5 Hot Residential Markets (And How CRE Looks, Too)
Realtor.com recently released its 2017 National Housing Forecast which gives predictions on what the real estate market will look like in the year to come. Overall, Realtor.com is predicting that interest rates will continue to rise which is something that has already been occurring post-election and may result in pricing some first-time buyers out of entering the market.
The report also touches on trends in real estate for the upcoming year which include, for 2017, millennials and baby boomers to dominate the market, Midwestern cities will continue to be attractive to millennials and western cities will continue to dominate when it comes to sales and prices.
One of the reports main focuses is its prediction of the top residential markets in 2017 so let’s look at the top 5 and see if they may also be in the top CRE markets.
1. Phoenix-Mesa-Scottsdale, Arizona
This Arizona metropolitan is predicted by Realtor.com to have sales growth of 7.24% and price growth of 5.94%. With growth over the past two years from a median sales price of $200,000 to $250,000 it is evident that demand is increasing in this area for residential properties. Which means that something is drawing people into this area and one reason could be due to the growth in the healthcare and medical industries. Ziprecruiter says that Phoenix is the top city in the nation for healthcare jobs.
This can be reflected in commercial real estate expansion of many medical facilities in the area. Multifamily is also in high demand with vacancy rates at their lowest since 1999 and many projects being built mostly centered around the light rail transportation in the area. Millennials are the big driver behind the demand for more apartments and mixed use residential and retail spaces.
2. Los Angeles-Long Beach-Anaheim, California
At number 2 the LA metro area is predicted to have sales growth of 6.90% and price growth of 6.03%. With a median sales price of $799,000 which is almost $200,000 more than just 2 years ago, this area keeps on growing and prices keep on getting higher.
With residential prices getting increasingly higher, there is opportunity for CRE in multifamily properties for millennials and newcomers to the area looking for a more affordable residence. There are multiple multifamily projects on the way including big projects like the possible 1,100 unit mixed use property in Times Mirror Square.
3. Boston-Cambridge-Newton, Massachusetts – New Hampshire
The only east coast metro to make the top 5 on Realtor.com’s report with sales growth of 6.09% and price growth of 6.32% being predicted. Boston has been seeing an increase in growth and demand which is leading to a desire for more retail space.
Bisnow is predicting a strong year for commercial retail space in the area with many projects underway. Most notably, a trend seems to be “grocer centric mentality” which has a retail space revolving around a centralized food market.
4. Sacramento-Roseville-Arden-Arcade, California
Number 4 on the list has the highest price prediction of the top 5 at 7.18% but sales growth is lower than the rest at 4.92%. Due to the rising costs of the Bay Area and Silicon Valley area, Sacramento has become a more affordable option for those working in the area.
The results can be seen in the growth of the multifamily sector within the Sacramento area. According to an article from Bisnow, the key to multifamily in Sacramento is that rent growth in the area has led the entire nation for 7 consecutive months. Many investors are jumping in and starting new projects due to millennials’ desire to work in the Bay Area and not have high living costs associated with that area.
5. Riverside-San Bernardino-Ontario, California
The lowest price growth of the top 5 at 4.98% but the second highest sales growth in residential at 6.88%. This area has a large industrial and warehousing market which could now see a new potential market thanks to proposition 64 passing in California which allows the recreational use of marijuana. The passing of this law now means that California could stand to see the same kind of boom that Colorado has seen.
In an article from Forbes, it states that growers will be the ones looking for warehouse space. The potential to purchase warehouse space that is sub 80,000 square feet and outfit it for growers could pay off soon. Looking at the case in Colorado, the state saw explosive growth in warehouse demand due to legalization.
What markets are you watching for 2017? We’d love to hear from you!