Article Written by Jeff Tucker
A panel of economists and real estate experts expect Austin to outperform the national market by the largest margin, followed by Phoenix, Nashville, Tampa and Denver
Expensive coastal markets New York, San Francisco and Los Angeles are most likely to underperform, though Zillow expects growth in every market
Key tailwinds include an improved economic outlook underpinned by progress on coronavirus vaccines, while affordability and available supply are potential drags
After outpacing all other large markets by the end of 2020, Austin’s housing market is again expected to be the nation’s hottest in 2021, leading a list of mostly Sun Belt cities expected to continue heating up faster than the nation’s large coastal markets.
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 Q4 2020 Zillow Home Price Expectations Survey, sponsored by Zillow and conducted quarterly by Pulsenomics LLC, asked 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 nation.
Austin was also 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.
A large majority (84%) of those surveyed said home value value growth in Austin would out-perform the national average, compared to just 9% who said they believed it would fare worse. Phoenix came in second with 69%, followed by Nashville (67%), Tampa (60%), and Denver (56%).
The top-five metros are all relatively affordable options compared to expensive coastal areas that have led home appreciation ranks in recent years, providing relative value for those looking to take advantage of low mortgage rates to buy their first home or move up in the market. The top five are also, for the most part, sunny locales; all except Nashville rank in the top-half of U.S. cities for their annual percentage of possible sunshine, according to NOAA data reported by NerdWallet.
The pandemic has not upended the housing market so much as accelerated trends we saw coming into 2020. 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.
The market in 2021 will be pushed and pulled in different directions by several competing economic forces. Tight supply conditions and affordability concerns were each cited by 29% of the panelists as the greatest potential headwinds. 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 again Millennials. Those favorable demographics proved a powerful demand driver in 2020, and are 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.
Expensive coastal cities are predicted to fall short of the national average — 82% of respondents said New York home values would grow at a slower pace than the nation as a whole. San Francisco (77%) and Los Angeles (67%) round out the bottom of the 20-city list.
“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.”
This edition of the Zillow Home Price Expectations Survey surveyed 113 experts between November 23, 2020 and December 8, 2020. The survey was conducted by Pulsenomics LLC on behalf of Zillow, Inc. The Zillow Home Price Expectations Survey and any related materials are available through Zillow and Pulsenomics.