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by Steven McCord, Co-Founder, Spatial Laser
For a real estate investor trying to fill a vacancy, it is not uncommon to find big differences between summer and winter. Summer vacancies get snapped up quickly by renters, and the reasons are quite simple: 1) many people try to move during summer school vacation to minimize disruptions for their school-age children, and 2) job-related relocations tend to happen well outside of the “holiday season” of November and December. The result is more demand for rentals in the summer months.
How much longer does a lease take in winter?
We crunched nearly 140,000 lease records from the North Texas region from the start of 2016 through to the eve of the Covid pandemic last year, to see how much of a seasonal difference exists in our market. We ignored, for the moment, the abnormal period during the pandemic, which is a separate discussion.
Seasons do matter. For all price categories, it took, on average, two to four weeks longer (17-27 days) to rent out a house in winter than in summer. For all rental levels, it took, on average, two to four weeks longer (17-27 days) to rent out a house in winter than in summer. 
Days on market are shorter in the summer
We also found that on average, cheaper homes rented out faster. The pool of demand for cheaper homes is larger, as there are more potential renters. Meanwhile, high-rent homes take longer to rent out. We calculated that it takes 10-20 days longer to secure a tenant for a $2500-$3000/mo home compared to a $1000-$1,500/mo home.
We calculated that it takes 10-20 days longer to rent out a $2500-$3000/mo home compared to a $1000-$1,500/mo home. Is a fast lease still possible in the winter?
The short answer is yes, if priced right.
The averages tell one part of the story, but there are still wide ranges for what can actually happen. Below, we show what the range looks like between the fastest 25% of the leases, with the fewest days on market, and the slowest 25%, with the most days on market. Fast lease ups do happen in the winter, though they aren’t as common. The fastest 25% of leases in winter took less than two weeks, for homes listed in a rental range of $1,500-$2,000/mo. 
Days on market can vary widely at all times of the year
What you can do
An extended vacancy period has a big effect on the profitability of a real estate investment. For a house renting for $1,750 a month, each day of vacancy costs you $60. A long vacancy period of 40 to 60 days results in a 10-15% drop in revenue for the year.
The best way to combat this situation is to time leases to expire during the summer, when your days on market are likely to be lowest. If a winter vacancy is unavoidable, your second-best option is to price the rent slightly lower than you might in the summer, in order to minimize the days on market. Most of the time, a small discount in rent is worth it, if it cuts your vacancy period to a minimum. About Spatial Laser
We help real estate investors find the perfect place to buy a home or invest. Our flagship product, Locate Alpha, lets you explore the market and form a laser-focused investment strategy based on rich data.
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The hustle and bustle of urban co-working
A huge co-working craze took off during the 2010s. Soon, companies like WeWork were all over the news. In the Dallas-Fort Worth area, on the eve of the pandemic, there were no less than 200 sites offering some form of co-working, or what many refer to more generally as “flexible office space.”
Typically in urban locations, these bustling locations were often in areas thought of as millennial hotbeds, close to the hubbub of urban activity and social environments that young people craved. Traditionally, owners and operators of co-working spaces gravitated to these urban environments to open new locations as a way to get the highest absorption and occupancy. For users of co-working spaces, they were a blessing – a way to get a collegial, interesting work environment at relatively low cost. Sometimes, these offered a short, or even walkable commute for an urban apartment dweller. 
Downtown Dallas, a traditional co-working area, requiring a commute for non-urban dwellers
Urban centers spurned in favor of suburbia
Then, the pandemic changed the dynamic. Remote work become commonplace, and many believe a sizeable number of jobs will stay that way forever. Urban settings — and urban co-working spaces — quickly fell out of favor as many people left the city to escape population density and minimize health risks. As work moved online in era of Zoom, remote workers could go wherever they wanted.
The emphasis of early co-working operators on urban locations is proving to be a mistake.
Suddenly, you had millions of people working out of single-family homes in suburbia or exurbia. Large, suburban homes often have ample space to set up a home office — perhaps an extra bedroom, or even a dedicated office room. The original co-working locations, in the city, became far away and impractical, and the emphasis of early co-working operators on urban locations is proving to be a mistake.
Urban environment typical of co-working in the past
A respite from the home environment remains vital
But there was another problem: working from home is not a complete solution. There needs to be a close-by “third place” that forms a bridge between home and the occasional office visit, even if that office visit is infrequent. Someplace to do focused work, use expensive office equipment, and get a break from the house.
The coffee shop craze of the 2000s is not pandemic-friendly.
