Best cities for investors in 2021
By Mynd Editorial Staff
The run-up in housing prices in many areas of the country, which was partly spurred by the pandemic-inspired flight to the suburbs from urban centers, seems to have more staying power than many experts expected.
In fact, few expected some of the extraordinary events that transpired in the housing market in the last 18 months or so: bidding wars in cities as disparate as Kingston, NY, and Coeur d’Alene, Idaho; lumber costs up by a multiple of 7; a shift away from office work that appears here to stay; and an epic housing shortage that has left many would-be homeowners sidelined.
Then, in the second half of this year, a sense of normalcy has returned. Some of the hottest markets stayed hot, and are expected to remain so through the end of the year and beyond. Some areas that saw a big run up in housing prices have cooled. Opportunities abound, and markets where there is more potential for upside are at the top of the list.
For investors looking to jump on that bandwagon, here are the places Mynd recommends checking out.
1. Atlanta real estate overview
Long known for its affordability, the cost of living is starting to edge up in Atlanta, the commercial capital of the South.
- The median list price of homes here hit $390,000 in June, up almost 15 percent year over year, according to realtor.com.
- The median sale price was $385,000.
- Atlanta rents were up 8.8 percent and 10 percent for one- and two-bedrooms, respectively.
- The price increases were the highest in the cities north of Atlanta, nearing 20 percent in Alpharetta and Duluth.
- Marietta, Sandy Spring and Smyrna saw double-digit hikes.
- Metro Atlanta’s population has risen by 400,000 people since 2015, according to the Census Bureau.
- Fewer than 60,000 apartment units were added in the last six years.
- Last year, it added another 34,000 people, making it one of the fastest-growing metro areas in the country.
What makes Atlanta’s economy go?
The area is home to 18 Fortune 500 companies, including Home Depot, Coca-Cola, Delta Airlines, Aflac and UPS. Hartsfield-Jackson Atlanta International Airport was the busiest hub in the world for 20 years running, until it was dethroned last year by an airport in China.
“Atlanta became what it is because it is a hub of transportation, including rail and air,” said David Zanaty, the head of institutional strategy at Mynd. “It’s also got a lot of diversity in the economy — it’s not just oil, it’s not just tech.”
“This makes it very resilient in a downturn,” he added.
There are also 57 universities in the Atlanta region, including Historically Black Colleges and Universities such as Clark Atlanta University and Spelman and Morehouse colleges; the highly ranked private Emory University; and public institutions such as Georgia State University and the Georgia Institute of Technology.
Population growth in Atlanta is fueled by the ambitious
It is a place that has attracted ambitious young people from throughout the South. For those who left for the cities in the North and are looking to return, most are not going back to the small towns in Georgia — or Mississippi, South Carolina or Alabama — that they left. They are choosing Atlanta, where a diverse community and a relatively progressive political atmosphere prevails.
“There is an in-migration to Atlanta from throughout the Southeast,” said Zanaty. “We have a lot of real estate refugees who are coming here and loving our cost of living.”
With all the corporate activity in Atlanta, salaries are competitive. The median income in 2020, according to the federal Department of Housing and Urban Development, was $82,700.
All these factors make Atlanta an attractive place for property investors.
“There are very high occupancy rates and demand is incredible,” said Mike Overley, director of single-family rentals at Mynd.
— TOM BRADY
2. Opportunities in the Phoenix real estate market
The Phoenix housing market might just be too hot for its own good.
- Home prices were up 29.5 percent in July compared to the previous year, hitting a median list price of $395,000.
- The median sale price was up to $399,900.
- Homes are selling after 25 days on the market, down from 40 last year.
- The average rental price for a 2-bedroom apartment in Maricopa County has gone from $908 a month in 2015 to $1,281 a month in 2021, according to the U.S. Census Bureau.
According to a recent Zillow survey of the 50 largest metro areas, Phoenix led the top 35 metro areas, with 8.4 percent annual growth in single family rental homes.
Affordable housing in Phoenix can still be found
Still, most homes on the market remain affordable to most people, assuming they spend about 28 percent of their gross income on housing. A family making the median income of $79,000 in Greater Phoenix could still afford 62.8 percent of what sold in the first quarter of 2021, according to the May market report for Arizona from Metro Realty.
Zillow experts pegged Phoenix as the second hottest real estate market in the U.S. this year, trailing only Austin. Property values grew by over 30 percent from June 2020 to June 2021, Zillow reported, compared to only 10 percent the previous year and 5 percent from 2018 to 2019.
