Cities such as Sacramento, California, should do well next year due to affordability, strong job markets and proximity to bigger metros. New York City, on the other hand, may struggle.

Next year is poised to be a good one for the real estate industry, according to a new report — but a handful of techie western cities are likely going to do especially well.

The report, out Monday from realtor.com, examines what are likely to be the strongest markets in the U.S. in 2021. The ultimate conclusion is that factors such as relative affordability and millennial homebuyers will “lead the nation in a year when real estate is expected to be strong coast to coast.” However, certain kinds of cities should pull ahead.

“A common driver of this year’s top markets is the prevalence of high paying tech jobs,” the report explains.

Realtor.com specifically expects the Sacramento, California, metro area to be the top market in 2021, based on a combination of projected home price growth and sales growth. The report links Sacramento’s strength to ongoing work-from-home orders resulting from the coronavirus pandemic, as well as the region’s proximity to the Bay Area, relative affordability, and good schools.

“The area draws a diverse crowd ranging from first time homebuyers to empty nesters looking to downsize,” the report states, adding later that “when residents want a change of scenery, it’s a short trip to Lake Tahoe, wine country or San Francisco.”

Of the remaining top ten strongest 2021 markets, only two — Charlotte, North Carolina, in third place and Harrisburg, Pennsylvania, in seventh — lie outside the West. But across the spectrum, the cities that realtor.com thinks will be strongest tend to have good local economies, tech-oriented jobs, and space  for people who want a little more room. Here are the full top 10 rankings:

  1. Sacramento, California
  2. San Jose, California
  3. Charlotte, North Carolina
  4. Boise, Idaho
  5. Seattle, Washington
  6. Phoenix, Arizona
  7. Harrisburg, Pennsylvania
  8. Oxnard, California
  9. Denver, Colorado
  10. Riverside, California

It’s also worth noting that half of these cities — Sacramento, Boise, Phoenix, Harrisburg and Denver — are all state capitals. That isn’t a coincidence, with the realtor.com report noting that such cities tend to have diverse and stable job markets.

“The strong government presence in these areas offers stability for their local economy and jobs markets,” the report adds. “This is especially important after a year when a global pandemic has significantly disrupted local economies across the nation.”

Affordability is also playing a significant role in which cities should excel next year. While San Jose and Seattle are certainly not affordable markets by most metrics, places such as Sacramento, Riverside and Harrisburg are all cheaper alternatives adjacent to larger and more expensive metro areas (San Francisco, Los Angeles, and New York and Baltimore, respectively). Oxnard also lies just outside of L.A., while Denver and Boise have tended to be destination cities for people fleeing pricier western markets.

Realtor.com ultimately ranked 100 metro areas. The New York metro area came in very last place, followed by Detroit, Dayton, Ohio, Little Rock, Arkansas, and Tulsa, Oklahoma. All of these areas are likely to see little sales and price growth, but realtor.com specifically expects sales in New York to decline by 3.8 percent. The report predicts New York prices will grow by 0.5 percent — by far the lowest of any metro area included on the list.

Danielle Hale

Still, despite some sluggishness in the country’s largest metropolis, conditions should overall be good for real estate in 2021. Danielle Hale, realtor.com’s chief economist, said in the report that means buyers can expect more competition and “sellers will remain in a position of power, but will find themselves on the other side of the bargaining table when buying their next home.”

“This past year, we’ve all become more reliant on technology to work, learn, and maintain personal connections,” Hale concluded. “The technology hubs that make this possible are thriving, as are their housing markets.”

Email Jim Dalrymple II

homebuying
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