Opportunities in The US Housing Market
Last year has been unprecedented and the housing market is witnessing an evolution with many housing trends accelerating by 5–10 years. States like Texas, Idaho, Florida, and Wyoming are witnessing unprecedented growth in the housing market as an increasing number of families move there. Although this migration trend is not new, the ability to work remotely, the need for space to work from home, and the reduced interest rates are significant drivers for people zig-zagging through the nation. The biggest influx has been in metropolitans with depressed housing or rental prices, while expensive home markets in high state tax states like California and New York have seen the most significant declines. Older millennials (30–39 yrs old) have replaced Gen-X as the biggest demographic segment to lead the housing trends.
Multiple public data sources exhibit this trend.
- U-Haul’s moving data showing cities with the largest increase in incoming population
- Apartment Guide’s data showing changes in demand and rental prices for studios to 4 bedroom apartments
- Zillow’s list of the hottest property markets in the country.
Areas with the largest growth and declines
People are moving from expensive tech or finance centers to other, more affordable cities like Las Vegas, Sacramento, Nashville, Atlanta, Miami and Houston. Las Vegas has seen a 30% increase in average apartment rent, while cities like New York, San Francisco, Los Angeles, and Denver are cooling off. San Francisco’s average rent has decreased by about 30%, and New York has witnessed an average depression of 15% on 2–3 bedroom apartments. People simply don’t see a reason to pay such high rents in these cities. Despite falling rental prices, home prices in the San Francisco Bay Area are an anomaly and prices are still not cooling off as much, indicating post-pandemic optimism and inventory shortage. The home inventory shortage has also contributed to an increase in demand for rentals in almost every growing area.
According to the data from UHaul, these are the top 15 destinations with the highest YoY growth in percentage between incoming population and outgoing population.
Why are people moving?
According to the Foundation of Economic Education and The Hill, there was already a migration from high tax states to lower-tax states. Now coupled with the ability to work remotely and low-interest rates have accelerated the trend for home buyers and investors also see an opportunity.
Rates: Declining rates for the last two years, especially the rock bottom rates last year, prompted people to invest in real estate or just to buy their first homes. However, the rates are starting to climb back up now.
Alternate tech destinations: People from California are moving to Texas, especially Austin and Dallas — places with high tech activity and relatively low taxes and lower home prices compared to SF Bay area. Telsa, Oracle and Palantir have decamped for Texas or Colorado.
Who is moving?
According to the “Buyers and Sellers Generational Trends Report” published by the National Association of Realtors (and I recommend reading this) and The Hill, families in high tax states see the current situation as an opportunity to relocate. The demographics that lead the trend are the Millenials. They are already the largest population segment. And with increasing spending ability, the older millennials did more transactions than the affluent GenX for the first time in 2020, and these transactions are increasingly in states like Idaho, Texas and Florida.
Conclusion:
Real estate and rental markets have been on fire through 2020 and one of the few industries that bucked the trend. Families looking to relocate see an opportunity with the low rates, ability to migrate from high tax states and avail remote work opportunities. Investors follow these trends and will fuel this growth. The housing and the rental market will continue to evolve and bring new opportunities along the way.
