Why it matters for property

Roughly $4.6B of committed public capital — convention centre, Fair Park, the 2024 bond — is landing on a county where the median ZIP still trades around a quarter of a comparable Los Angeles address. Most of it is concentrated in a narrow band: the southwest corner of downtown, Fair Park and South Dallas, and the East Dallas drainage corridor. Those are, not coincidentally, among the lowest-priced ZIPs on the map.

The funding structure is the part worth internalising. Hotel tax and general obligation bonds do not raise your rate; the appraisal does that on its own. So the public programme is, for an investor, close to a free option — upside in the value line with no matching entry in the cost line. That is the opposite of how civic investment usually works, and it is a direct consequence of Texas funding its cities the way it does.

The honest risk

The convention centre is not fully financed. As of early 2026 the city was extending a $1B bridge loan and had pushed its revenue bond issuance to the autumn, with $665M of the plan resting on naming rights and asset sales that have not been realised. Hotel tax receipts are cyclical, and the project finance zone assumes visitor growth that a downturn would not deliver.

Underneath that sits a subtler problem. Dallas County is not the only place capturing DFW’s growth — Collin and Denton have been taking a rising share of it, with newer stock and, in places, lower effective rates. A civic programme concentrated downtown is a bet that the county centre holds its pull. Watch the population-change layer on the ZIP map: several inner-county ZIPs have been shrinking while the metro adds a million people a decade.

Investor-favourable

No state income tax. Rental income and capital gains face federal tax only. For a high-bracket owner this is worth more than most state-level real estate incentives, and unlike Oklahoma’s holding-period capital gains deduction it carries no conditions, no holding period and no sunset risk.

No rent control, and no path to one. State law preempts municipal rent control. Rents reset at market on every renewal, and there is no local political route around that.

Fast, cheap eviction relative to most large metros. Texas justice courts move quickly and filing costs are low. This is a real component of a defensible vacancy assumption, not a talking point.

Annual appraisal protest. Because appraisals reset yearly they can be contested yearly, with a mid-May deadline in Dallas County. A successful protest is a permanent reduction to the largest line in the P&L, and it compounds over a hold.

Elastic supply keeps entry sane. Dallas builds. That caps appreciation, but it also means you are rarely paying a scarcity premium, and construction cost rather than land sets the floor.

Watch closely

The homestead sequence, and what it excludes. Five exemption increases in a decade — $15k in 2015, $25k to $40k in 2021, $40k to $100k in 2023, $100k to $140k in 2025. Every one of them is a homestead measure. An investment property receives none of them, which means the relief has been narrowing the base while your share of it grows.

The one measure that did reach investors expires. The 2023 package included a three-year pilot capping appraisal growth at 20% a year on non-homestead property under $5M. It is a pilot. Check its status before you model a hold that depends on it.

Insurance. North Texas hail has repriced property insurance sharply. Roof age drives quotes, and a renovation that skips the roof can leave a policy uninsurable or priced punitively.

Short-term rental rules are unsettled. The city’s 2023 ordinance restricting short-term rentals in single-family districts has been in litigation. Do not underwrite a Dallas deal on short-term rental income without current legal advice.

Structural risk

The appraisal ratchet. Your rental is reappraised to full market value every year with no cap. In a rising market the tax line grows at the appreciation rate, not at inflation — a five-year hold at 5% annual appreciation raises the bill by roughly 28%. Model it as a percentage of value, never as a fixed dollar amount, which is why this portal charges it against the modelled value each year.

School finance is outside local control. The ISD share is the largest component of the bill and is set by state formula, recapture and compression. There is no one to lobby locally.

Non-disclosure state. Texas does not require sale prices to be public. Every price series here, Zillow’s included, is modelled from listings and tax records rather than observed from a register. Confidence intervals are genuinely wider than in a disclosure state.

Concentration in corporate relocation. A large share of recent demand traces to employers moving headcount out of higher-cost states, a flow that is policy-sensitive and reversible in a way organic population growth is not.

Why error correction

A pure momentum model extrapolates a boom forever; a pure affordability model calls every hot market a bubble the year before it doubles. An error-correction specification carries both: short-run dynamics from momentum and flow variables, plus a long-run anchor that pulls price back toward what local income can actually finance.

The strength of that pull is λ, and it is estimated below rather than assumed. Dallas comes out with a small but statistically real λ — the market has repeatedly run ahead of local income and then cooled rather than corrected.

Where P* differs from the OKC build

In a low-property-tax market you can approximate the affordability anchor with principal and interest alone. In Dallas you cannot: tax and insurance are roughly a third of the monthly payment on a median home. Both are therefore inside P*.

The consequence is worth naming. Because a large slice of the Dallas payment does not respond to interest rates, a given rate cut buys less affordability here than the same cut buys in a low-tax metro. The rate slider will show you this directly.

The IRR simulator

Monthly cash flows, solved for the internal rate of return by Newton–Raphson and annualised. Equity in is down payment plus renovation plus every buy-side cost. Operating flows carry rent growth, vacancy, operating costs, property tax on the modelled value, insurance, and debt service split into interest and principal. Exit nets commission, closing, title and the loan payoff.

Property tax is charged against the model's projected value each year, not the purchase price. That is how Texas actually works, and it is the difference between a plausible five-year IRR and a flattering one.

The advisor

Each ZIP is ranked by percentile on every criterion you select, with direction handled per criterion — high yield is good, high price per entry is not. The composite is the simple average of those percentiles.

A simple average is a deliberate choice. Any weighting scheme would encode a view about what matters, and you are better placed to hold that view than this page is. If a criterion matters more to you, select it and drop the ones that do not.

What the fit refused to give

The interest rate has no separately identified short-run term. Every specification tried — contemporaneous, lagged one to three months, cumulative over six and twelve months — either came out statistically indistinguishable from zero or, worse, positively signed. That is not evidence that rates do not matter. It is what happens when rates rise in exactly the periods when the economy is hot and prices are climbing anyway: 2004–06 and 2021–22 both sit inside the sample.

So the rate was left to act the way theory says it should — by moving the affordability anchor, which then pulls on price through λ. The decomposition chart separates that rate-driven part of the pull from the rest, so you can still see the channel working. Calibrate your trust in it with this: on the county median home, a two-point rate rise takes about 6% off the modelled twenty-four-month price and turns annualised growth from roughly +1.7% to −0.4%. That is a real elasticity, but it is slower than the 2022 experience, when rates moved four points and price growth stalled within months. The model books most of that stall as momentum decay rather than as a rate shock, which is a limitation you should hold in mind whenever you move the slider hard.

What could not be estimated at all

Population and income growth. Regressed annually against price growth over twenty-four years, both come back insignificant with an R² of 0.01. The reason is not that they do not matter — it is that DFW population growth has sat near two percent every single year, so there is almost no variation to identify against. Their long-run contribution is instead absorbed by the fitted intercept.

Permit flow. Correctly signed but nowhere near significance. Retained at its fitted value so the supply slider does something, but it does very little, and you should not read much into it.

The population and income sliders therefore move the forecast as deviations from the fitted baselines — 2.0% and 2.5% a year. Leave them at baseline and the model runs on estimated parameters alone. Move them and you are layering a judgement on top, which is a legitimate thing to do as long as you know that is what you are doing.