According to a Homes.com survey, buying a home is the most stressful life event for some. Elizabeth Keatinge has more.
A couple of years ago, freshly-minted college graduates John and Samantha Reidy crisscrossed North Carolina in search of a place to settle and buy a house.
After hitting seven cities – including bustling millennial enclaves such as Charlotte, Durham and Raleigh – they decided that nearly all of those housing markets had gotten too expensive. So they picked under-the-radar Winston-Salem.
Last year, they bought a house there for $106,000, including repairs, and plan to stay in the area for decades. John is even hoping to convince his parents to move down from Agawam, Mass.
“We have no intention of leaving,” says John, 24, an athletic trainer. Besides its mix of urban amenities and laid-back pace, “Winston was a place we could afford.”
The 50 percent runup in U.S. home prices since 2011 is reshuffling the pecking order of hot housing markets. While many midsize metro areas that had been affordable, up-and-coming alternatives – such as Kansas City, Missouri; Nashville, Tennessee; Raleigh; and Salt Lake City – are still coveted by buyers, but their sales are declining or increasing more slowly amid sharply rising prices and shrinking supplies.
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Meanwhile, many smaller, more affordable markets – such as Boise, Idaho; Dayton, Ohio; Greenville, South Carolina; and Winston-Salem – are benefiting from an influx of new residents and home sales that continue to climb.
“Even the second-tier markets are getting a little too pricey for a lot of residents,” economist Adam Kamins of Moody’s Analytics says. “Home prices are not rising as rapidly in the (third-tier) markets … and if you can get a good job there you may find a better quality of life.”
In second-tier metro areas – ranked 26th to 50th by population – single-family house prices increased 10 percent in the 12 months ending in the first quarter to a median of $343,000, according to Moody’s figures. Sales were virtually flat last year.
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In Nashville, the median home price was up 8.6 percent annually at $263,000. That came on the heels of four consecutive years of double-digit price increases, Moody’s figures show. In the city and just beyond, the median home price tops $300,000. Nashville is a hotbed for tech, health care and aerospace companies, and its vibrant downtown is a millennial magnet.
But the soaring prices have taken a toll. Homeowners devote 35.1 percent of their monthly income to housing costs, up from a 27.8 percent average over the past 13 years, according to ATTOM Data Solutions. Metro area sales fell 4.3 percent in 2017 year and are down 0.5 percent so far this year.
“Things have slowed down,” says Sher Powers, an area broker and president of Greater Nashville Realtors. “It’s not a bad thing for the market. It can’t sustain itself endlessly. There has to be some correcting. It’s still a sellers’ market.”
Daniel Williams, 32, and his wife searched for an entry-level house for three months and lost out on three bids before finally purchasing a three-bedroom in the Antioch community. But they had to shell out $220,000 for it, well above the $180,000 they had budgeted.
“It makes me nervous,” says Williams, an auto mechanic. “I’ve never owned a home before.”
Domestic net migration – the net number of people moving into the Nashville area after accounting for those moving out – slowed to 18,700 in 2017 after topping 20,000 for two years, according to Moody’s and Census Bureau data
In Kansas City, another midsize city, home prices jumped 10.3 percent last year while sales fell about 10 percent, according to Moody’s. Some buyers have been priced out, but there also just aren’t enough homes available.
“We put a house on the market and the same day it’s going to be sold,” says Andrea Sheridan, a broker and president of the Kansas City Regional Association of Realtors.
By contrast, many smaller cities have a healthier balance of supply and demand, as well as lower prices. In third-tier markets, ranked 51 to 100 by population, prices rose 6.4 percent to $246,000 in the first quarter from a year earlier – below the U.S. median of $264,000 – and sales were up about 1 percent, in line with the national average.
In Winston-Salem, home prices were up about 9 percent annually, but that followed just a 3 percent uptick over the previous two years. And the median price early this year was still a manageable $166,000. The share of monthly income needed to pay housing costs is 22.8 percent, down from a 13-year-average of 24.6 percent, ATTOMS figures show.
“Slow and steady has been the Winston way,” says Blake Ginther, owner of the Ginther Group realtors. Home sales leaped 23 percent in 2016 and another 22 percent last year.
Besides its affordable housing and temperate climate, the area – home to Hanesbrands clothing, tobacco giant R.J. Reynolds and BB&T bank – has used its revived downtown and growing health care industry to draw retirees and some millennials, Ginther says.
“You can be away from the city, but you can still get there in 10 minutes,” says Reidy, the trainer whose three-bedroom house occupies a half-acre lot.
Domestic net migration to the area rose to 4,300 last year from 3,000 in 2016.
Now, however, some third-tier metro areas are getting pricier as they draw more residents. In Boise, a tech hub that has fast become a hip, more affordable alternative to larger cities such as Seattle and Portland, Oregon, the median house price was up 18.4 percent early this year at $255,000. In Aida County, which includes, Boise, the median was $324,000.
Yet home sales were up 23 percent in 2017 and 2 percent the first half of this year despite historically low supplies, according to Moodys and Boise Regional Realtors.
“We continue to be an attractive place,” says Gary Salisbury, a local broker and president of the realtors group.
With fewer homes for sale today, would-be buyers are having to get creative about making their bid stand out.
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