Hottest and Coldest Markets in the US Heading into the New Year
One of the bright spots of the disastrous economic free fall of 2020 was that the housing market was still able to thrive during this unprecedented period in time. Historic low interest rates and a demand for housing when everything else was closed helped to fuel this industry growth. However, that is not to say that the housing landscape picture did not change during this time.
A recent housing report by Zillow demonstrates the changing dynamic of some of America's biggest real estate markets. Although the hottest markets heading into 2021 may not surprise you, those cities on the list of coldest markets may raise some eyebrows. Here are the five hottest and five coldest housing markets predicted in 2021 and what is contributing to these prognostications.
Hottest Housing Markets in 2021
The Sun Belt is the definitive hot place to be when it comes to housing in 2021. In addition to the moderate climate, the region is also attracting families looking for good schools, plentiful jobs, and a lower cost of living. Here are the top five housing markets for the year ahead.
- Austin, Texas
- Phoenix, Arizona
- Nashville, Tennessee
- Tampa, Florida
- Denver, Colorado
Austin is leading the way into 2021. The capital city of Texas is expected to outperform the national market average. Austin was also the hottest market in 2020, showing its strength across a wide array of factors. Home sales in December 2020 were up 24% in Austin compared with the same month in 2019.
Phoenix is hot on Austin's heels for the top spot, boasting a number of sprawling suburbs with plenty of space to grow. This helps to keep prices down as transplants look for land and abundant sunshine. Rounding out the top five are Nashville, Tennessee, Tampa, Florida, and Denver, Colorado. All five of these markets are seeing explosive job growth, beckoning young professionals looking for a new place to put down their roots.
Coldest Housing Markets in 2021On the other end of the spectrum are the cities that people are leaving in record numbers. Here are what the experts predict to be the coldest markets throughout 2021.
- New York City, New York
- San Francisco, California
- Los Angeles, California
- Philadelphia, Pennsylvania
- Minneapolis, Minnesota
There is no doubt that big cities are out and suburbs are in as we head into a new year during a time that is sure to be challenging for many. Many people fled New York City during the initial phase of the COVID-19 pandemic as the city grappled to contain the virus.
Los Angeles is still being propped up largely because of its attractive climate that will always lure people to the area. Conversely, homebuyers are having a more difficult time justifying the high cost of living in cities such as San Francisco and Philadelphia.
Factors Contributing to the Shift
While it was not surprising that Austin, Nashville, and Phoenix are topping the list of hottest markets, what is somewhat surprising is that New York City and San Francisco are cooling off significantly. These two markets bottoming out is a clear reversal of last year's trends.
So what is driving this shift? The pandemic is the biggest driver of this change in market popularity. With more and more people working from home, it is no longer necessary to live near your place of employment. This influence has clearly driven a significant amount of homebuyers out of the economic epicenters of Los Angeles and New York City. This is where more affordable cities such as Tampa and Phoenix will step in and take over that decreasing market share.
In addition, there has been a sharp uptick in millennials looking to buy into the housing market for the first time. Because this demographic is likely unable to afford houses in New York City and in California, it only makes sense that they would gravitate toward the more affordable and trendy markets.
One thing is certain. The effects of the COVID-19 pandemic are going to be felt well after the vaccine has hopefully done its work. The changing landscape of the housing market is just one of these changes.
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