A recent housing market forecast suggested that Boise, Fresno, Seattle, San Jose, and the San Francisco Bay Area could be five of the strongest real estate markets in 2021. The report came from the research team at Realtor.com.
In their estimation, those five metro areas will see the biggest home-price gains during 2021, among the nation’s 100 largest metros.
These, and other housing markets on the list below, share something in common. They all have very inventory levels, combined with strong demand from buyers. And that puts upward pressure on home prices.
Top 10 Housing Markets for Price Growth (Forecast)
Real estate market forecasts for Boise, Fresno, Seattle, San Jose, and the San Francisco Bay Area suggest that prices could continue to rise steadily in 2021. This is according to the housing analysts and researchers at Realtor.com.
On December 2, the company published a “2021 Housing Forecast” with data and projections for cities across the U.S. Specifically, this report offered predictions for home sales and prices during 2021, for 100 of the nation’s biggest metro areas.
According to the authors: “Amid COVID-19 uncertainty, 2021 will be a robust sellers market as home prices hit new highs (+5.7%) and buyer competition remains strong…”
We sorted their list of predictions based on year-over-year price growth, to see which real estate markets have the strongest forecasts for 2021. The metro areas of San Jose, Seattle, Boise, Fresno, and the San Francisco Bay Area took the top five spots.
Here are the top-ten housing markets in Realtor.com’s forecast, when sorting by (predicted) year-over-year price growth:
The state of California made a strong showing in this report, taking five of the top-ten spots. That’s not surprising, given the severe supply shortages that are affecting many cities across the Golden State.
It’s also not surprising to find Seattle, Washington and Boise, Idaho at the top of this real estate market forecast for 2021. Those cities — like most others shown in the above table — have a serious imbalance between supply and demand. (Plenty of demand, not enough supply.) And that’s putting upward pressure on home prices.
Analyzing the Top 5 Metro Areas
Tech hubs. That’s one of the things the top-ranked housing markets have in common.
With the exception of Fresno, all of the metro areas listed below have strong tech industries that attract high-paid workers from around the country and globe. This brings more home buyers into the market.
As you’ll soon see, these metros have other things in common too, like a heavily skewed supply-and-demand situation.
1. San Jose, California
Over the past few years, the San Jose real estate market has been a story of extremes. It has some of the most expensive homes in the country, based on price per square foot. It’s also one of the most competitive housing markets, due to limited supply and strong demand from buyers.
Given these factors, it’s not surprising to see it receive such a strong home-price forecast from the research team at Realtor.com.
San Jose will likely experience a market downturn sometime in the future. The current rate of home-price appreciation cannot last forever. This market is already overpriced by national standards (e.g., $1 million for a three-bedroom ranch house).
The median home value is currently around $1.1 million.
Eventually, this real estate market will experience a decline in home prices following a pullback in demand. It’s practically inevitable. But that probably won’t happen in 2021. Recent forecasts for the San Jose housing market suggest that house values will continue to climb over the coming months.
In late-December, the research team at Zillow wrote: “San Jose home values have gone up 15.2% over the past year and Zillow predicts they will rise 12.1% in the next year.”
So we have not one, but two forecasts predicting double-digit price gains in 2021, for this real estate market.
2. Seattle, Washington
Like many of the top-ten housing markets in the Realtor.com outlook, Seattle, Washington has a real supply problem. There just aren’t enough homes listed for sale to satisfy the demand from buyers.
According to a recent report, Seattle had less than a one-month supply of homes for sale as of November 2020. That’s miles below what is considered to be a balanced real estate market, and it gives sellers the upper hand.
Meanwhile, the population for the Seattle-Tacoma-Bellevue metro area continues to grow at a steady pace. U.S. Census Bureau data show that the city’s population grew by a whopping 23.8% from 2010 to 2019. The broader metro area has grown rapidly as well, in recent years.
According to the 2021 housing market forecast published by Realtor.com: “The area’s booming tech scene, high quality of life, and access to both the water and mountains draws a crowd from all over the country.”
The real estate data firm Zillow also issued a strong forecast for the Seattle-area housing market, going into 2021. In December of 2020, they predicted that the city’s median home value would rise by 11.1% over the next year.
Related: Seattle ranks #2 for price growth
3. Boise, Idaho
It doesn’t take a crystal ball to issue a positive prediction for the Boise, Idaho housing market in 2021. With chronically low supply levels and soaring demand from home buyers, the new year will bring more of the same. Rising prices.
Buyers entering the Boise real estate market in 2021 will likely encounter stiff competition, tight supply, and even bidding wars in some cases.
Housing inventory in the Boise area is so low that we had to double-check the numbers. As of early December 2020, this real estate market had less than a 0.5-month supply of homes for sale — one of the lowest levels we’ve seen among U.S. metro areas.
The median home price in Boise rose by nearly 20% over the past year or so. That’s well above average and indicates a red-hot housing market.
The irony here is that many people have moved to Boise for its relatively affordable home prices. But the way things are going, it won’t remain affordable for long. It’s currently following the “Seattle model” — rapid price growth fueled by a serious supply-and-demand gap.
4. Fresno, California
Back in November, we reported that Fresno, California had experienced a major decline in the number of homes for sale.
From November 2019 to November 2020, real estate listings within the Fresno-area housing market declined by a whopping 58%. Talk about shrinkage. As a result, buyers are now competing more fiercely than before, pushing home values upward.
In terms of year-over-year price growth, the Fresno metro area came in at #4 in the Realtor.com housing forecast for 2021.
Fresno also has the distinction of being the most affordable market among the top-five metros on this list. As of December 2020, the median home value in the area was around $280,000. But that median could easily climb above $300,000 before the end of 2021.
As Zillow wrote at the end of 2020: “Fresno home values have gone up 9.6% over the past year and Zillow predicts they will rise 10.4% in the next year.”
5. San Francisco Bay Area
What can we say about the San Franicso Bay Area real estate market that hasn’t been said before. It’s one of the most expensive areas in the country, and it continues to climb.
One trend we’ve seen over the past few months is a “mini-exodus” of folks leaving the city of San Francisco for surrounding (and more suburban) areas. The coronavirus pandemic, and the resulting rise of remote work, are the primary factors driving that trend.
The research team at Realtor.com expects home prices in the San Francisco Bay Area to rise by around 8.4% during 2021, putting it in the #5 spot among the nation’s 100 largest metros.
Disclaimer: This article includes housing market forecasts that were provided by third parties not associated with the publisher. The Home Buying Institute makes no claims about future home prices or other real estate trends. Such predictions are the equivalent of an educated guess.