I agree that Tarrant Co, and even Dallas Co, are the gold standard in REI for an investor seeking stable, long-term investments. Other markets, e.g. some places in Florida or California, have more upside potential but also more risk and a different regulatory environment. Nine percent annual appreciation is high for DFW real estate...markets tend to revert to the mean, so I don't recommend planning your REI purchases with a 9%-appreciation base case.
One important thing to note is that prices will probably go down as interest rates go up. If you read the "related" story "Why Changes in Mortgage Rates Matter for House Prices" from Pete's post (bottom of the page), you will see a table that illustrates this.
Here's something I haven't heard much talk of yet: oil prices and inflation. As you may know, the US economy has seen little inflation despite massive monetary easing by the Fed. We have also NOT seen deflation as oil prices cratered 60%. It's possible that companies maintained their pricing during low oil prices and enjoyed higher profits as their transportation costs fell. But what will happen when/if oil prices rise, as they have been recently? If the past is any indicator, companies will pass their increased transportation costs to their customers...which could lead to a period of sustained inflation. I've also seen some talking heads on CNBC saying that wage growth is coming/inevitable...but those guys will say anything sometimes. If they're right, inflation will also be coming/inevitable.
How does all this affect your RE investments? Interest rate increases will lower the price that the retail buyer can afford to pay, and retail inflation will reduce their ability to make payments. This may actually be a double-edged sword because this could push more prospective buyers into lower-cost houses, which could fuel a boom in construction in this currently-underserved market segment. Also, as interest rates go up, credit requirements will become looser because banks will be making more profitable loans and can therefore afford to loan to riskier borrowers. This would lead to an outflux of customers/demand from the rental market in some segments, i.e. lower-end renters probably still couldn't get a loan.
And don't forget about Black Swan events...