For investors, the Phoenix rental market is attractive. The rent for an average home is about $2,000 a month and, in some neighborhoods, well over $2,500 a month, according to AZ Big Media.
Phoenix home prices are still rising
The rise in prices is largely influenced by outsiders moving to this desert city. More than a quarter of Phoenix's prospective out-of-state buyers came from Los Angeles, and another 17 percent from Seattle, according to Redfin. And more than a third of sales were in cash this spring in the greater Phoenix metro area.
Devyn Gillespie, sales director for Mynd in Phoenix, said these out-of-state buyers are squeezing out locals.
And as long as fewer houses are put on the market, prices are not likely to come down. “The inventory shortage is worsened by the affordability issue,” Gillespie said. “People have nowhere to go if they sell their homes.”
— TOM BRADY
3. Las Vegas real estate defies the odds
CoreLogic had a gloomy prediction for the Las Vegas housing market late last year, forecasting a steep decline in prices as it expected international tourism to fall off and bring down the local economy.
But 9 months later, Corelogic was like the gambler who saw his stack of chips disappear. The company reported Vegas was fourth among major metros for increased home prices, which skyrocketed 18 percent. The Nevada Current wrote, “What seemed like a sure bet proved to be a fool’s wager,” adding that CoreLogic wouldn’t answer their emails.
The numbers tell quite a story. The median sales price of previously owned single family homes, the better part of the market, was a record-breaking $395,000 in June. As for new homes, the median Southern Nevada sale price was a record-setting $402,990 in May. Typical rental rates zoomed up by over 17 percent year over year, the second-highest growth nationally, making Las Vegas an attractive proposition for investors.
Las Vegas economy see benefits in shift to tech
The city was heavily tourism-dependent 13 years ago, and for that reason was “the poster child” for the 2008-09 crash, says Vivek Sah, director of the University of Nevada Las Vegas’s Lied Real Estate Institute. It didn’t start to recover until 2013.
One factor that has historically discouraged companies from moving to Vegas, Sah points out, has been a less-than-stellar school system. (Even the uneducated, he said, have typically been able to earn six figures at casino and resort jobs.) And there’s just one university serving the population.
“Nevada got a huge gift when Tesla opened one of its ‘gigafactories’ in Sparks,” says Brittany Merollo, an economist with Moody’s Analytics. “People started investing more in Nevada and price rises exceeded the national average.”
In 2019, national commercial real estate services firm CBRE Group ranked Vegas as one of its top ten up-and-coming tech talent markets. Google says its new $600 million facility in suburban Henderson will hire at least fifty employees, earning an average of $65,000 — well above the median national household income of about $56,000.
The University of Nevada at Las Vegas opened a tech incubator, the Harry Reid Research and Technology Park, named for the former senator. The school predicts it will create 25,000 jobs and generate $2.6 billion in revenue. In cooperation with Startup Nevada, which gets federal funding, the city created an innovation center to help support startups; 13 were in residence in August 2020. The future is visible on the city’s streets: it is allowing tech companies to use public infrastructure to test out innovations like self-driving cars.
Inventory shortage plagues Las Vegas housing market
Those incoming, well-paid tech workers will likely continue to raise home prices. What’s more, says Merollo, a shortage of labor is also affecting home prices.
When builders can erect fewer homes, they are more likely to build more expensive ones to increase profit. And the city is limited in where it can expand since Nevada is about 80 percent federal land, she says.
The downside of the boom? As in many other metros, middle-class families are being priced out.
“The median household income of about $61,000 is not a lot of money when you see median prices that may be cresting $425,000 by December,” said Aldo Martinez, president of Las Vegas Realtors.
In addition to the incoming tech workers, the tech-enabled Covid-era Great Reshuffling may attract a new class of temporary residents. Zillow placed the city among its top ten metro areas for digital nomads, who can work from anywhere via email and Zoom, and whose number doubled to eleven million in 2020.
Maybe those nomads who came to Vegas will stay in Vegas.
— BRIAN BOUCHER
4. Austin’s housing market goes wild
Austin’s reputation for livability has turned the former “hippie haven” portrayed in the 1989 indie film classic “Slacker” into one of the country’s hottest real estate markets.
- It was the fastest-growing metro in the U.S. in 2020, growing three percent over the previous year.
- 184 new residents arrive every day.
- It now has a population of about 2.3 million.
- Austin is now the country’s twenty-ninth largest metro area.
