The spring home-buying season has kicked off after a year of surprise twists and turns for the real estate market. After a sharp drop-off in interest at the start of the pandemic, Americans newly attuned to work-from-home comforts returned their attention to home-buying with vigor.
Soon they began snapping up property, sending prices higher in every major metropolitan area in the nation tracked by the National Association of Realtors. At the end of 2020, home prices were about 15% higher than a year earlier, before the pandemic shuttered the U.S. economy, according to NAR data.
And in about 88% of metropolitan regions, home prices experienced double-digit price growth.
Against that backdrop, some cities are witnessing outsized demand from homebuyers, as area prices are being driven up far beyond the national average.
The hottest housing markets, where bidding is the most competitive, share a few traits, according to economists and experts.
First, their housing stock tends to be more affordable than in large cities such as New York and San Francisco. Bigger homes for less money are attracting workers from large coastal cities who can do their jobs remotely and opting to relocate. Second, many of these smaller cities offer lifestyle benefits, such as warm weather or a lively cultural scene.
Take Austin, Texas, where the median listing price for homes jumped almost 26% from February 2020 — right before the pandemic — to February 2021, according to an analysis from Zillow. The city is experiencing strong population growth as major employers such as Apple and Tesla are building offices and facilities there and hiring thousands of workers in the area.
In fact, about 150 people are moving to Austin each day, according to local realtor Justin Sheppard, the co-founder and broker at The Agency Texas.
"A lot of people are moving here for jobs," Sheppard said. "And then, with being able to work from home, there are a ton of people that move here because of that as well."
Among them are David and Helen Fain, who are in the midst of relocating to Austin from San Francisco. They said they were given approval by their employers to work remotely, freeing them up to move to a less expensive region than the Bay Area.
The couple, who are expecting their first child in a few weeks, are both originally from Texas and wanted to be closer to family. Austin's lifestyle was also a draw, the couple told CBS MoneyWatch.
"There's an energy that's going on in Austin," Helen Fain said. "I think there always has been. We both are from Texas, so Austin has always been just one of those really cool, quirky places."
What's hot in 2021?
Austin is projected to hold onto its ranking as one of the nation's hottest markets in 2021, according to a Zillow forecast based on interviews with realtors and other industry experts. More than 8-in-10 experts surveyed by Zillow expect Austin to outperform the national average in home value growth, the study found.
Denver; Phoenix; Nashville, Tennessee; and Tampa, Florida, are also likely to outperform this year, although a smaller share of experts identified those places as potential hot markets for 2021, the real-estate services company said.
"They sit at the intersection of two trends: one is affordable housing, and number two is their Sun Belt locations," said Chris Glynn, principal economist with Zillow. "They have nine to 12 months a year of sunny weather and outdoor weather."
To be sure, not all of the cities that enjoyed the strongest growth during the pandemic are located in the Sun Belt region. Provo, Utah, demonstrated the strongest growth during the pandemic, with home listing prices rising by one-third, Zillow data found. Boise, Idaho, and Rochester, New York, were also among the hottest markets during the past year.
Boise is attracting buyers who are relocating from Seattle, San Francisco and other pricey markets, Glynn said. Its median listing price stood at about $467,000 at the end of February — a 23% jump from a year earlier, but still a far cry from the median listing price of roughly $984,000 for San Francisco homes.
Millennial buyers are also driving the increase in home prices, with recent record-low interest rates attracting first-time buyers into the market, economists noted. Markets with lower home prices compared with New York or San Francisco are appealing to these buyers. One such place is Pittsburgh, where the median list price was about $226,333 in February.
All that buyer demand has created a seller's market — yet sellers have been slow to put their homes on the market, noted Redfin economist Daryl Fairweather.
"People are more eager to buy a home with more space and that just supercharged the housing market," Fairweather said. "At the same time, though, home sellers have still been reluctant to sell — especially during a pandemic. If you're not really eager to move, you are gonna stay put, because why risk moving when there's a virus out there?"
With low inventory across much of the nation, buyers are making concessions to convince sellers to accept their offers.
"It used to be, before the pandemic, that was only in places like the Bay area, or Seattle, where buyers were going above and beyond," Fairweather noted. "But now that is so much more widespread. I was just talking to an agent in Atlanta who was telling me that buyers are even offering just, like, bribes — essentially, cash to sellers."
To secure deals in hot markets, some buyers are offering free leasebacks, essentially allowing the seller to live in the house for free for a short period after the closing. That's something the Fains agreed to in their purchase contract in Austin.
The Fains said they have advice for people who are searching for a home in a hot market: Find a great real estate agent who can guide you through the process. Also, be prepared for emotional ups and downs. Helen Fain recounted losing out on an offer after there were 40 other bids on the property.
"It was hard to kind of accept that," Helen Fain noted. "What we just had to tell ourselves, and what our realtor assured us, is there will be something else that will be out there."