Dallas-Fort Worth Economic Indicators – Dallasfed.org

The Dallas-Fort Worth economy expanded in December. The number of employees increased moderately and the unemployment rate declined. Home prices were relatively flat in the fourth quarter, and affordability remained stable. Although the office leasing industry remained sluggish, industrial demand recovered in the fourth quarter.

labor market

Employment growth accelerates in December

DFW employment increased 2.4% in December after declining in November (chart 1). Employment growth was mixed across major sectors, with strong gains in manufacturing, financial activities, and leisure and hospitality. Employment numbers fell in December in the construction and mining and professional and business services sectors. DFW's unemployment rate fell to 3.7%.

Salary growth slows in the fourth quarter

DFW payrolls grew at an annual rate of 0.6% in the fourth quarter, slower than the 0.8% increase in the third quarter (chart 2). His DFW gains over the three-month period were mixed across major sectors. Employment growth was strong in leisure and hospitality, financial activities, manufacturing and other services. Salaries in professional and business services remained largely unchanged, while employment contracted in trade, transport and public services, education and health services, construction and mining, and information.

real estate

Housing prices were almost flat in the fourth quarter

DFW home prices were little changed in the fourth quarter, according to recently released data from the Federal Housing Finance Agency. Compared to the third quarter, prices rose 0.1% in Dallas and Fort Worth. Meanwhile, prices rose 0.4% in Texas and 1.5% in the United States during the same period. In 2023, home price growth was 1.4% in Fort Worth, 3.5% in Dallas, and 2.7% in Texas, all lower than the national rate of 6.5% (chart 3).

Affordability remains low

Housing affordability stabilized in the fourth quarter as prices remained roughly flat and mortgage rates declined (chart 4). In Dallas, the percentage of homes sold that were affordable to middle-income households remained unchanged at 27.3% in the fourth quarter, while in Fort Worth, the percentage of homes sold that were affordable fell slightly to 29.3%. Affordability in the U.S. held steady at 37.7% last quarter. DFW's affordability remains below the national average, and also below the numbers for Austin, Houston, and San Antonio.

Office vacancy rate flat, demand sluggish

Demand for office space in DFW remained subdued in the fourth quarter (chart 5). Net absorption decreased by 1.6 million square feet due to net displacement from older or less desirable Class B space, according to data from CBRE Research. The vacancy rate increased from 25.1 percent to 25.3 percent, which equates to more than 58 million square feet of vacant space. Sublease space availability decreased to 10.4 million square feet, representing 15.5% of total availability. Sublease space is concentrated in suburban markets, and much of the space is furnished with furniture and other office necessities. In the fourth quarter, the volume of space under construction increased to 5.2 million square feet. Businesses say leasing activity, a leading indicator of the amount of commercial real estate the market absorbs, or net absorption, is accelerating in smaller spaces but remains sluggish for larger deals. he pointed out.

Industrial rentals are steady, but vacancies are rapidly increasing

The strong momentum in industrial leasing continued in the fourth quarter, driven by demand from third-party logistics companies, manufacturing companies, and retail companies. Net absorption was 9.1 million square feet, more than double the space absorbed in the third quarter, according to CBRE.chart 6). Rising delivery levels, which totaled 19.6 million square feet in the fourth quarter, pushed the vacancy rate to 8.1%. Area under construction decreased from 47 million square feet to 30 million square feet at year-end. The East Dallas submarket has the highest level of speculative construction, followed by the South Dallas submarket.