The southern housing markets in the U.S. are primed to outperform in 2020. Conversely, California markets are expected to underperform as home values are predicted to fall.
A panel of 110 economists and real estate experts were asked to share their predictions for 2020 in the Q4 2019 edition of the Zillow Home Price Expectations Survey. They evaluated home value growth in 25 large markets in the U.S. compared to the national average.
Generally, the panelists expect home values to rise by 2.8% in 2020. For this survey, the 25 markets were scored by the number of panelists who forecasted the market to outperform as compared to the number of panelists who predicted that it would underperform.
Seattle, WA was the only city where the number of panelists who expected it to outperform (40%) was equal to those who expected it to underperform, thus scoring 0.
Southern Markets Expected to Outperform
Of the 14 markets that received a positive score, 11 are located in Texas or elsewhere in the Southeast and Southwest. Portland, OR; Denver, CO; and Minneapolis, MN, were the only non-southern markets that received a positive score. Skyler Olsen, director of economic research at Zillow, said:
“At the top of the list are metros still providing relative affordability and thriving, amenity-rich communities that appeal to younger adults willing to make a move. These features, plus the ability to grow and add housing in the future, are attractive propositions for employers and employees alike.”
According to the experts surveyed, Austin, TX, is the market most likely to outperform the national average this year, boasting a score of 76. This means that 83% of respondents predicted the Texas state capital would outperform, while only 7% voted the opposite.
The Charlotte, NC market holds the second spot with a score of 59, followed by Atlanta, GA at 51. Out of all the markets, Charlotte was the only one expected to outperform by all of the surveyed panelists.
The Dallas, TX, housing market and Phoenix, AZ, both scored 34 – the only tie in the report. Specifically, Phoenix real estate thrived in 2019 due to its strong job market, proximity to expensive markets in California and a dry, warm climate. With the fastest home price growth and rising rents, the metro is expected to continue to outperform in 2020.
California Markets Forecasted to Underperform
Ten markets – six of which are in California – received negative scores and are, therefore, predicted to underperform in 2020. San Francisco got the lowest score, receiving -40, followed closely by San Jose with -38. The Los Angeles real estate market came in third-lowest with a score of -35. Riverside, Sacramento, and San Diego completed the list of California markets that are expected to underperform this year.
Cincinnati and Columbus, OH; Miami, FL; and Oklahoma City, OK, were the only markets outside of California to receive negative scores. Zillow’s Olsen said:
“Having subjected buyers to a crucible of fierce competition for multiple years, many West Coast markets hit an affordability ceiling that set off declining home values in the most expensive of these. Indeed, this price correction – a clap back from having appreciated with too much exuberance in the recent past – pushes many previously hot markets to the bottom of our experts’ list.”
Not only are economists and real estate experts expecting these markets to underperform in 2020, but they also predict that home values in those markets will fall sharply by the end of this year. The panelists who believed at least one metro would experience falling home values generally agreed that the California markets would make the list. In particular, 57.1% expect home values to drop in San Francisco, 50% predict San Jose and 38.1% expect a drop in L.A. Nashville was the only metro where none of the experts predicted a decrease in home values.
Here is the list comprising all 25 housing markets included in the report, with stats for each: