Investors Business DailyJust six months ago, the idea of a housing boom would have seemed ridiculous as millions of Americans were losing their jobs. But low interest rates and the work-from-home trend are stoking real estate stocks and home sales in smaller housing markets.
The flip side is that once-sky-high markets have come crashing down, especially in the San Francisco Bay Area. But overall, both new and existing-home sales have reached levels last seen before the Great Recession.
Real estate stocks are rebounding strongly. The triple-leveraged Direxion Daily Homebuilders & Suppliers (NAIL) ETF has shot up 900% from its coronavirus crash lows. Homebuilders like LGI Homes (LGIH) and D.R. Horton (DHI) have broken out into buy zones.
Low mortgage rates spurred longtime fence-sitters to jump into the market, Realtor.com Chief Economist Danielle Hale says. But she acknowledges the housing boom is uneven.
“Among a lot of key homebuyer demographics, high-income folks, we haven’t seen the same level of job losses that we have among lower-income workers,” she told IBD. “So that has helped the market from a homebuyer perspective.”
Demographics are a factor too as more millennials — the nation’s largest adult generation — are starting families and driving demand for single-family homes. And the leading edge of Generation Z, an even larger cohort that straddles young adults and adolescents, is just starting to buy homes.
Best Housing Markets
As living within commuting distance to work becomes less important, the housing boom is elevating some surprising markets.
According to Realtor.com data for September, the hottest metro areas include Fresno, Calif.; Columbus, Ohio; Rochester, N.Y.; Colorado Springs, Colo.; Bakersfield, Calif.; Portland-South Portland, Maine; Worcester, Mass.; Stockton-Lodi, Calif.; Harrisburg-Carlisle, Pa.; and Allentown-Bethlehem, Pa.
Under this definition, “hotness” reflects a combination of factors like how quickly properties sell and the number of views per property.
In January, before the coronavirus forced millions to work from home, the San Francisco-Oakland area was the hottest metro market. Fresno was No. 9.
Bakersfield was No. 10. It moved up to No. 5 last month even as the collapse in oil prices slowed its energy sector. But the biggest gainers include Allentown, Pa. (No. 65 in January), Portland, Maine (56), and Harrisburg, Pa. (54).
Outside the top 10, others have made big leaps too, such as the Riverside-San Bernardino-Ontario, Calif., area about two hours’ drive from Los Angeles. Before the pandemic, it was already growing as a major distribution hub for Amazon and other e-commerce companies. It’s now the No. 39 market, up from No. 68 in January.
Regional differences could also determine which real estate stocks outperform. Of the 30 hottest housing markets, 20 are in the West and Northeast.
Worst Housing Markets
The San Francisco-Oakland area plunged to No. 45 in September as Bay Area tech giants like Facebook (FB) and Twitter (TWTR) allowed employees to work from home indefinitely.
The San Jose-Sunnyvale-Santa Clara area — in the heart of Silicon Valley — plunged to No. 62 in September from No. 3 at the start of the year.
Housing markets outside high-cost, high-tax California felt the pain too. The Dallas-Fort Worth metro area, which has been drawing businesses and residents from California, saw its rank tumble to No. 41 from No. 19 in January.
The crash in oil prices may also be slowing the Dallas housing market. Many companies that serve the Permian Basin farther west have headquarters there.
At the very bottom, the coldest large metro areas last month included Miami-Fort Lauderdale-West Palm Beach, Fla.; Baton Rouge, La.; Honolulu, Hawaii; McAllen-Edinburg-Mission, Texas; Cape Coral-Fort Myers, Fla.; and New York, N.Y.-Newark-Jersey City, N.J. Most of those markets were already near the bottom in January.