Phoenix will be America’s second-hottest housing market in 2021, topping a list of mostly Sun Belt cities expected to continue heating up faster than the nation’s large coastal markets, according to a new Zillow survey of experts. Coming in at No. 1 on the list of America’s hottest housing markets in 2021: Austin, Texas.
The booming Texas destination heads a lineup of sunny and relatively affordable metro areas — Phoenix, Nashville, Tampa and Denver — that are most likely to outperform the nation in home value growth, according to a panel of economists and real estate experts recently surveyed by Zillow.
The Zillow Home Price Expectations Survey, sponsored by Zillow and conducted quarterly by Pulsenomics LLC, asks a large panel of economists, investment strategists and real estate experts for their predictions about the U.S. housing market. The Q4 survey also asked about their expectations for 2021 home value growth in 20 large markets compared to the nation1.
An overwhelming 84% of those surveyed said Austin values would out-perform the national average, compared to just 9% who believe it would fare worse. Phoenix came in second with 69%, followed by Nashville (67%), Tampa (60%), and Denver (56%). Page views on Zillow for-sale listings in Austin by out-of-town searchers were up 87% in November compared to 2019.
The top-five metros are all affordable options compared to expensive coastal areas that have led home appreciation ranks in recent years, providing relative value for Millennials looking to take advantage of low mortgage rates to buy their first home. The top five are also, for the most part, sunny locales. Four of the five counties holding the largest cities in these MSAs all rank in the top-third of counties in the contiguous U.S. for average daily sunlight, according to NASA data analysed in The Washington Post. Davidson County, home to Nashville, ranked just below the midline.
Top 15 housing markets for 2021
“The pandemic has not upended the housing market so much as accelerated trends we saw coming into 2020,” said Zillow senior economist Jeff Tucker. “These Sun Belt destinations are migration magnets thanks to relatively affordable, family-sized homes, booming economies and sunny weather. Record-low mortgage rates and the increased demand for living space, coupled with a surge of Millennials buying their first homes, will keep the pressure on home prices there for the foreseeable future.”
An improved economic outlook thanks to COVID-19 vaccine roll-outs and better treatments was pegged as the most likely tailwind for the housing market in 2021, followed by sustained strength in first-time home buying among Millennials. It proved a powerful demand driver in 2020 and is expected to persist for years to come.
Those looking for homes — especially their first — will enter a competitive market. Getting pre-approved for a mortgage, working with a trusted agent and taking advantage of online research tools are a few tips shoppers can use to get a leg up.
Austin was predicted to be the hottest market in last year’s survey, and that proved true. By mid-December the median list price for homes in the Austin metropolitan area was up 23.6% year over year — the largest rise among the 50 largest U.S. markets.
“During the pandemic I think a lot of people spending a big portion of their paycheck on rent or mortgage in cities like New York and San Francisco started working from home and suddenly had options. Their dollar goes a lot further in the South, the climate is better, and Austin has a lot to offer — from the food scene to outdoor activities and live music,” said Thomas Brown, a Zillow Premier Agent in Austin and CEO of The Agency Texas. “Those factors are going to continue drawing people into the Austin market in 2021.”
Expensive coastal cities are predicted to fall short of the national average — 82% of respondents said New York would see sub-par growth in 2021. San Francisco (77%) and Los Angeles (67%) round out the bottom of the 20-city list.
Tight supply conditions and affordability concerns were each cited by 29% of the panelists as the greatest headwind.
“While sustained tailwinds are forecasted this year across most of the shifting U.S. housing landscape, certain densely populated markets with high-priced real estate face prevailing headwinds,” said Terry Loebs, founder of Pulsenomics. “Accordingly, home value appreciation rates within coastal cities such as New York, San Francisco, and Los Angeles are projected to see a downshift from last year’s remarkable levels.”