As expensive coastal metros struggle to find solutions to rising housing costs, homebuyers have begun looking to smaller more affordable metros where land is cheap and incomes are growing. Already, Spokane, Las Vegas, Charlotte and Orlando are attracting out-of-town homebuyers and, thanks to the low cost of acquiring and developing land for new home construction, each is poised to attract homebuyers for years to come. That makes these the four metros primed for growth over the next decade.
Sales of new homes increased 37% in Spokane from Q4 of 2018 to Q4 of 2019 compared to only 5% growth in existing homes. The city is currently the most competitive housing market in the country with a Compete Score™ of 89. That’s in part thanks to significant homebuyer interest from out-of-towners—73% of Redfin searches for homes in Spokane come from homebuyers located outside the metro.
Conveniently, Spokane is well suited to absorb all of the potential new migrants. That’s because in Spokane land is cheap and therefore homebuilding is inexpensive. The cost of acquiring land to develop on is a major reason housing supply has lagged behind demand in big expensive cities. In Seattle, land comprises 42% of the value of the homes, but in Spokane, land comprises only 23% of the value of homes, making it harder for homebuilders to turn a profit on land in Seattle than in Spokane. Seattlites, who are used to a median home price of $570,000, will find Spokane homes extremely affordable, regardless of whether they are buying an existing home with a median price of $255,000 or a new home with a median price of $350,000.
“Tons of people are moving in from the coasts because Spokane is more affordable and less crowded,” said Redfin market manager Michelle Kendrick. “Spokane has all of the basics you would want in a city, but at a great price. It feels like we are in a construction boom. A lot of the new construction is happening on the outskirts of the city, which contributes to our version of traffic. To people from out of town the traffic is nothing, but if you have lived here a long time you do notice it. Job growth has also been a draw for out-of-towners. We have a new Amazon distribution center, the airport is expanding, and the medical industry is big and growing.”
In Las Vegas, home sales are growing at the rapid pace of 15.7%, with 47% of homebuyer interest coming from outside the metro. The primary source of out-of-town homebuyers is Los Angeles, where the median home price is $650,000 and land comprises about 61% of home values. In Las Vegas, homebuyers can purchase an existing home for $285,000 or a new home for $388,000. With land comprising only 25% of home values in Las Vegas, new construction is a profitable investment for developers.
“Las Vegas is a pretty competitive market, and I see both new homes and existing homes receiving multiple offers,” said Redfin agent Carol Vandenberg. “I see plenty of buyers from Los Angeles. They are used to the sunshine and the two cities are so connected.”
In Charlotte, home sales are growing at an annual pace of 14.5%. With 40% of search activity coming from outside of the metro, Charlotte—where household incomes are growing 5% annually and jobs grew 2.9% in 2019, well above the national rate of 1.4%—will continue to attract job seekers. Charlotte is well positioned to absorb growth given that land comprises only 28% of home values on average in the metro. Notably, Charlotte is home to one of 2019’s hottest neighborhoods in the country (Wildwood), and that neighborhood has a new housing development under construction.
Jobs, median household income, home sales, and home prices have all been growing in Orlando. Inexpensive land—it comprises only 29% of home values—has also meant growth in new homes sales for the city. Sales of new homes increased 21% in Orlando from Q4 of 2018 to Q4 of 2019 compared to only 5% growth in existing homes.
The top four U.S. booming real estate markets were selected based on the criteria that average share of land value be less than 30%, home price growth be more than 4%, home sales growth be greater than 4%, and percent of searches from outside the metro be at least 40%. Redfin analyzed 78 metros across the United States.
Average share of land value is calculated from the accessed land and home values in the 2017 property tax assessment files. Sale price growth and home sale growth is from January 2019 to January 2020 and is seasonally adjusted. Household income growth is from 2017 to 2018. Job growth is from December 2018 to December 2019. Median sale price of new construction and existing homes is from Q4 2019. Compete Score™ is for Q4 2019.
