Competitive real estate markets with low inventory tend to experience significant home-price gains. And we’ve seen plenty of that over the past couple of years.
Despite the coronavirus pandemic, many housing markets across the U.S. experienced double-digit home price growth during 2020.
But what about the rest of 2021 and beyond? Which U.S. real estate markets might see the biggest gains of this year and next?
Based on our analysis, some of the housing markets to watch include: Austin, Riverside, Phoenix, Sacramento and Nashville. These metro areas will likely see above-average home price growth between now and early 2022.
On the downside, many would-be buyers in these areas will continue to get “priced out” of the market due to steadily rising house values.
10 Housing Markets That Could Get Pricier in 2021
In February, the research team from Realtor.com published a housing market report that indicated low supply levels nationwide. Their report was essentially a warning to home buyers in 2021. Be prepared for stiff competition.
According to the authors, buyers “are in for another fiercely competitive home-buying season with record low inventory pushing prices higher and homes selling more quickly.”
This report also offered some insight into metro-level housing markets across the country. Specifically, it contained property listing data for 50 of the nation’s largest metropolitan areas. It also showed how the number of real estate listings (i.e., homes for sale) has changed over the past year.
We used this report, along with other data sources, to determine which cities and metro areas could see the biggest home-price gains over the next year or so. The housing markets below could get a lot more expensive between now and 2022.
- Austin, Texas
- Riverside and San Bernardino, California
- Raleigh, North Carolina
- Jacksonville, Florida
- Dallas, Texas
- Phoenix, Arizona
- Tampa, Florida
- Sacramento, California
- Atlanta, Georgia
- Nashville, Tennessee
Methodology: We sorted Realtor.com’s data to find out which metros experienced the biggest decline in total real estate listings. We then cross-referenced that list with population-growth trends for the past decade, and home-price growth for the past year or so. The end result is a list of housing markets where prices could rise sharply through 2021 and into 2022.
The table below is based on the February Realtor.com report. It shows the metro areas we feel are most likely to see major home-price gains over the next year or so.
Note: The “active listings” column shows how the total number of real estate listings changed from January 2020 – January 2021. As you can see, listings have dropped substantially in all of these metro areas.
|Metro||Active Listings, YoY|
|Austin-Round Rock, Texas||-67.40%|
|Riverside-San Bernardino-Ontario, Calif.||-60.60%|
|Dallas-Fort Worth-Arlington, Texas||-54.80%|
|Tampa-St. Petersburg-Clearwater, Fla.||-53.00%|
|Atlanta-Sandy Springs-Roswell, Ga.||-52.00%|
What They All Have in Common
All of these real estate markets have something in common. They’ve all experienced a steep decline in the total number of homes for sale, over the past year or so. You can see that in the table above.
Why does this matter? Because it’s part of a pattern.
In recent years — and especially during 2020 — we’ve seen a consistent pattern playing out in cities across the United States. It occurs when real estate markets with an already low level of supply experience a major drop in the number of homes for sale.
Combine this with strong demand from buyers, and you have all of the ingredients for steadily rising home values.
These housing markets have something else in common, as well. Significant population growth. All ten of the metro areas shown above experienced double-digit population growth over the past ten years, far exceeding the national average.
The city of Atlanta, for example, grew by nearly 19% from 2010 to 2019, according to the Census Bureau. That was nearly triple the U.S. population growth rate of 6.3% during that same nine-year period.
These real estate markets are being influenced by the following:
- Double-digit population growth from 2010 – 2020
- Strong demand from home buyers, as evidenced by sales activity
- Steep declines in the number of homes listed for sale
- In other words: a very lopsided supply-and-demand situation
Closeup: Current Trends in 5 Hot Markets
Real estate markets like Austin, Phoenix, Riverside, Sacramento and Tampa have gotten a lot more expensive over the past couple of years. And we expect this trend to continue into 2022, at least.
Austin-Round Rock, Texas
What can we say about the Austin real estate market that hasn’t been said before. It’s one of the hottest markets in the country in 2021, largely due to a strong local economy that attracts residents from elsewhere across the U.S.
But it’s not all roses and rainbows.
The Austin housing market has become a lot more expensive over the past five years or so. As a result, a lot of average earners in the area have been priced out of the local real estate scene. And it’s only going to get more expensive throughout 2021 and into 2022.
Housing inventory within the Austin-Round Rock metro area is woefully low right now. And that comes at a time when demand is soaring due to explosive population growth. You don’t have to be an economist to predict which way prices are headed in a situation like this.
Phoenix has long been a hot spot (figuratively and literally) for retirees. But over the past few years, it has become increasingly popular among a younger demographic seeking a relatively affordable real estate market.
As a result of these trends, the Phoenix-Mesa-Scottsdale metropolitan population has grown steadily over the past decade. The Phoenix area real estate market is also suffering from a supply shortage, when measured by the number of homes for sale.
Lots of buyers — not enough inventory.
Prices in this housing market have climbed steadily in recent years, and that will likely continue through 2021 and into 2020.
In February, the research team at Zillow wrote: “Phoenix-Mesa-Scottsdale Metro home values have gone up 15.4% over the past year and Zillow predicts they will rise 10.2% in the next year.”
Riverside-San Bernardino-Ontario, California
Real estate markets in the Riverside / San Bernardino metro area have also seen a steady influx of new residents. Many of them are relocating from pricier coastal markets, like San Diego and Los Angeles.
According to Taylor Marr, lead economist for the national real estate brokerage Redfin: “A lot of people leaving L.A. County are suburbanizing in Riverside County and San Bernardino and finding affordable housing there.”
In February, Zillow reported that the median home value in the Riverside-San Bernardino-Ontario metro area had risen by 10.2% over the past year. Looking forward, they predicted that prices would “rise 11.7% in the next year.”
Like most of the real estate markets on this list, the Sacramento metro area has received an influx of new residents “fleeing” from pricier markets.
In particular, we’ve seen a steady migration of people leaving the San Francisco Bay Area in favor of the more affordable Sacramento housing market.
But there’s not enough supply to meet this rising demand, and that’s driving home prices north at a steady pace. In fact, the median house price in the Sacramento area has more than doubled over the past ten years. It’s a much more expensive real estate market today than a few years ago. And that trend will likely continue going forward.
A recent forecast from Zillow: “Sacramento–Roseville–Arden-Arcade home values have gone up 10.8% over the past year and Zillow predicts they will rise 11.4% in the next year.”
Tampa-St. Petersburg-Clearwater, Florida
Home prices in the Tampa metro area rose by more than 11% over the past year or so, according to Zillow. This real estate market has outperformed the national average and will probably continue to do so throughout 2021.
In a recent survey, a panel of economists and real estate experts singled out Tampa, Florida as one of several housing markets that could “outperform the national market by the largest margin” during 2021.
It’s a supply-and-demand story, as always. Tremendous population growth has increased demand among home buyers, while inventory levels have plummeted. This makes the local housing market more competitive, while putting upward pressure on prices.
According to the U.S. Census Bureau, the city of Tampa’s population grew by nearly 19% from 2010 to 2019. Meanwhile, the number of homes for sale has shrunk considerably (see table above).
Disclaimer: This report contains real estate forecasts and predictions from third parties not associated with the Home Buying Institute. HBI makes no assertions regarding future home prices or housing trends.