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The 10 Best Housing for Markets for First-time Buyers and Flippers

MainStreet logo MainStreet 12/12/2014 Robert McGarvey

NEW YORK (MainStreet) — Expect a widespread recovery of the nation’s housing market in 2015. That’s the top line summary of a new report out of Realtor.com. But the rest of the story is that ten markets are primed for better than average growth and those are the ones that real estate investors, flippers, and especially first-time homebuyers need to focus on, said Realtor.com chief economist Jonathan Smoke.

The other part of the story: the markets that do not make Smoke’s list include many that have been torrid in recent years. Think San Francisco, New York City, Boston, Miami, and Austin for starters. Their problem: challenging affordability poses special problems for the Millennial first-time homebuyers who, increasingly, will shape the nation’s housing markets. It just is very hard for any Millennials who are not Trustafarians or at least employed in a booming technology company to handle the hefty mortgages in those towns.

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As for the markets that made Smoke’s list, all excelled in at least a couple key metrics, he said. He added that just a few years ago, it was a struggle for him to put together a list of ten prospering markets. This year, he said, there were plenty of candidates, and the top ten are all attractive on multiple levels. Affordability and Millennial appeal are common threads, he said.

Note: Smoke does not rank a pecking order among the top ten. In an interview, he insisted all are strong, with considerable appeal, but not every market will appeal to every buyer.

Read More:Rent or Buy: The Ultimate Real Estate Question

Enough preamble. Drumroll, please. Here are the Realtor.com winners:

Atlanta Look for exceptionally strong rates of new household formation, said Smoke. Atlanta will also see 11% growth in home sales. Median Atlanta sales price is $240,000, according to real estate website Trulia.

Dallas-Fort Worth “No surprise here,” said Smoke. DFW won its spot with brisk household formation rate (tops over the next five years, per Realtor.com) and home sales are forecasted to climb 7% in 2015. Median Dallas sales price per real estate site Zillow: $239,205.

Denver Again, “no one is surprised,” said Smoke. Colorado - perhaps because of marijuana and a Rocky Mountain high - suddenly is a national draw. The one negative: “supplies are tight,” said Smoke. Zillow pegs the median price at $281,000.

Des Moines Now you are surprised. Said Smoke: “I am probably the only housing forecaster looking at Des Moines. It made the list because of Millennials.” Highly affordable housing (median sale price per Trulia is $125,000) and a mini tech centered industry - called Silicon Prairie by locals - suddenly has Des Moines winning notice.

Houston Ranks third in rate of household formation. Realtor.com pegs employment growth at 4%, double the national average. Home sales also climbing. In March, the Houston Business Journal reported that the median selling price for a Houston home was $189,100.

Los Angeles Smoke acknowledged that this winner is surprising. “Affordability is problem one in Los Angeles,” he said. Zillow put the average home value in Los Angeles County at $485,600. But, said Smoke, his forecast is for a 6% jump in home sales. Los Angeles also ranks fourth nationally in the rate of new household formation.

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Minneapolis-St. Paul Zillow said the average home value in Minneapolis is $197,500 and that affordability is what won the Twin Cities a place on the list. Smoke pointed to brisk growth in Millennial home ownership, as buyers are attracted to the selling prices and the urban amenities of the Twin Cities.

Phoenix Ground zero for the imploded Sand State real estate disaster, Phoenix is firmly on the rebound, said Smoke. A big factor: affordability. Zillow puts the median home value at $169,600. “We see big growth in household income in Phoenix and a 22% jump in housing starts," said Smoke.

Read More: The Top 5 Rebounding Housing Markets

San Jose - Santa Clara, Calif. The traditional hub for Silicon Valley, the region has the California problem: breathtakingly high prices. In San Jose, Zillow said the average home value is $727,300. But, said Smoke, supply is tight, household income is rising and house prices are scarcely going up (he forecast a 2% rise in 2015).

Washington, DC. Smoke is unusual in singing praises for inside the Beltway living. He acknowledged that: “The perception is that it is off the fast track list. The reality is that it turned the corner in 2014. Washington will see a lot more growth. It’s people moving there and demand outweighs supply.” Zillow has the average home value at $361,100.

--Written by Robert McGarvey for MainStreet

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