There’s no denying that we are in an incredibly unique moment for buying and selling real estate. The pandemic caused a sharp drop in homebuyer confidence at the onset, but it has now soared to heights that surpass pre-pandemic levels. Remote work has caused a considerable migration of workers, predicted to reach 14.5 million people, according to Redfin, meaning new markets will step into the spotlight.
National Trends Pushing Demand
Recent reports from the Fannie Mae Home Purchase Sentiment Index (HPSI) stated a decline in both November and December which signals waning confidence in the market by homebuyers. Despite this, many real estate experts like Realtor.com and Redfin are predicting home prices to rise and that sales will follow suit. Respondents of the HPSI did also feel that it’s not as good of a time to sell – potentially signaling fewer new listings in the market and a rise in more demand for available homes.
Suppose there is a shortage of sellers in major markets, especially in cities like Seattle, Denver, and Austin, where a lack of new homes relative to demand is already present. In that case, we’re likely to see even more competition. In just the last year, the national median home sale price increased 15% YoY to $318,250, nodding to the increasingly competitive market as a whole.
Consumers are continuing to pursue homeownership despite high prices because interest rates on 30-year mortgages are low. Over 2020 they continued to drop and are averaging 2.75% in February of 2021.
Why These Cities?
There are many other trends, specific to each city, that are making them attractive to homebuyers. An important contributing factor to high demand in top markets like Seattle, Denver, and Charlotte, is the city’s growth in tech companies and jobs. These new jobs (and notable salaries) are enough to pull in out-of-towners, especially when paired with a high quality of living and access to the outdoors.
Cost of living is a second driving force for these swift changes in demand as people flee expensive cities searching for more affordable homes in areas near the big cities. With remote work becoming more widespread, pricey cities like San Francisco and Los Angeles are losing people to neighboring towns and cities.
This phenomenon of migrating remote workers choosing smaller cities has been coined the ‘Sunbelt Surge’ by Zillow because the top markets tend to be further inland and in sunny locations. For local homebuyers in these smaller cities, this influx of big-city buyers with bigger budgets undermines housing affordability.
Redfin, Zillow, Realtor.com, and Norada have all mentioned these local markets as prime locations for home sales growth in 2021. These markets attract new homebuyers at a higher-than-normal level, making it wise for sellers to ride the wave of increasing home values. Factors beyond increased sales growth and price growth also strengthen their position at the top of most lists. For some of these markets, peak demand is yet to come.
Top 10 Cities with the Highest Demand
Being number one on Realtor.com’s list is no small feat, and it makes sense for Sacramento. According to their data, this blossoming city’s predicted growth is an astonishing 24.6% YoY when combining sales and price growth. The most significant factor in this increase in demand is related to the city’s proximity to San Francisco as remote employees from Silicon Valley search for more affordable housing.
San Jose, California
Albeit short on space, San Jose is another location for remote workers seeking a change of scenery. It is home to Apple, Google, Facebook, Linkedin, and even Realtor.com – making it a prime location for visiting the San Francisco office (occasionally). While it’s not the most affordable city, with a median home price of $1,199,050, it still offers access to beautiful scenery and is, of course, in the heart of Silicon Valley, bringing with it plenty of high-paying tech jobs.
Boise City, Idaho
Having ranked at number one on Realtor.com’s 2020 list, it’s no surprise that Idaho’s capital also showed up on almost every list for 2021. This hidden gem boasts Rocky Mountain adventures just a short drive away, a thriving economy, relatively affordable living, and a growing selection of tech companies. It’s a further move for remote workers seeking something new, yet buyers are coming in from Washington, Oregon, and California nonetheless.
While Seattle is still one of the more expensive cities in the U.S., its continued growth in tech jobs has continued to attract employees and eventual homeowners. Top that off with access to both water and mountains, being one of the country’s greenest cities, plus a high quality of living, and you have a top-tier city for young homeowners. Realtor.com predicted a combined sales and price growth of 18.6 percent, YoY for this growing city that expands down to the Tacoma market as well.
Traditionally a haven for the snowbirds, Phoenix is now attracting young buyers due to its affordability, sunny weather, and a wide offering of shopping, dining, and entertainment. It boasts public institutions in the education, government, healthcare sectors, and private companies in the technology, manufacturing, and military industries. Realtor.com found its median home price to be on the lower end, at $412,260.
Denver has experienced high growth over the last few years as it attracts more tech companies and millennials along with them. The city’s median home price has soared to $520,000 as builders struggle to keep up with demand, although the cost of living is still relatively affordable. With the Rocky Mountains nearby, year-round outdoor activities, and sunny, mild weather, Denver is a hot market this year and probably beyond. Sellers won’t want to wait if they’re considering letting go of their Denver home.
Although Austin didn’t make Realtor.com’s top 10 list, it is still deserving of praise as both Zillow and Norada ranked it high on their lists. Why? Again, being part of the ‘Sunbelt Surge’ attracts people for a lower cost of living and access to many major tech companies. Top that with outdoor activities, live music, a thriving nightlife scene, and fantastic food, and you’ve got a hotbed for millennial transplants. Like Denver, Austin’s homebuilders have not been able to keep up with demand, and home prices have increased 10% YoY, making it a great time to sell if you’re currently the owner of an Austin property.
Sun, sand, and surf are enough to bring anyone to Tampa, and they have, especially in the world of tourism. Another one of Zillow’s top five cities for 2021, Tampa boasts affordable living with a median home price of just $251,287 and a population of roughly 4 million people. Its warm weather and access to the beach make it an ideal location, which is why home prices are expected to continue to rise significantly.
Charlotte, North Carolina
With one of the nation’s highest population of millennials, a ranking as a top tech city, and a median home price of just $368,819, Charlotte is a hot market for real estate. Realtor.com predicts a combined growth rate of 19%, attributed to its open space and affordability. Sellers will want to hold on to their property for a little while longer as this market has yet to reach its peak.
With a projected sales growth rate of 14.4% and a price growth rate of 3.8% YoY, Harrisburg has attracted the attention of those seeking a higher quality of life as opposed to Philadelphia, New York, and Washington D.C. living. Not only that, but having access to downtown from the suburbs in just 15 minutes and you’ve got a prime location to buy a home and raise a family comfortably.
Other Markets Worth Highlighting
Remote workers with more freedom, a low supply of new homes, and homebuyers seeking more affordable markets will also impact many smaller markets that we didn’t mention.
For example, Nashville, Tennessee, was number 3 on Zillow’s list based on the aforementioned ‘Sunbelt Surge’ where sunny weather, a booming economy, and affordability make it desirable. Oxnard and Riverside fell at number 8 and 10 on Realtor.com’s list, respectively, for their location relative to Los Angeles’s overly expensive home prices.
Columbus, Ohio, doesn’t offer the sunshine, but the long list of major companies based there, general affordability, and the continued rise in property values make it notable. Lastly, with a Realtor.com predicted combined growth of 17.2%, Nevada’s ever-famous Las Vegas is a steady market for those seeking sunshine and so much more. These locations, and many more, are going to see increased demand for 2021.
Justin Nedell is a Content Marketer at PropLogix who enjoys writing blogs and other digital content as well as facilitating webinars for the company. He currently lives in Denver, has traveled to over 30 countries, and enjoys hiking, trail running, snowboarding, yoga, learning French, and spending time in the mountains.