Success in real estate investment is all about doing your research and choosing the right market for your money. Although the media frequently speaks of the “American housing market,” there really is no such thing. Every state and every city has its own market, and when you’re setting up your income property calculator, you need to know which markets are performing best and offer the safest bets for your investment. We’ve got a list of the hottest markets in 2019 and beyond, and a few warnings about places to watch out for.
Hottest Markets in 2019
What to Know
If you’ve been relying on data from 2018, it’s time to update. In 2019, the hottest markets in the United States had half the total number of households as those on last year’s list and 7% fewer households per square mile. This means some of the best markets can be found outside busy metropolitan areas.
What Makes Them Hot
There are a couple of important things to note about how to tell which markets are heating up. For one thing, listings in the hottest markets were visited three times more often than the average home listing and twice as often as listing in the nearest big city. In these ZIP Codes, it took just 17 days for the average home to sell. The average for the rest of the nation is 57 days.
Expected Hot Markets
There are a few places in the list of hottest markets that anyone might have been considering for their income property calculator. These are places that have been doing well for a while or had all the earmarks of good growth.
Rochester, New York
People in the Northeast are increasingly looking to move away from the big cities and into more livable neighborhoods. Rochester definitely qualifies—and the number one area right now is the village of Churchville. The median sale price has gone up almost 39% there since 2017.
Greece, in Monroe County, is another area in the Rochester suburbs to look out for. The median sales price here went up more than 6% in 2017 and another 3.4% in 2018. These and other hot areas around Rochester are characterized by small communities within walking distance of local dining and shopping.
Boston is a consistently good performer, and lately, it is particularly popular among millennials and first-time homebuyers. Much of this is due to Boston’s increasing importance in the tech sector, but there are also strong education and healthcare industries keeping things moving.
Prices here been on the rise since 2012. In the greater Boston area, median home prices have increased by nearly 4% year-on-year since early 2018. That trend is expected to continue into 2020.
Boise has been moving up in recent years for a very specific reason: people fleeing California, Oregon, and Washington state with their confiscatory tax policies, and now state-wide rent control in Oregon and California. Economists from all political persuasions agree on one thing: rent control never works and only hurts the people it’s trying to help.
Property prices in Boise rose 13% between 2018 and 2019, making it one of America’s hottest real estate markets. Currently, predicted sales growth is around 1.5%, and predicted price growth moving into 2020 is close to 7%.
Unexpected Hot Markets
A few markets on this list are ones that no one was expecting. Most of these new additions to the hottest real estate markets of 2019 have been fueled by buyers looking for an urban lifestyle with proximity to a big city. Consider these for your income property calculator:
Just as Boston is heating up, some of the nearby suburbs are doing well, too (not everyone wants to live that close to the statue of Ben Franklin). In Melrose, the average home on the market tends to get two offers and sells about 3% above list price in 20 days or so.
Sales prices have gone up 14.5% since 2018, and the hottest homes on the market frequently go for as much a 7% above their list price and sell in less than two weeks.
Omaha Nebraska may not be the first place you might think of when you’re considering places you’re going to be figuring in your income property calculator, but it is growing quickly. The median list price for homes in Omaha is up 19% over 2018.
The Downtown area is a little slower than the Westside district, but Downtown is a hot area for condos and townhouses. Even better, home values in Omaha have been going up for the last three years. There is strong economic growth in the city, meaning Omaha is a place for investors to watch moving into 2020.
Las Vegas, Nevada
Las Vegas is not an entirely unexpected hot market, but the pace of growth is. The city was particularly slammed by the 2008 housing crisis and full of foreclosed properties and empty construction sites. With a booming national economy, no sales tax in Nevada, and low mortgage rates, the real estate market here is one of the hottest in 2019.
The tech industry is growing and attracting more millennials, so this trend is likely to continue. Right now, price growth is predicted to increase by just under 8% in 2020.
Bridgeport’s housing boom is being supported by political policies in the state of New York. A lot of the movement here, however, is by people right on the border between upper-middle-class and rich who can’t afford New York’s “mansion tax.”
But the city is also seeing an influx of millennials who want to be within a train ride of New York without New York prices, taxes, or crime rates. Prices are expected to grow around 4% in the next year with about 5% growth in sales.
Looking to 2020
In addition to the markets already listed, look for breakout years from these markets in 2020:
This city has affordable property, close to a 7% average CAP rate, and is seeing population growth of 2% a year.
Cape Coral, Florida
Property here is slightly more expensive, but the population growth is close to 4%. Housing starts are moderate, and the average CAP is closing in on 6.5%.
Kansas City, Missouri
Kansas City is not experiencing a lot of growth, just under 1%, but the average CAP rate is over 7%, and affordability is high.
What to Avoid
Anything in California will be risky. Rent control, lots of regulation, worker shortages, and excessive taxation make it tough to build or remodel profitably, though demand is high. And as rent control sinks in, markets will dry up. Watch out for Oregon for the same reason.
Virginia is another state to tread cautiously in. Virginia’s housing markets have high rates of negative equity, and foreclosure rates are well above average. Illinois is in a similar situation, with Peoria leading the way in terms of real estate markets to avoid. In the last two years, prices have gone down 16%, and more than 20% of real estate is underwater.
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