With the national economy on cruise control, it might be easy to forget that some markets are clearly hotter than others. The latest look at “sizzling” markets from John Burns Real Estate Consulting [1] finds seven high-demand, high-potential markets in the U.S. at the dawn of Q2. All but one are west of the Mississippi.
Escalating home prices aside, Seattle is the hottest market in the U.S. right now, according to the report [2]. For one thing, there’s Amazon; for another, there's Microsoft. For a third, there’s business in general. Thirty-one publicly traded companies in Seattle have seen their shares increase 51 percent, year-over-year. Homes in the Emerald City have gained 15 percent on resale, year-over-year as demand and competition remain high. “Seattle also possesses less than one month of supply, the lowest of all markets,” the report found.
A close second is Dallas, with a pro-growth attitude, no income taxes, and 2.4 percent year-over-year job growth. Competition for houses in Dallas is so high, Burns reported, that demand has “helped push home prices 65 percent above prior peak levels.”
A number of new builders have entered the market, increasing competition too. Currently, Dallas builders are working on 734 active projects, second only to Houston’s 1,000 active communities and 15 percent above where Dallas was last year.
But, a word of caution for these two cities: Seattle and Dallas have the most long-term risk among top markets right now, Burns reported.
On the West Coast, Riverside-San Bernardino proved a survivor of the crash and has become a hub for commuters who work at coastal job centers. It’s also the market Burns says that will be the strongest for home growth over the next two years. The region’s tendency towards oversupply, the report states, is likely to not be an issue.
“Rising Asian buyer appeal that has recently been fueled by nonstop China Airlines flights between Taiwan and Ontario,” Burns reported.
The “Silicone Slopes” of Salt Lake City has become such a tech hub that Burns ranked the market the fourth-hottest in the country. Tech giants like Adobe are growing alongside smaller startups, and a strong jobs market fuels equally strong household growth. According to the report, Salt Lake employs 17 percent more people than it did pre-recession.
“Strong demand has pushed home prices up 10 percent, year-over-year, and we project another strong year in 2018,” the report said.
The only sizzling market east of the Mississippi, Nashville, is especially a hit for millennials and people looking for smaller homes. Unemployment in Nashville is a well under average at 2.6 percent, and jobs are 23 percent above their prior peak, the report stated.
“This 'it' city has become a hipster and tourism mecca, given the countless honky-tonks and foodie hot spots,” the report said. “Builders and local municipalities have struggled to keep up with the growth. Cost creep remains a concern for local builders as fees and labor costs continue to rise.”
Another California hot spot is San Diego, where an extremely tight supply has resulted in robust price gains for both new and resale homes. Double-digit employment growth for higher-income segments ($120K–$200K) helps offset some of the affordability issues. The city remains a draw for its growing biotech sector, San Diego’s diverse economy, and benefits from a large military presence.
The final sizzling market on the list is, fittingly, where the sun rarely goes down. Phoenix, once one of the country’s foreclosure depots, now has a two-month inventory and sales totals second only to Atlanta, at 124,000 homes (new and resale). Permits are down two-thirds from their peak, but this, Burns reported, makes Phoenix easily the most affordable top market in the country.