- Kansas City’s inventories have been shrinking for ten years.
- Prices in Salt Lake County hit an all-time high in the third quarter of 2019.
- Philadelphia’s prices rose when inventories fell by double digits.
- Supplies of homes for sale in Minneapolis have been far below demand since 2014 and have put upward pressure on prices over the past six years. Minneapolis prices have risen steadily every year since then.
- Inventories in Syracuse have been declining since 2016.
Last November, home prices at the national level increased for the 93rd straight month. The median price for existing single-family homes was 5.4% higher than it was a year ago. That’s a substantial increase, mainly because Novembers’ increase marked the 93rd consecutive month when prices increase on a year-over-year basis. It looks like the most extended housing price boom in recorded history isn’t ending anytime soon.
Price appreciation is good news if you’re a homeowner but not so great for buyers. Every housing market is unique, and trends in one market may differ considerably from others located not far away. Today’s price inflation is not so good for a buyer seeking an affordable first home.
Real estate market changes result from local conditions. A natural disaster like a flood, a regional economic catastrophe such as a plant closing, or the appeal, or the opening of a new subway station that makes it easier to commute, can change a market’s fortunes overnight.
The laws of supply and demand govern real estate. Changes in either supply or demand create conditions that consumers can anticipate when they decide to buy or sell. For example, lower quantities of local homes for sale or the arrival of large numbers of buyers, such as the millennial generation, will drive up prices as buyers compete for a shrinking pool of properties. Conversely, a decline in demand or an increase of supplies, such as the millions of foreclosures ten years ago, will cause prices to fall.
Analyzing the current conditions of local markets can help you anticipate price changes shortly. In no particular order, here’s a list of seven “Cinderella” markets– metros that stand a good chance of joining the top markets by the end year.
Through November, prices in Marion County were up 12% over last year, more than twice the national median of 5.4%. Low inventories, which were down 11.4% from 2018, force prices up as buyers competed for listed properties. New listings were down 43%, a sign that higher prices are not motivating sellers, at least not yet. Housing, however, is much cheaper than the national average, making it a lot more affordable for residents to buy.
“High demand is driving increased prices, balanced against the challenge of low inventory,” says Shelley Specchio, CEO of the regional board of Realtors. “However, we still consider this a strong market given the fact that sales are consistent, and buyers are present and optimistic.”
With unemployment at only 2.7% and non-farm employment rising by the same percentage, Indianapolis is on a roll, attracting new workers in search of housing. With this kind of numbers, prices will continue to rise in 2020, qualifying Indianapolis as one of the country’s hottest housing metros.
Kansas City never experienced the best of the housing boom of 2005 nor the worst of the bust that followed it. It hasn’t been a leader in the housing recovery, nor is it one of the hot spots like San Francisco, San Jose, or Denver where prices have peaked and are now returning to earth.
Its homes are appreciating at about 5.3%, virtually the same pace as the national median of 5.4%. In the third quarter of last year, it listed 20th in the Federal Housing Finance Agency’s list of top performing markets.
Kansas city’s economy is healthy and poised for growth. Total non-farm employment rose 1.4% over the past year, and at 2.8%, its unemployment rate beats the national average. At $229,306, its median home price is comfortably below the national median of 271,300. Kansas City is popular with young buyers, (ranked 14th among millennial-friendly markets by LendingTree).
In November, traditionally one of the slowest sales months of the year, the Kansas City market looked like a place where prices are getting ready to take off. During the year, inventories plunged 18.7. By closing out the year with the cupboards bare, the stage is set for further price increases as the spring season opens.
Could 2020 be the year that Kansas City breaks out of the pack? Can it prove that you don’t have to be the nation’s high-tech center or a popular destination, like San Francisco or Las Vegas, to have an exciting housing market?
Kansas City’s inventories have been shrinking for ten years.
Source: Kansas City Regional Association of Realtors
Over the past three years, stocks have been the most critical driver of home prices in most markets. When it comes to shrinking inventory, no city can out do Salt Lake City. From the beginning of the decade to the end, the number of homes for sale declined by 77%. Prices in Salt Lake City increased 9.8% in the third quarter of last year, one of the top five in metros the nation in terms of year-over-year appreciation.
