Penske Truck Rentals just released their “Top Destinations” list, and the metro areas that top that list have a few things in common. The most obvious commonality is that the list is dominated by the Sun Belt. Of course, that’s nothing new; Sun Belt metros have been outpacing the rest of the country for decades.
The less obvious commonality is this: several of these markets got absolutely clobbered during the housing market crash of a decade ago. Those markets that got hit the hardest in the downturn are staging the most dramatic recoveries, as people pour back into those suburbs and cities. Why the influx? Markets like Atlanta, Phoenix, Tampa and Las Vegas became dirt-cheap after the crash, and while their prices have risen sharply over the last seven or eight years, they are still significantly lower than the coastal gateway cities like San Francisco, New York and Los Angeles.
As mortgage rates creep higher, affordability will be an increasingly important driver of differences in housing demand between markets, and it’s a good bet that the markets in this list will continue to outperform.
The Top 10 cities of 2018 (including previous year ranking) are as follows:
- Atlanta (1)
- Phoenix (2)
- Tampa (5)
- Orlando (6)
- Denver (8)
- Houston (4)
- Las Vegas (7)
- Charlotte (9)
- Austin (new)
- Portland (10)
Not all of the markets in this list are part of the Sun Belt, with Portland and Denver being the obvious exceptions. That said, all ten markets in this list have dynamic and fast-growing job markets, and there is a time-honored saying in regional economics: “people follow jobs.”
Atlanta, which has continued to top the list, is a perfect example of this maxim. A quarter of a million households went through foreclosure in metro Atlanta during the downturn, according to CoreLogic, but now the metro area is back on its feet, with homeownership rising, and job growth in excess of 60,000 a year (a 2.2% annual growth rate, compared with the national average of 1.7%). And, home prices are rising faster than in most other metros. Atlanta is attractive to businesses and to residents because of its role as an economic hub for the entire southeast, its diversity, and its relative affordability.
At the bottom of the housing crash, Phoenix suburbs were littered with foreclosure signs, but, true to its name, Phoenix rose from the ashes, posting some of the fastest rates of home appreciation in the country, recently rising at an annual rate close to 8%. The Phoenix economy is growing fast, pushed even faster by companies in California searching for a less expensive place to operate.
Las Vegas is far outpacing the nation in percentage home price increases, and it has a good bit of room to rise further. Fewer than 1% of homes there have recovered to their pre-recession values, compared with 50% nationwide. Las Vegas had its home prices cut in half during the housing crisis, referencing the Case Shiller index for that metro area. Now Las Vegas is leading the nation in percentage home price increases, rising at better than 12% annually in the most recent Case Shiller data.