While perhaps not as robust as 2020’s record-shattering volume, the rest of 2021 and 2022 are expected to see high demand for home purchases, especially as consumers look to secure low mortgage rates and younger generations reach home buying age.
“I think [the industry forecasts] are being a bit conservative for the second half of the year,” Charley Clark, SVP and executive director of mortgage warehouse finance at TIAA Bank, said in an interview. “That’s just based on our numbers and our experience. April, May and June performance for us were consistent with production from the second half of last year.”
Although more sellers are listing their properties and falling lumber prices offer cause for buyer optimism, the years-long for-sale inventory shortage have led to ballooning prices and tanking affordability. Cities experiencing rising interest can anticipate more of the same over the next 12 months and some will certainly see a rise above the national average home value growth rate.
Comparing an area’s current housing inventory to historical norms stands as a good barometer of the market’s conditions, according to Zillow Senior Economist Jeff Tucker. Without many choices for buyers, sellers don’t face the competitive pressure to undercut each other, resulting in bidding wars.
“Multiple-offer situations are the proximate cause of a lot of value growth and that information transmits quickly to other real estate agents listing the next batch of homes for sale,” Tucker said in an interview. “But frankly, the best predictor of upcoming price appreciation is the most recent few months of price appreciation. There’s momentum intrinsic to that time series that’s much more predictable than other prices, like the stock market for instance.”
Using a model that combines the historic price levels, current market values and supply conditions, Zillow forecasted the year-over-year home price growth by May 2022 in the 100 largest metro areas. From the Sun Belt to the West, local lenders from the top 12 housing markets in expected appreciation rates talk about what makes their cities ripe for a boom.
12. Riverside, California
Local professional: Matt Rundle, branch manager at Westin Mortgage, a Mountain West Financial company
What makes the Riverside market poised for growth?
“It’s real simple to me. Riverside is the benchmark city of the Inland Empire. We’re 45 minutes from the best beaches in the world. People move here from an affordability standpoint compared to the rest of Southern California. Additionally, with the pandemic allowing employees to work remotely, people who live in the San Diego, Orange and Los Angeles counties are coming to Riverside.
“If you’re a seller, you’re in great shape. There’s not enough inventory, there’s a lot of buyers on the street. Buyers are competing against a lot of people to get a house accepted and doing anything they can to make their offer look the best. And I’m telling potential buyers, you want to buy today versus next month or the month after that. I don’t know that the inventory is going to catch up to the demand. I think the market stays strong and keeps pushing prices up.”
11. Las Vegas, Nevada
Local professional: Crystal Schulz, loan officer at Pinnacle Lending Group
What makes the Las Vegas market poised for growth?
“The coronavirus had everyone in a frenzy thinking that the bottom was going to fall out and drop us into a recession, especially with just how impacted we were with employment on the strip. That’s what makes our market unique, the local economy is about 60% service industry with people in restaurants and casinos. But buying and renting is becoming an issue for the average person here in Las Vegas. We have first-time home buyers, a lot of action from other states and investors too, making it very competitive, even on new-build homes.
“The lack of anything available at under $300,000 is crazy, sellers can get 20 offers on properties within the first two days. A lot of people are being priced out and people are guaranteeing to pay above appraised value. We have a lot of people moving in from other places benefitting from the lower cost of living and no state income tax. The price per square foot is literally at about double what it was five years ago.”
10. Boise, Idaho
Local professional: Suzi Boyle, loan specialist and branch manager at Castle & Cooke Mortgage
What makes the Boise market poised for growth?
“We’ve had this kind of crazy market since 2016 but it didn’t get national attention. A healthy real estate market has four-to-six months of inventory. We haven’t had four months of inventory since 2014. I have 72 pre-approved ready-to-go buyers that have been trying all year to find a home. There’s no supply, unless you’re willing to wait eight months for a custom build job. It’s become a pressure cooker market, because it’s 35% cash buyers.
“We do have a lot of tech people that commute to Silicon Valley, finance people that commute to LA and aerospace and biotech that commute to San Diego. In addition to all that, we have a lot of California retirees coming here. People like the climate, it’s a good place to raise kids, we have really low crime, we have 52 wineries in the Treasure Valley and everybody can afford to golf and ski here.”
9. Salt Lake City, Utah
Local professional: Dave Robison, broker and owner of goBE Realty, and former president of Utah Association of Realtors and Salt Lake Board of Realtors
What makes the Salt Lake City market poised for growth?
“Offers have got to the point where people are just buying the home despite an appraisal or inspection with non-refundable earnest money up front. If you were at a grocery store and there was only one peach left, you wouldn’t care if it was bruised and wait around for fresh ones. You just buy it and take it right now. That’s the mentality.
“Rents keep going up, home prices keep going up and we aren’t seeing a break in demand. We have more people than we have housing…so we can’t build our way out of it right now. We don’t see an end in sight due to our current population needs and people coming here from out of state in greater numbers than pre-COVID.”
8. Spokane, Washington
Local professional: Cambria Henry, realtor, owner and managing broker of Haven Real Estate Group
What makes the Spokane market poised for growth?
“There’s a lot of frustration for buyers that have been looking for a little while. The houses they could have afforded a couple months ago are now completely out of their price range. Buyer demand is incredibly strong.