The coffee shop craze of the 2000s is not pandemic-friendly. Even post-pandemic, coffee shops have their limitations due to noise and shared, insecure Wi-Fi, among other concerns. Furthermore, suburban co-working spaces are often trailing in quality compared to their urban counterparts, in terms of comfort, facilities, equipment, and finishings.
This brings us to the co-working spaces of the future: close to suburban remote workers, affordable, and a step up from what’s out there today. This brings us to the co-working spaces of the future: close to suburban remote workers, affordable, and a step up from what’s out there today. About three-quarters of homes are more than 2 miles of some form of co-working facility.
Only about 27% of single-family homes in the Dallas-Fort Worth metro area, for example, are within 2 miles of some form of co-working facility (if you include executive suites), according to Spatial Laser analysis. This means the other nearly three quarters of Dallas homes require travelling some distance to reach one of these facilities. Areas of single-family housing without convenient access to co-working spaces are shown below in grey:
Areas of single-family housing that are more than two miles from any co-working space
Where should new co-working spaces open?
We set out to form a starter framework for where these new co-working spaces might go:
Site evaluation criteria we may use to evaluate co-working locations
Example of candidate sites resulting from the analysis
What to doWith the changes happening in the demand landscape for co-working spaces, think about whether a strategy adjustment may help. We can always help. About Spatial Laser
We help real estate investors find the perfect place to buy a home or invest. Our flagship product, Locate Alpha, lets you explore the market and form a laser-focused investment strategy based on rich data.
In 20 years, the urban area of Dallas-Fort Worth grew 40%+
Development of the Dallas-Fort Worth real estate market has moved quickly in the last 20 years. By our estimates, about 40 square miles of land per year get developed. This is an area larger than the massive DFW airport, or about 15-20,000 football fields, every single year*. That is also the same as 11,000 Costcos!
That means the urbanized area has grown by 40-50% in the last 20 years from 1,400 square miles to 2,200. Therefore, the Metroplex has added almost one additional New York City, in terms of land, over 20 years. We calculated this using satellite imagery. In the chart below, the black dots represent urbanized land within 40 miles of DFW airport, while light grey shaded dots represent undeveloped land within that same area. 
Urban growth in Dallas-Fort Worth over the last 20 years
Source: Spatial Laser analysis Housing shortage
And yet today, inventory, or homes for sale, in the Dallas and Fort Worth housing markets is extremely low. We wrote about this last year, as some segments of the market were falling below 2 months of inventory, Since then, the market has tightened even further. Houses that get listed on the market are snapped up quickly, sometimes in hours. There are simply not enough houses on the market, as sellers are held back by the ongoing pandemic, while demand surges due to the improved affordability.
There are simply not enough houses on the market, as sellers are held back by the ongoing pandemic, while demand surges due to the improved affordability. Building more houses
There's still plenty of land to build on. A quick look at the breakdown reveals that 44% of the land within a 40 mile radius from of DFW airport is simply "grass." Without mountains or other impediments, much of this land is easily buildable.
Source: Landsat imagery analysis by Spatial Laser
Developers are scrambling to buy land to build more houses. Some cities that were mostly grass and dirt a decade or two ago are increasingly built out with housing.
Based on today’s city limits, cities like Prosper went from 9% built-out to about 55% today. Buildable space in these markets is getting snapped up quickly. Below, we compare some of the Collin County markets, which are growth hotspots: 
Developed and undeveloped space in Collin County cities
Source: Spatial Laser Analysis
Of course, not all undeveloped land is buildable, but this gives a starting point. Some cities have become heavily urbanized in a short time.
As search for land continues, there always a tradeoff of buildable space vs price vs location. In our analysis, we account for these tradeoffs by looking at job access and future job growth. What it means for homebuyers
Homebuyers and investors can look forward to a greater supply of new housing in the future, but this may take several years. Until then, competition may be fierce.
*Using a more conservative estimate, the number could be 15,000 football fields per year. About Spatial Laser
We help real estate investors find the perfect place to buy a home or invest. Our flagship product, Locate Alpha, lets you explore the market and form a laser-focused investment strategy based on rich data.
Dallas-Fort Worth housing market boosted by record low mortgage rates
The 30-year fixed mortgage rate, the most popular loan product, fell to historic lows at least 14 times in 2020. Mortgage rates are lower than they have been since the government started tracking them in 1971. This is good news for homebuyers in the Dallas and Fort Worth housing markets, whether you are an investor or looking for a place to call home.
Source: Freddie Mac
79,000 more homes became affordable to households earning $50k/year
Lower rates result in lower monthly payments. Thanks to these lower payments, more houses are affordable now compared to just one year ago. In 2020, 79,000 more homes in the D-FW area became affordable to households making $50,000 per year. Similarly, in 2019, 67,000 new homes became affordable.
