The Bracketology of the Next Emerging Markets

Lesley Deutch photo
Ken Perlman Headshot

Lesley Deutch

Ken Perlman

March 19, 2021

Over the course of the last year, the Great American Move has benefited markets such as Salt Lake City and Charlotte as they become destinations for homebuyers looking for more space and better values. As demand heats up, home prices are rapidly appreciating, creating affordability challenges in locations once considered “value-oriented,” and creating opportunities in the “next” emerging markets.

Many of these “next” markets have a common theme: a university presence that provides the benefits of a big city lifestyle with a smaller town atmosphere, including an ever-expanding intellectual base, culture such as music and theater, and of course sports. As this week marks the launch of the first March Madness Tournament in two years, we dedicate this edition of The Light to the Bracketology of the Next Emerging Markets.

  • The Southeast Conference. The Southeast region is poised to welcome 62% of national household growth over the next decade. Using our consulting work over the last year as an indicator, the Southeast is already seeing an explosion in growth. Metro areas with populations under 1.0 million are becoming lifestyle communities for families seeking better affordability. Cities like Greenville, South Carolina (Furman University and Clemson nearby) and Knoxville, Tennessee (University of Tennessee) have a median new home price below $300,000. Watch for double-digit price appreciation in some of these cities due to increased demand and limited inventories.
 
  • The Western Conference. As Phoenix and Denver grew, we saw expansion to nearby cities like Tucson (University of Arizona) and Fort Collins (Colorado State). Single-family building permit issuance in Tucson increased 31% YOY as builders burned through developed lot positions. New single-family permits in Fort Collins are up more than 30% YOY and based on our work in the market, we are forecasting double-digit annual single-family permit growth for the next three years. The threat in Fort Collins will be affordability which is why many of our builder clients are already looking at density and rental solutions there.
 
  • Perennial Powerhouses. Okay, we get it. We’re hardly calling Austin (University of Texas) and Phoenix (Arizona State University) emerging markets anymore, but both merit mentions as university cities and a clear destination for new home buyers, particularly out of California. But with close to 20% price appreciation for both markets (based on our Burns Home Value Index), affordability will be a key concern, which is why we are seeing those markets expand outward (Austin to the east and south; Phoenix to the west and southeast).
 
  • Bracket Busters. Looking for bracket busters? Check out Myrtle Beach, South Carolina (Coastal Carolina University) and Birmingham, Alabama (University of Alabama at Birmingham) where the housing cost-to-income ratio is below 25.0%, and year-over-year home prices are climbing around 10%. In the West, the Spokane, Washington (Gonzaga University) to Coeur’d Alene, Idaho I-90 corridor has been extremely busy. With a median new home price of around $480,000, the value proposition for Spokane-CDA is compelling when compared to relocation markets like Seattle, Portland or California’s Bay Area.
 

These are just some of the representative markets we’ve been studying across the country. There are many others. We expect we might get some unhappy notes from our clients who are already established in these next emerging markets and want to keep them a secret. But with limited homes available for sale; all-time low mortgage rates; all-time high levels of personal wealth, savings, and home equity; a projected economic recovery; strong demographics; and an accelerated pivot to the ability to work remotely, we think 2021 could be One Shining Moment for many of these next emerging markets.

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About The Author

Lesley Deutch photo
Lesley Deutch
Managing Principal
Lesley has more than 25 years of experience consulting with executives in the finance and real estate industries throughout North America. She works across a wide spectrum of industries including apartments, for-sale housing, high-rise development, urban projects, single-family rental, building products, and commercial developments.
Ken Perlman Headshot
Ken Perlman
Managing Principal
Ken works with real estate executives to help them make appropriate strategic decisions regarding their residential communities, including for-sale and rental of all types. He has a particular specialty in large-scale master-planned communities.

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