“It’s absolutely beautiful here. It’s hard to drive more than 20 minutes without hitting a lake and it’s very mountainous. But we also have an actual city with an international airport so it’s easy to travel. It’s an hour flight to Seattle, it’s an hour to Boise, you can get to LA very quickly. And you can be here and still have a lot of the conveniences that you want out of a city. We’ve got fantastic restaurants, great shopping but then you still have that small town feel. And it’s very, very spread out. We have all four seasons. It’s amazing here.”
7. San Jose, California
Local professional: Robert Bachman, branch manager at New American Funding
What makes the San Jose market poised for growth?
“We won a bid the other day at $300,000 over asking price. We’re seeing more cash buyers, they now make up over 20% of our market. One out of every 797 people in San Jose is worth over $30 million. Investors pool together just to buy houses and flip them in less than three months. You have Google, Netflix, Apple…Money is incredible out here. It’s the high-tech capital of the world.
“Then you have the perfect temperature outside. Santa Cruz is less than 30 miles away, you have Carmel and Monterey only an hour and 15 minutes away, you can get to Napa in an hour and a half. Then there’s San Francisco and Sausalito.”
6. San Diego, California
Local professional: Joe Feinhandler, mortgage broker at Best Equity Funding
What makes the San Diego market poised for growth?
“Demand’s extremely strong and I don’t see that changing much. A lot of my old clients are selling and moving out of state because they’re retiring, cashing out and taking advantage of the high sales prices. You’d think that would be giving more inventory but it’s being absorbed faster than it’s coming out.
“All the coastal regions are always ahead of the rest of the country in home price growth, but I’m seeing more of an exodus from Los Angeles. I mean, 65 to 75 degrees for 330 days a year with no rain is definitely alluring. The prices…it’s the weather tax. Biotech’s been in the area for a good while so there’s plenty of employment and lots to do year-round. It’s just a desirable place to live, raise a family and the colleges keep people coming in. A lot of times if they can stay by any means necessary, they’ll make that happen.”
5. Ogden, Utah
Local professional: Jeff Holden, branch manager at Academy Mortgage
What makes the Ogden market poised for growth?
“There’s still a major inventory problem. I’ve had multiple people put a property under contract without the home appraisal and it doesn’t seem to bother them to move forward. I’ve seen people pay as much as $200,000 over the ask price. It’s been crazy.
“I’ve always felt that Utah was one of the best kept secrets in the United States. We have four distinct seasons and recreation available in each. People come here and they love it. Particularly now, people are tired of living on top of each other and people are tired of paying more to park their car than they are for their steak dinner. And I think the pandemic fueled a desire to be somewhere where you’re a little more spread out and a lot of people are flocking to Utah because we offer that.”
4. Phoenix, Arizona
Local professional: Andrea Crouch, owner of the Crouch Group
What makes the Phoenix market poised for growth?
“We have seen multiple offers on our listings (30 is our record), them going 10% to 30% above list price, escalation clauses, buyers waiving inspections and appraisals, even writing in their pets, cars, college education for the seller’s children, monkeys, and pizza in their above-and-beyond offers. Those are just outlandish examples of buyers doing whatever it takes to get their new home.
“Buyer demand is real and there are no signs of this slowing down. And no, this is not a bubble. Home builders are steadily increasing their production and their prices are increasing every time I enter a sales office. They also have bidding wars on their lots that they release like warehouse stores released toilet paper in 2020.”
3. Provo, Utah
Local professional: Andrew Ford, president of the Utah Central Association of Realtors
What makes the Provo market poised for growth?
“We do have an exodus from California and Washington specifically because of the tech industry pulling in people that traditionally wouldn’t come here. We have such a housing shortage right now that the average house goes from list to contract in about six days.
“But most of all we just have higher childbirth than everywhere else in the country, so our natural population increase is strong. Millennials are the largest demographic and they’re at that home buying age and we have a lot of them looking to purchase. We also have a net influx of migration. We have a huge student population with many coming from out of state. They end up getting married, having babies and staying here, then the grandparents move here to be close to their grandkids.”
2. Fort Myers, Florida
Local professional: Andy Davis, CEO and loan originator at D&V Home Mortgage
What makes the Fort Myers market poised for growth?
“Basically when COVID hit, it’s the busiest we’ve been since 2006. Why is Fort Myers growing so much? Probably affordability, prices down here just haven’t gone up as much as they should have. People that look to buy in Florida, Texas, Arizona, and California, you’re going to get the nicest place to live compared to any of the others and for a much better price.
“And then number two, with us having a university down here with Florida Gulf Coast, I think that helps us with keeping the modern restaurants around and that type of thing too. That, along with the fact there still has been a sufficient amount of new builds too, it just kind of sets up for a pretty perfect market.”
1. Austin, Texas
Local professional: Seamus Donohoe, loan officer at Supreme Lending
What makes the Austin market poised for growth?
“On top of the State Capitol, the University of Texas — which is massive — and the music scene, there’s incredible growth coming from the technology movement into Austin. As it’s grown over the years, one thing that’s blown me away is the transformation you see in the skyline. I brought my car in for service the other day and noticed six cranes. The tech industry is driving that.
“There’s no state income tax, which is a huge draw. There’s a lot of land so there’s a lot of room for growth. You could come to Austin and find yourself something on five or 10 acres in close proximity to the city and get a great deal. That’s a really good opportunity to park some money.”