Source: Spatial Laser Analysis
Two out of five of the newly affordable houses are in areas with strong fundamentals
Many of the newly affordable homes are concentrated in Garland, Mesquite, Irving, Grand Prairie, and the City of Fort Worth. Many of the homes are in areas on strong footing, with 42% of the total, or 33,000 houses, located in areas that score a 6 out of 10 or higher on our Locate Alpha Homeowner Index. This index is heavily weighted on school scores, crime rates and access to amenities. Some homes do even better, with 14% of of the total in areas scoring 7 out of 10 or above.
There are opportunities for investors too. 77% of these homes were in areas scoring a 6 out of 10 or higher on the Locate Alpha Long-Term Investor Score, which is heavily weighted on rentability: access to jobs, and potential for cashflow. 
Houses newly affordable to households earning $50k per year
Source: Spatial Laser Analysis 106,000 more houses became affordable to households earning $70k/year
Similarly, for households earning $70,000 per year, 106,000 more houses in Dallas-Fort Worth became within reach in 2020, thanks to lower mortgage payments.
Housing affordability in Dallas-Fort Worth
Of those, three out of four are in hot areas
For those buying homes on the Dallas side of the Metroplex, newly affordable opportunities entered the scene in areas such Allen east of US 75, parts of Little Elm, Carrollton. On the Fort Worth side, they appeared in areas like Saginaw and Arlington. Many of the homes were in neighborhoods with strong fundamentals, with 72% of the houses, or 76,000 units, located in areas scoring 6 out of 10 or above on the Locate Alpha Homeowner Index. 43% scored a 7/10 or above. For investors, 54% of the homes scored a 6/10 or higher for long-term investment.
Source: Spatial Laser Analysis
What about rising prices?
For those following the Dallas real estate market, lower rates have contributed to rising prices in many parts of D-FW this year. When we did this analysis, we assumed prices in previous years were the same as they are today, in order to properly isolate the effect of interest rates from rising prices. This helps us show that there has in fact been a net gain in affordability.
We assumed prices in previous years were the same as they are today, in order to properly isolate the effect of interest rates from rising prices. This helps us show that there has in fact been a net gain in affordability.
However, the challenge remains that inventory is very low, and while many houses are affordable based on their value, the ones that do get listed on the market are snapped up faster than ever before. This requires you to be vigilant and responsive, ready to snap up the right opportunity when it appears.
Our assumptions:
We calculated the PITI required for every house in the metro area, based upon prevailing 30-year fixed mortgage rates for each year, valuations of the houses at present, and a debt-to-income ratio (DTI) requirement of 25% for a house (which allows some room for other debts that may take it up to 35%, generally the higher end of what is acceptable for lenders). Also a 25% down payment is assumed. If assuming a 20% downpayment, total houses involved are 6-10% lower, but the change from year to year is about the same. Conventional, conforming loans only. Other programs are not taken into account. About Spatial Laser
We help real estate investors find the perfect place to buy a home or invest. Our flagship product, Locate Alpha, lets you explore the market and form a laser-focused investment strategy based on rich data.
Heat, sunshine, and the housing market100+ degrees and nary a cloud in the sky: these are typical peak summer conditions. Some years, it lasts only a few weeks. Other years, it could be two months or more. The shade under a tree during a Texas summer can certainly take the edge off the heat. During most of the day, people tend to avoid venturing outside in the sun. But, your house and your neighborhood are going to feel very different if they are under a canopy of leaves compared to just sitting out there baking under the direct sun. Areas without shade tend to accumulate a lot more heat during the day and radiate it back out at night, keeping an area much hotter than it otherwise would be. This means more energy costs, not to mention wear and tear on your foundation from the famously "expansive soils" of Texas that can crack the foundation slab supporting your house. Therefore, some shade is probably quite desirable. The shadiest cities in the MetroplexBy using data from satellites, it is possible to measure the amount of greenery just about anywhere. We did this, and averaged it out within the limits of each city in the Dallas-Fort Worth area. The tree-lined enclaves of the Park Cities rank highly but don't make it into the Top 10. Interestingly, the south side of the Metroplex has some very dense foliage: Cedar Hill and Duncanville, thanks to the green hills adjacent to Cedar Hill State Park that spills over into many of the residential areas. The "Cross Timbers" cities of Colleyville, Flower Mound, Keller, Denton and Southlake also rank highly thanks to the narrow band of forest, called the Cross Timbers, that results in dense tree growth in these cities. On the other extreme, we have cities in more of a prairie setting, as well as those that are newer and have fewer mature trees: Allen, Frisco, Plano, Carrollton, and The Colony. In these areas, most trees are concentrated in narrow bands on flood plains and creeks. To make this analysis fair, we focus on neighborhoods only (with single family homes), we exclude other non-residential land uses, and exclude flood plains.  