When it comes to real estate across the nation, different markets appreciate at their own pace. Given the short, and long-term effects of the pandemic, sometimes appreciation can be a hard factor to determine, but it is always a smart idea to look at historical data to see what we can learn. So which markets across the nation are actually experiencing appreciation?
Historical Proeprty Trends Changing at Speed
In order to get a better idea of what 2022 may hold, we must take a look at what’s happened in the last two years. Obviously, 2020 was a historic year for many reasons, but looking back we can see the different factors that were driving the markets at the time.
For instance, before the pandemic, markets such as Los Angeles and New York , generally speaking, experienced strong appreciation due to their immense draw. Smaller markets like Indianapolis experienced less appreciation, but at the same time, these smaller markets did not dip as much when recessions hit.
Historically, investment properties in the mid-west did not experience much appreciation, and instead, investors would rely on these properties for their cashflow. But since the pandemic, people can work from virtually anywhere, and have moved to these smaller cities that offer a higher quality of life.
Which Cities Are Experiencing Momentum Going Into 2022?
There have certainly been quite a few changes in the nationwide economy due to the pandemic. When we look into it deeper, there are certain clusters of cities that are experiencing different rates of growth driving different rates of appreciation within these groups of cities.
- Atlanta, Austin, Charlotte, Dallas/Fort Worth, Denver, Nashville, Phoenix, Raleigh, Salt Lake City: These cities experienced the highest influx of people moving in due to strong household and employment growth- which already existed prior to the start of the pandemic. With its already strong growth these smaller city centers were attractive markets for people working from home, and that were looking for a higher quality of life
- Houston, Indianapolis, Riverside-San Bernardino, Sacramento, San Antonio, Seattle-Tacoma, Tampa-St. Petersburg: Although not as strong as our first group, this group of cities benefit from a large population of people that are looking for a higher quality of life. These cities were more mature. They did not have the fast growing economy prior to the pandemic that our first group had, but their lower cost of living attracted a lot of people to them.
- Cincinnati, Columbus, Fort Lauderdale, Kansas City, Louisville, Miami-Dade, Minneapolis-St. Paul, Portland, Washington, D.C., West Palm Beach: Markets in these cities grew in a measured manner or remained about the same throughout the pandemic. Modest development in these regions helped abate demand-driven headwinds, driven by the lower cost of living when compared to big cities.
- Boston, Chicago, Las Vegas, Los Angeles, New York City, Northern New Jersey, Oakland, Orange County, Orlando, San Diego, San Francisco, San Jose: These are some of the cities that were hit hardest by the pandemic, and saw an exodus of people when this all started. However, in 2021, we saw people returning to big cities and as the country becomes better at managing the virus, we expect a strong recovery in the long term, as these cities remain some of the most attractive places to live.
- Baltimore, Cleveland, Detroit, Milwaukee, New Haven-Fairfield County, Philadelphia, Pittsburgh, St. Louis: Several Midwest cities fall into this category. Household and employment growth are not strong in these cities resulting in lower desirability and weak in-migration
What This Means for Investors
With the effects of the pandemic still felt (and spreading) across the country, it’s hard to know exactly which markets will appreciate next. As such it is very important that we examine historical data and what is going on in the current market to really understand how property prices will be affected. It seems that major cities have taken a big hit while smaller city centers are really thriving, but only time will tell if this trend continues into 2022.