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Low Inventory Drives Home Buyers to Explore Big City Alternatives

December 17 2019

Boise, Idaho, McAllen, Texas and Tucson, Ariz. top realtor.com's list of markets set to sizzle in 2020

SANTA CLARA, Calif., Dec. 12, 2019 -- While the U.S. housing market is expected to cool in 2020, certain markets will remain steadfast, fueled by strong local economies, job creation, and available inventory, especially at the entry-level price point. Topping next year's housing markets list are Boise, Idaho, McAllen, Texas, and Tucson, Ariz., according to realtor.com's analysis of the 100 largest metros released today.

Based on realtor.com®'s analysis of projected home sales and price data, this year's list highlights the trend of people moving from expensive coastal cities to more affordable areas inland. In fact, nine out of 10 of 2020's hottest markets are not on the coast -- a significant change from last year when four out of 10 markets were on or near the water. This trend is particularly noticeable in Boise, which jumped from the No. 8 position last year to the top spot for 2020. Boise is seeing an influx of out-of-state buyers looking to enjoy the city's amenities at a lower price point compared with places such as California.

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In the top 10 markets, home sales are expected to increase by 2.4 percent and prices by 3.1 percent on average year-over-year. This is in contrast to a 1.8 percent decrease in home sales and a 0.8 percent increase in sales prices nationwide, according the realtor.com® 2020 housing forecast.

Top 10 markets in 2020

  1. Boise, Idaho
  2. McAllen-Edinburg-Mission, Texas
  3. Tucson, Ariz.
  4. Chattanooga, Tenn.
  5. Columbia, S.C.
  6. Rochester, N.Y.
  7. Colorado Springs, Colo.
  8. Winston-Salem, N.C.
  9. Charleston-North Charleston, S.C.
  10. Memphis, Tenn.

"Many of the markets on this year's list are late bloomers in the current housing cycle, meaning they still have plenty of inventory and prices are within reach -- a rare combination in recent years," said George Ratiu, senior economist, realtor.com®. "Additionally, a number of the top markets in 2020 are welcoming an influx of buyers from nearby large cities that have become crowded, expensive and lack sufficient inventory."

Buyers have more choice

With inventory at historically low levels nationwide, home ownership has become challenging, especially for first-time buyers. In fact, this year's list represents the nation's only markets which retain sufficient inventory, especially at the entry level price point. The search for affordability has attracted a large number of buyers into these markets, with active listings decreasing 11 percent year-over-year. However, in many of the top 10 markets, constricted supply is a relatively new issue and the total stock of inventory remains plentiful and in a good position to absorb growth.

Sister cities

Many of the markets on this year's list are smaller cities that are handling overflow from nearby larger cities that have become crowded and unaffordable. For example, Colorado Springs is becoming a respite from Denver's pricey housing market and Memphis and Chattanooga are affordable options for people looking for Nashville alternatives.

University towns

Interestingly, the majority of top markets are home to a college or university. This is likely due to the fact that many schools are creating incubators to nurture entrepreneurs and start-ups, helping to fuel local job markets. Rochester, N.Y., for example, is home to two large universities and is benefiting from this trend.

Retirement boom

Cities like Tucson, Ariz., Winston-Salem, N.C., Columbia, S.C. and Charleston, S.C. have become popular retirement destinations. Many baby boomers are looking to spend their golden years in a warmer climate and escape the high property tax rates that are common in the Northeast. Arizona, North Carolina and South Carolina do not tax Social Security retirement benefits, making these states attractive to older buyers.

"As a whole, millennials are driving the housing market, but what's interesting in this year's list is that not all of our cities fall into that category. In fact, only half of this year's top 10 are millennial markets and the other half are being driven by retirees and mid-lifers leaving more expensive coastal cities," added Ratiu.

1. Boise, Idaho

  • Median home price: $295,000
  • Home price change: +8.1 percent
  • Sales change: +0.3 percent
  • Combined sales and price growth: +8.4 percent

Idaho's capital city has seen a boom in population over recent years, having nearly doubled in size since 1990. Many of the city's newcomers are transplants from more expensive coastal cities. Boise is home to a mild four-season climate with a vibrant community that actively takes advantage of the area's easy access to mountains, rivers, lakes and parks. A strong school system, thriving job market and top-notch healthcare draw a diverse crowd to Idaho's capital. A favorable tax structure -- which includes relatively low sales and property tax and no state Social Security tax -- as well as relatively affordable housing has made this area popular for retirees as well as young professionals. Boise is no stranger to realtor.com®'s Top Markets List, it was No. 8 in 2019.

2. McAllen-Edinburg-Mission, Texas

  • Median home price: $152,000
  • Home price change: +4.0 percent
  • Sales change: +4.4 percent
  • Combined sales and price growth: +8.4 percent

Nestled along the Rio Grande and Mexico border in the southern tip of Texas sit the cities of McAllen, Edinburg and Mission. The area has a rich heritage which can be felt throughout and is home to the National Butterfly Center and annual Citrus Fiesta. Affordability is a main driver for many people moving to the area from other parts of Texas and the country -- in fact, McAllen is one of the most affordable markets in the country, with a median home price of just $152,000. Emerging job opportunities coupled with the fact that Texas does not have a state income tax is drawing many young professionals to the area.

