lower cost of living areas or escape the now-crowded metroplex," she added.
Many of the homes for sale in Dallas are now being sold only after the seller sweetened the deal with a price discount, or they end up sitting idle on the market.
According to Redfin, 33 percent of homes sold with price drops in April, up 1 percentage point year over year. By comparison, 20.3 percent of homes sold above list price, down by 3 percentage points year over year.
What Happens Next
The Texas housing market is shifting in favor of buyers, and Dallas could be among the metros experiencing price drops by the end of the year—especially if inventory continues to grow.
But Nixon expects buyer demand to remain low for the foreseeable future. "Right now there is a massive affordability gap between the cost of renting versus owning that makes buying at current interest rates and prices the less appealing option," she said.
"Unlike during the pandemic, there is plenty of rental inventory available, and rents are even falling in several submarkets," Nixon continued. "Eventually, I think the housing market will recover, but it's going to require some combination of lower home prices and lower mortgage rates."
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