Population Growth and Low Inventory Drive Competition for Homes
While the housing market has cooled in many major cities since last year, other cities have only gotten hotter. In certain areas of Texas, North Carolina, Colorado and the Pacific Northwest, homes are selling like hotcakes thanks to strong job and population growth, worsening inventory shortages and, as Redfin’s CEO pointed out in December, relative affordability. Buyers should prepare themselves: These markets are shaping up to be even more competitive than they were in 2013.
As we said last week, Austin, Dallas, Denver, Houston, Portland, Raleigh, San Antonio and Seattle are among Redfin’s fastest markets. In February, a total of 37.9 percent of homes went off the market in less than two weeks in these eight markets, compared with 30.7 percent last year, and 22.5 percent across 27 markets.
Speed isn’t the only thing that’s impressive. While the overall housing market has seen home sales drop since last year, sales in these eight markets are surprisingly steady given the limited number of homes available for sale. As of February, home inventory in each market had fallen from the year before and was at the lowest point in at least four years. Given the few options available, many of these sales likely comprised brand new homes, which are not listed on the Multiple Listing Service and thus not counted in total inventory.
* Inventory for Denver is unavailable due to data anomalies.
Housing demand in these markets stems from strong population growth. These eight markets were among the fastest growing in the nation between July 2012 and July 2013, according to recently released Census data, growing between 1.1 percent and 2.6 percent that year compared with 0.7 percent in the U.S. as a whole.
Populations are increasing in these places in part because of strong job growth.These eight markets have seen job growth of between 2.3 percent and 4.5 percent since last year, far better than the national average of 1.6 percent. More than half of the population growth in each market can be attributed to net migration.
Babies are another factor. More than a third of the 2013 population growth in these markets came from the natural rate of increase, or the difference between births and deaths. But a new baby doesn’t just mean that a family may need a bigger house. Children can also be a magnet for members of the extended family, who also need homes, says Redfin agent Allen Wyde.
“Here in Raleigh, young couples who relocate here for a job often find their parents packing up and following,” he says. “These ‘traveling grandparents’ can’t resist being nearby their grandchildren.”
In addition to jobs, lifestyle opportunities and cost of living are also major draws in some of these markets, homebuyers say. In a February survey of 1,975 homebuyers, Redfin found that those who were relocating to Denver, Portland or Seattle named lifestyle as the top reason for moving, followed by jobs and being close to family and friends. Those who were relocating to North Carolina and Texas said jobs were the top reason for moving, followed by the low cost of living.
And homes in those places are indeed more affordable. Our analysis of market affordability found that more than 45 percent of homes for sale in Raleigh, Houston and Dallas are affordable on two median incomes, compared with 12 percent in Los Angeles and 7 percent in San Francisco.
These eight housing markets will be anything but sleepy this spring, and buyers should expect strong competition and continued price pressures.
“I’m preparing my clients to make decisions quickly and to put their very best offer forward from the start,” says Redfin Houston agent Tara Waggoner. “I also advise them all to write a personal cover letter to the seller. It’s a great way to make an offer stand out among multiple bids.”
Want other tips for making your offer more competitive this spring? Check out our special report on the most effective bidding war strategies.