When Curbed magazine reported this summer on the city’s “wild” real estate market, it led with an anecdote about an East Austin house without central air-conditioning that got snapped up in four days for $2.6 million, $850,000 above the listing price. A home in not-very-trendy Brushy Creek got almost a hundred offers in a weekend.
“Totally insane,” said one agent.
Median prices cross the half-million mark
- The median home price in the Austin-Round Rock area has hit $536,000, up more than a third from last year.
- Homes are spending an average of just three weeks on the market, down from more than six.
- Housing supply is “critically low,” according to the Austin Board of Realtors, meaning new homes may go up only in the suburbs.
- Rents have climbed lately too: as of July, they were 11.9 percent higher than the same month in 2020, beating the national average of 8.4 percent and the state average of 7.9.
Population growth is anticipated to continue, points out Edward Friedman, a director at Moody’s Analytics. “Housing starts are 20 to 30 percent higher than the last boom, of 2005-2006,” he said. “No one thought they would get that high again. Austin is there.”
Top tech companies in Austin are creating a hub
The Texas capital is one of the beneficiaries of a widely reported exodus from Silicon Valley. LinkedIn data shows it is the top recipient of tech migration among U.S. cities over the last year. STEM occupations currently account for almost twelve percent of all jobs, the fifth-highest among large U.S. metros.
- The city was home to some 6,500 startups and tech companies as of 2019.
- Apple is building a billion-dollar campus that will hire 15,000, making it the city’s largest private employer.
- Tesla picked Austin for one of its new “gigafactories,” a $1.1 billion facility that will employ 5,000.
- Oracle announced in December that it is moving its headquarters from San Francisco to Austin.
These companies join other major employers like IBM, Samsung, and AT&T that have already found a home in Austin.
The state system’s flagship campus just admitted one of its largest-ever freshman classes, bucking the pandemic-era trend. Graduation rates have risen from only half in 2010 to nearly three-quarters in 2020.
“Before Austin was a tech hub, it was a university town,” says Friedman, the Moody’s economist, “which raises kind of a chicken-and-egg question, because the state university has had a big-time computer science department for decades.”
With a median age of 33, it’s one of the younger cities in the country, which lends a youthful vibrancy.
— BRIAN BOUCHER
5. Charlotte real estate market is on the upswing
- At the end of 2020, data from Realtor.com designated Charlotte, NC, as number three among the hottest markets for 2021.
- As of August, the median list price of a single family home was $350,000, nearly 20 percent over last year’s figure.
- Investors who got in on the market five years ago have seen a stunning 56 percent return, and there seems to be room to run.
Real estate experts believe the city is a beacon for the young and upwardly mobile. A report on trends in the industry, written by the consulting firm PwC and the Urban Land Institute and based on the insights of more than 1,600 people in the field, placed Charlotte among its “boomtowns,” which are attracting “far more than their share of smart young workers” and was well on its way to recovering from COVID-related job losses.
More homes and more people to fill them
The city was forecast to be number 11 in the country in construction activity in 2021 to meet growing demand, meaning there is plenty of room for new investment.
The market is “just a frenzy” for sellers, realtor Jill Castle told news outlet WCNC, which reported that one broker was even going door-to-door in desirable neighborhoods to solicit potential sellers. A hundred people move to the city every day, joining the Fortune 500 companies that call Charlotte home, including Honeywell, Lowe’s, and Brighthouse Financial.
What’s more, the city is likely to become only more livable as Charlotte implements its comprehensive plan, which states: “All Charlotte households will have access to essential amenities, goods, and services within a comfortable, tree-shaded 10-minute walk, bike, or transit trip by 2040.”
Affordable housing in Charlotte attracts millennials
“Charlotte is the number one city in the country attracting Millennials, because it’s one of the largest drivers for financial services,” says Thomas Stepp, director of investor services at Mynd.
Charlotte is the country’s second-largest financial center; Bank of America and Wells Fargo are among the city’s top employers.
“Companies that would previously have been based in Manhattan are now moving bankers who are in years one to five of their careers to Charlotte because of the city’s affordability,” says Stepp. Millennials are the population most likely to be renters, and rents have increased five percent year-over-year.
The prominence of financial institutions in Charlotte makes the city very reliable for investors.
“If you’re worried about rising interest rates or inflation,” Stepp addes, “there is probably no better place to invest than in a city with a healthy financial market, because banks do very well in that climate.”
Owing to increased pandemic-era government spending in the last two years, inflation has been on the rise, and if it does not moderate, real estate investments, typically a hedge against inflation, are an attractive option.
— BRIAN BOUCHER
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