3. Tucson, Ariz.

  • Median home price: $230,000
  • Home price change: +3.3 percent
  • Sales change: +3.4 percent
  • Combined sales and price growth: +6.6 percent

Many people are flocking to Tucson, which boasts warm temperatures and 286 days of sunshine each year. The sun-baked city is one of the most popular retirement destinations in the country, however, it is also drawing the younger generation, as the city is home to The University of Arizona. Additionally, large companies including Amazon, Texas Instruments and Caterpillar have recently moved to or expanded within Tucson, creating many new job opportunities. After taking a large hit during the 2008 recession, the area's housing market has bounced back stronger than ever. Sellers are hesitant to put their homes on the market as they feel there is still room for prices to grow.

4. Chattanooga, Tenn.

  • Median home price: $189,000
  • Home price change: +3.6 percent
  • Sales change: +2.0 percent
  • Combined sales and price growth: +5.6 percent

Set along the Tennessee River in the foothills of the Appalachian Mountains sits the lively city of Chattanooga with all its Southern charm. The area still prides itself on its small town roots, but also offers residents robust nightlife with a plethora of boutique bars and cozy restaurants. Tennessee has no state income tax, which draws many young professionals and businesses to the area. After Nashville's real estate market took off, investors began looking for other opportunities within Tennessee, and this led many to Chattanooga, which also ranked No. 4 on 2019's Top Markets list.

5. Columbia, S.C.

  • Median home price: $178,000
  • Home price change: -0.2 percent
  • Sales change: +5.5 percent
  • Combined sales and price growth: +5.3 percent

The historically rich city of Columbia is South Carolina's state capital, and holds tight to its small-town roots. Columbia offers residents a high quality of life while housing remains relatively affordable. The city is known for being famously hot, but the weather isn't the only thing heating up. New construction is booming in Columbia and buyers from all over the country are migrating to the area. Columbia is also home to the University of South Carolina, making it a great area for young professionals who enjoy the energy of a college campus.

6. Rochester, N.Y.

  • Median home price: $149,000
  • Home price change: +0.4 percent
  • Sales change: +4.7 percent
  • Combined sales and price growth: +5.1 percent

New York state's third-largest metro boasts a mix of history and innovation. The city is home to two major universities -- The University of Rochester and Rochester Institute of Technology -- that consistently produce top talent and entrepreneurs. It also boasts several medical facilities such as Rochester Regional Health and large employers such as Wegmans, Paychex and Xerox. Despite a healthy job market, the area still enjoys relatively low housing prices. Former home to pioneers and independent thinkers like Susan B. Anthony and Frederick Douglass, Rochester has worked hard to preserve and honor its landmarks. The city's downtown recently underwent a revitalization which is attracting a new group of younger residents who enjoy the area's breweries, art and jazz scene.

7. Colorado Springs, Colo.

  • Median home price: $312,000
  • Home price change: +6.3 percent
  • Sales change: -1.4 percent
  • Combined sales and price growth: +4.9 percent

Recently named the most desirable place to live in the country by U.S. News and World Report, Colorado Springs' residents enjoy an outstanding quality of life with low living costs and easy access to the Rocky Mountains. Colorado Springs has a strong job market and a highly educated workforce in aerospace, defense, cybersecurity and technology. Major employers include Lockheed Martin, Oracle, Hewlett Packard and Progressive Insurance. Residents enjoy the city's beautiful scenery and more than 70 art galleries. Colorado Springs has become a great alternative for those priced out of Denver. Given the close proximity, some choose to live in Colorado Springs and commute to Denver.

8. Winston-Salem, N.C.

  • Median home price: $169,000
  • Home price change: +0.5 percent
  • Sales change: +3.6 percent
  • Combined sales and price growth: +4.1 percent

The fifth largest city in North Carolina, Winston-Salem has become a cultural hub for fine arts and theater. The revitalization of its downtown has added a number of hotels, restaurants and apartment complexes that make it attractive to millennials and retirees alike. This led The New York Times and The Wall Street Journal to rank the city second in their respective lists of most livable downtowns in America. Wake Forest University and several small colleges attract a young crowd, but the city has also been named one of the best places to retire in the U.S. by CBS Moneywatch. Many of the area's residents refer to themselves as "half-backers" or people who moved from the Northeast to Florida, but decided to settle "half of the way" back to be closer to friends and family.

9. Charleston-North Charleston, S.C.

  • Median home price: $270,000
  • Home price change: +1.9 percent
  • Sales change: +1.2 percent
  • Combined sales and price growth: +3.1 percent

South Carolina's largest city is defined by cobblestone streets, horse-drawn carriages and pastel antebellum houses. The historic port city is consistently named one of the best small cities in the world by Conde Nast and the "World's Best City" by Travel + Leisure. Home to Charleston Air Force base and several universities, Charleston attracts a diverse group of residents who enjoy the state's low property tax rates. Major employers in the area include Boeing, Walmart, Bosch and Medical University of South Carolina. Residents and tourists alike enjoy the city's many restaurants and close proximity to the beach.

10. Memphis, Tenn.

  • Median home price: $188,000
  • Home price change: +3.0 percent
  • Sales change: +0.1 percent
  • Combined sales and price growth: +3.1 percent

Elvis's hometown is home to several major employers including FedEx, AutoZone, ServiceMaster, International Paper and First Horizon National, making it an attractive market for jobs and real estate. It's also a great place for millennials and good for singles looking to mingle, as more than half of the city's adult population is not married. Locals enjoy the short commute times, great music scene, culture and professional sports including the NBA's Grizzlies. The most populous city in Tennessee, Memphis is considered a hub for transportation with a bustling airport and easy access to four major freeways. The city also houses about two dozen college campuses along with tourism attractions like Beale Street, Graceland and the National Civil Rights Museum.

For more information and methodology, click here.

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*Median home prices based on the January-August 2019 period.

**Home price and sales change are year-over-year estimates through the end of 2020.

About realtor.com®

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