Source: NDVI (Normalized Difference Vegetation Index), captured through Copernicus Open Access Hub of the European Space Agency Note: To make a fair comparison, flood plains (including creeks) which are not habitable were excluded. Limited to cities with 20,000 residents or more as of 2010. Showing the greenery index in more detail, we start to see a lot of differences between neighborhoods at a micro level.  Source: NDVI (Normalized Difference Vegetation Index), captured through Copernicus Open Access Hub of the European Space Agency. The darkest greens correspond to an NDVI of 0.84 or higher, where the highest level is 1.0. Are older neighborhoods shadier?We looked at relationships between greenery and the age of the community, as well average home prices. We expected older neighborhoods to be shadier, since trees grow larger over the years. Typically, neighborhoods start out quite barren after the land is cleared, and new trees planted along roads take time to grow. Also, we expected certain areas such as the Eastern Cross Timbers to score higher, which is a 15-mile-wide belt of woodland that extends through areas like Flower Mound, Southlake, Colleyville, and Arlington, as shown below.  Dallas-Fort-Worth Level 4 Eco-regions. Source: Environmental Protection Agency The averages do suggest that older neighborhoods tend to be leafier. The data also suggest that areas within the Blackland Prairie ecoregion (including Dallas and Collin counties) don't reach "peak" green until about 60 years after they are built, meaning neighborhoods built in 1960 or earlier. Meanwhile, those in the Cross Timbers and Grand Prairie (not to be confused with the city of Grand Prairie) eco-regions, might reach that level of "green" in half the time. Also, the Cross Timbers areas reach what could be be considered a "high" level of green about 20 years faster than the other regions.  Source: Spatial Laser analysis Higher-priced communities tend to be greenerHigher-priced homes tend to have more greenery, and this is clearest in the Backland Prairie and Grand Prairie areas around Dallas and western Tarrant county, as shown below. In these areas, we can expect that after a neighborhood has been around a while, it becomes greener. This makes sense as the close-in neighborhoods, which are more expensive, also tend to be the oldest and greenest. However, greenery is not related to price in the Cross Timbers belts in Tarrant and Denton counties. This is probably because the large amount of natural growth in these areas makes greenery less "special." How about cause and effect? Can we conclude that greenery drives price in a meaningful way? No. Proximity to jobs and a whole host of other price drivers are also at work. What is the specific effect of greenery considering a variety of factors? We will explore that in a later post.  Source: NDVI Index, Spatial Laser Analysis Highly granular voting data for the 2016 election was compiled a few years ago and made public online via websites operated by Harvard and MIT. For the first time, this made precinct-level data across the country relatively accessible. "Voter precincts" are fairly small, at about a third of a square mile to one square mile in a typical urban area. But the people living within a given precinct can vary widely. From one neighborhood or subdivision to the next, there are different types of housing for different income levels and family sizes. These differences contribute to different political preferences. What if we wanted to estimate what is happening at the city block level? You may want to do this when screening blocks that you want to live in, if it is important to you to find the prefect niche for yourself to live where you feel most comfortable. Or, it is valuable for other purposes, like campaign planning. Referring to our favorite diagram, we can see just how much more detail we can get by taking it down to the block level. Let's get detailed!  We can get an idea of the block level patterns by using the datasets we developed for the Locate Alpha product. We use location factors and block-level demographics to create a predictive model. See some example results below:  Plano area election results: precinct level   Plano area election results: block-level estimates (single family home blocks only) About Spatial Laser
We are building a software-as-a-service offering to help real estate investors in single-family homes form a micro-level investment strategy and avoid making mistakes. We use machine learning to model sales prices, rents, investment returns, risk, and market conditions at the hyper-local level using ranking and scoring. We make it easy and actionable with maps and color codes. As we build our product, we are looking for early adopters and test users. Be the first to know about product updates by signing up here: https://mailchi.mp/spatiallaser/prelaunch A question came up on the website city-data.com that is frequently asked about real estate investing in the Dallas-Fort Worth area: "Where do I start?" Everyone has their favorite area to invest, but what if we wanted to be totally objective? I went into the latest test version of the Locate Alpha system and set some constraints so that the suggestions are solid enough for a first-time investment:
There are are a few areas like this on the Dallas side, but you will find more on the Fort Worth side. Some examples are shown below. From there, you start monitoring the listings in those areas and seeing how much work you're willing to put into upgrades. If you're looking for something rent-ready, which I recommend for a first investment, there are ones that pop up that have already been fixed up, which after all costs, gets you a lower cap rate but still could achieve 4%+. For a second or third property you can start to widen the criteria a bit and take on something a little more ambitious.     About Spatial Laser