One reason that inventories are shrinking is that Salt Lake City homeowners are staying in their homes longer, and home builders are not building enough new homes to meet the increased demand of younger generations. Salt Lake City’s median home tenure rose from 14.7 years in 2010 to 23.4 years in 2019. During the same period, the number of homes for sale dropped by 59%, and the median sale price jumped 74.4% to $340,000 over nine years.
Salt Lake City is popular with millennials. It’s a winter sports center set in a beautiful valley not far from some of America’s most spectacular national parks and forests. It’s also a young and prosperous city. Nearly a third of its population are millennials, who make a median income of $64,000. It’s a significant center for Microsoft and Adobe, and unemployment is below 5%.
Prices in Salt Lake County hit an all-time high in the third quarter of 2019.
Source: Salt Lake Board of Realtors
Over the last seven years, Philadelphia home prices have risen almost 46%, according to data from local economist Kevin Gillen. “The city feels like it’s getting a face-lift,” said Mark Zandi, chief economist of Moody’s Analytics.
Demand is increasing. Employment grew by 13,000 jobs in the second half of 2019. In the last seven years, the population has grown, income has jumped, and nearly 6,000 vacant units have vanished. The region’s cost of living rose only 1.9% last year.
Two of Philadelphia’s neighborhoods rank in the top 20 for having the largest share of millennial residents, and one of its zip codes ranks second in the nation for its popularity with millennials (71%). It extends across Manayunk, a neighborhood known for its flourishing small businesses, a wide range of leisure activities and dining choices – in other words, a millennial haven minus the hustle of large crowds and congested traffic. Since 2006, when the city’s population reached its lowest point in a century, no major city has experienced a more significant increase in 20- to 34-year-olds than Philadelphia, as measured by the change in the percentage of the city’s overall population, according to the Pew Charitable Trusts.
In addition to its popularity among millennials, shrinking inventories are contributing to Philly’s real estate renaissance. In November, inventory was 19% lower than in 2018. Since 2011, the market’s median home price has risen steadily every year, increasing 62%.
Source: Pew Charitable Trusts
Philadelphia’s prices rose when inventories fell by double digits.
Source: Long & Foster
Like Salt Lake City and Indianapolis, Minneapolis’ median sale prices have risen modestly but steadily every year since the recovery began. Prices in Minneapolis have now reached an all-time high of $222,600 after increasing 68%. According to the S&P/Case−Shiller Home Price Index.
Inventories of homes for sale have not fluctuated much since the recovery began in 2014. Supplies have been too small to supply the market’s demand. A four−to−five-month supply is considered normal; Minneapolis has been operating with only a two to the four-month amount for the past five years. Low quantities have contributed to a steady rate of appreciation, but Minneapolis is still nearly $50,000 below the national median of $271,300. Homes are selling faster, spending from 79 days on the market in 2014 to 48 in 2019−still fewer than the 38-day national average.
Minneapolis is still one of the most affordable major markets in the nation, which has helped to make it popular with millennials. It receives more applications for purchase mortgages than any other major city, and 48% of its applications for the adults under 35.
At some point soon, if current trends continue, Minneapolis’s supply problem may drive prices high enough and fast enough to qualify as one of the nation’s hotter markets.
Supplies of homes for sale in the Twin Cities have been far below demand since 2014 and have put upward pressure on prices over the past six years. Minneapolis prices have risen steadily every year since then.
Source: Minneapolis Area Realtors
Home to Syracuse University and two SUNY schools, higher education is Syracuse’s largest employer. With a steady economy that reflects stable national employment and a lower than average cost of living,
Its median home price of $145,000 as of last November is less than half the national median of $271,300. Prices appreciated at a rate of 5.2% through November, slightly below the national median of 5.4%, and the average income is twice as high as the amount required to qualify for a mortgage. However, inventories of homes for sale have been falling since 2015 and are 16% below and half as large as in 2016.
Nearly three in four new Syracuse residents in 2017 were millennials, according to a study of the moving patterns of young people produced by the National Association of Realtors. Syracuse has the third-highest percentage of new residents born between 1980 and 1998 of the 100 most significant metropolitan areas in the country.
Best of all, millennials can also afford to buy 48% of homes on the market. For those willing to spend some sweat equity, Syracuse is one of the best markets to find a foreclosure. Approximately 1 in 6 homes are underwater on their mortgages. It’s understandable considering Syracuse’s median home value is more than $150,000 below the national median home value of $226,300.
Inventories in Syracuse have been declining since 2016.
Source: Greater Syracuse Association of Realtors