We are building a software-as-a-service offering to help real estate investors discover where to buy rental properties, down to the exact block and individual opportunity. We use machine learning to model investment returns, risk, and market conditions at the hyper-local level using proprietary ranking and scoring. We display this visually in a colorful map-driven system. Investors get recommendations they can act upon immediately. As we build our product, we are looking for early adopters and test users. Be the first to know about product updates by signing up here: https://mailchi.mp/spatiallaser/prelaunch Have you ever noticed all the big houses in the Dallas-Fort Worth suburbs? They are a reflection of changing consumer tastes over time, as well as dramatic growth in high-paying professional jobs. Big houses weren't always so common. If we look at the data, a noticeable jump in average home sizes happened in the mid-to-late 1980s. This coincided when everything was getting bigger in Dallas — most of today's high-rise skyline also sprouted up in the '80s. The size of new homes surged from 2,100 sqft to 2,500 sqft. Sizes have crept up only slightly since then, to about 2,600 sqft on average today. Even before that, there was a jump in size from the modest homes of the 1940s and 50s, to the larger and more luxurious homes of the '60s. The size of new homes took off in the 1950s, rising from 1,500 sqft on average to 2,000 sqft by 1965.  Meanwhile, lot sizes for newly built homes seem to be getting smaller.
 What might the post-COVID future look like if more people work remotely and demand larger homes that can accommodate home offices? We may see another bump in average sizes soon. About Spatial Laser
We are building a software-as-a-service offering to help real estate investors discover where to buy rental properties, down to the exact block and individual opportunity. We use machine learning to model investment returns, risk, and market conditions at the hyper-local level using proprietary ranking and scoring. We display this visually in a colorful map-driven system. Investors get recommendations they can act upon immediately. As we build our product, we are looking for early adopters and test users. Be the first to know about product updates by signing up here: https://mailchi.mp/spatiallaser/prelaunch Continuing on our theme of improving neighborhoods in Dallas, we decided to look at the question from another angle: code violations. What are code violations? They are things reported to the city's "311" hotline system that affect the quality of neighborhood life. According to the Dallas Open Data website, "The most common are high weeds, litter, junk motor vehicles, and bulky trash." Looking for improvements We set out to look for improvements. A neighborhood where code violations are in decline are places that are showing improved levels of upkeep and pride of ownership. We compared the two year period of 2016-18 (the latest available), which had a whopping 266,000 violations across the city of Dallas, with the two-year period of 2014-16. Several hot spots showed substantial reduction in the number of violations reported per square mile:
 These are all areas that are worthy of a closer look for future investment potential. Taken together with other indicators we have explored, like renovation activity, building permits, and others, we can pinpoint with a good degree of confidence where things are headed. Code violation categories:  Source: Fort Worth Code Compliance Division About Spatial Laser:
We are building a map-driven system and app called Locate Alpha to help investors quickly screen investment locations to avoid making investment mistakes, using advanced mapping techniques. To sign up for updates, please visit our home page www.spatiallaser.com. How can we identify neighborhoods that are on the up-and-up? Places that are rapidly improving, where money is pouring in to keep houses fresh and up to date? These are often the type of areas that are going to see significant uplift in price over time. One way to do that is by changes in economic indicators, but what if we want something that's a little more "up to the minute"? We decided to check MLS listings for the number of times the word "upgrade" or "renovated" is mentioned, and put that on a map.  In Northwest Dallas, an arc of renovation is clearly pushing westward into areas that were historically cheaper.  South of I-30, renovation activity is radiating north and west of the Bishop Arts district.  If the word "renovation" in an MLS listings is telling us that renovation has already happened, that makes it a kind of lagging indicator looking at the recent past. What if we wanted something forward-looking that might tell us a hint of the near-future? Building permits can help. We took building permit data from the Dallas Open Data Initiative and filtered out major public works to identify areas where construction is happening "now." There are some overlaps but also some important differences. Construction permit data are picking up major redevelopments happening north of I-30. But they also identify some activity happening outside the core Oak Cliff zones, in places further east like Cedar Crest, where home renovation is at an earlier stage and happening at a smaller scale. These changes vary widely from block to block. But this helps us find which blocks might be the hot blocks of the future, and help us hone in on buying opportunities there in order to benefit from the upward trend, whether it's for flipping or a buy-rehab-rent strategy.  |
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January 2021
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