Housing Heat Index: Which state real estate markets are doing the best, worst during the pandemic?

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Before the coronavirus recession, Utah’s housing market was on fire. Then came the COVID-19 pandemic, which sent residents of Northern California and Seattle in search of affordable homes and more space, and an already-hot market grew hotter.

Dave Robison, president of the Utah Association of Realtors, sums up the activity simply. “It’s insane,” says Robison, a real estate broker in Salt Lake City.

His assessment isn’t just salesmanship. Utah home prices have been soaring as Californians stream into the state. Utah boasts the nation’s strongest pace of job growth, along with rock-bottom unemployment, ultra-low mortgage rates, few mortgage delinquencies and low state and local taxes.

All those factors pushed Utah into first place in Bankrate’s Housing Heat Index for the fourth quarter of 2020. Residential real estate has boomed during the coronavirus recession, and Utah has emerged as a particularly desirable market.

Other states in the Mountain time zone also are thriving. Montana, Idaho and Arizona rank second, fourth and sixth, respectively, in Bankrate’s index.

At the opposite end of the list is Hawaii, a state that has been hit hard by the COVID-19 pandemic. Its tourism industry has ground to a halt, and Hawaii’s jobs picture has darkened.

The 5 states with the hottest housing economies

The Housing Heat Index shows how states’ real estate markets are faring in the coronavirus-fueled housing boom, and how they might perform in the future. To calculate the ranking, Bankrate analyzed six data points: annual home price appreciation reported by the Federal Housing Finance Agency’s Home Price Index; share of mortgages past due as reported by the Mortgage Bankers Association; unemployment and job growth from the U.S. Labor Department; the cost of living index from the Center for Regional Economic Competitiveness; and state-by-state tax burdens as reported by the Tax Foundation.

These five states had the strongest housing economies in the fourth quarter of 2020:

  1. Utah. Its home values jumped 15.4 percent in the 12-month period that ended Dec. 31, third-best among U.S. states, according to the Federal Housing Finance Agency. Utah posted the second-strongest job growth in the nation from December 2019 to December 2020, according to a Bankrate analysis of Labor Department data. And its tax burden is among the lowest in the nation, according to the Tax Foundation.
  2. Montana. Home prices rose 15.5 percent in the past year, and Montana has the nation’s lowest level of past-due mortgage payments, according to the Mortgage Bankers Association.
  3. Nebraska. A state not usually associated with housing booms, Nebraska had the nation’s lowest unemployment in December, at just 3 percent. Its home price appreciation was a robust 12 percent for the year.
  4. Idaho. Idaho’s home prices have been the hottest in the nation, soaring 21.1 percent in the year ending Dec. 31. And job growth is the strongest in the country. However, Idaho’s overall ranking was tempered by middle-of-the pack readings for cost of living and taxes.
  5. Indiana. The state’s home prices jumped 12.3 percent in 2021, and its tax burden is the ninth-lowest in the nation.

Buyers seek affordability, space

The prominent rankings of states in the Mountain time zone illustrate a shift in the housing market: Americans are still drawn to healthy labor markets, but even before the coronavirus pandemic, they were growing less willing to pay up to live in places like San Jose, Seattle and Boston.

COVID-19 has pushed many — especially those who can work remotely — to leave the priciest areas for more affordable regions.

“We are seeing the makings of a renewed affordability migration,” says Mark Vitner, senior economist at Wells Fargo. “The beneficiaries of that shift have largely been the midsized metros in the mountain states of the West.”

The median price of a single-family home sold in Silicon Valley during the fourth quarter was a whopping $1.4 million, according to the National Association of Realtors. The typical price in Salt Lake City was $406,500 — above the national median, but not dramatically so, and just a fraction of the price paid by residents of Northern California.

The price gap has spurred many in high-cost markets to consider moving. The notion is especially appealing to workers who can take their high-wage jobs to areas with lower costs of living.

“People suddenly have the ability to choose where they live, because they’re not tethered to an office,” says Alicia Holdaway, an agent at Summit Sotheby’s International Realty in Draper, Utah, and president of the Salt Lake City Board of Realtors. “We’ve had a net in-migration that’s been happening for years, and that’s only increased.”

Every boom brings its disadvantages, of course. In some cases, new arrivals to Utah’s housing market are flush with cash and willing to bid up prices.

“There’s always a flip side,” Holdaway says. “We’ve been seeing housing affordability become a crisis.”

The 5 states with the coolest housing economies

As a nationwide housing boom rages, every state saw property values increase during the 12 months that ended in December. However, some state economies are struggling with weak job growth and other challenges. The bottom 5 on our index:

  • 47. Illinois. High unemployment and tepid price appreciation placed Illinois near the bottom of the pack.
  • 47 (tie). Louisiana. It ranks worst in past-due loans, with nearly 11 percent of homeowners behind on their mortgage payments. Louisiana also fares poorly on price appreciation, job growth and tax burden.
  • 49. New York. Hit hard by the pandemic, New York is facing a number of headwinds. It ranks near the bottom in job growth, unemployment, tax burden and past-due loans.
  • 50. Washington, D.C. The district ranked last in home price appreciation, with an increase of just 1.5 percent for the year. The city also ranked last in cost of living, and near the bottom in unemployment.
  • 51. Hawaii. This tourism-dependent state ranks dead last in job growth and unemployment and near the bottom in price appreciation. “The overall picture is one of a very weak economy,” says Carl Bonham, executive director of the University of Hawaii Economic Research Organization.

Methodology

To calculate the Housing Heat Index for the fourth quarter of 2020, Bankrate analyzed six data points:

  • annual home price appreciation for the fourth quarter as reported by the Federal Housing Finance Agency’s Home Price Index;
  • share of mortgages past due for the fourth quarter as reported by the Mortgage Bankers Association;
  • unemployment rate for December from the U.S. Labor Department;
  • annual job growth as of December from the U.S. Labor Department;
  • the cost of living index for 2020 from the Center for Regional Economic Competitiveness;
  • state-by-state tax burdens for the 2020-21 fiscal year as reported by the Tax Foundation.

The index overweights home price appreciation, the metric that most clearly conveys a housing market’s desirability. And the index underweights cost of living and tax burden — home prices can soar despite those factors, but a new wave of remote work makes those factors more relevant than they were in the past.

Housing Heat Index for fourth quarter of 2021
State Overall rank Appreciation rank Past due rank Job growth rank Unemployment rank Cost of living rank Tax rank
Utah 1 3 5 2 5 31 8
Montana 2 2 1 12 12 29 5
Nebraska 3 12 14 6 1 22 28
Idaho 4 1 40 1 12 21 20
Indiana 5 10 36 10 11 11 9
Arizona 6 4 10 8 39 27 24
Washington 7 6 3 27 35 38 16
New Hampshire 8 9 12 46 8 43 6
North Carolina 9 17 22 16 28 12 10
South Dakota 10 45 2 11 1 24 2
Tennessee 11 19 23 14 32 5 18
Georgia 12 18 45 5 23 8 31
Kansas 12 25 29 18 6 16 35
Ohio 12 11 33 30 21 6 39
Alabama 15 28 38 4 7 10 41
Oregon 16 15 4 39 32 40 15
Maine 17 8 28 38 17 39 29
Missouri 18 36 21 13 24 3 12
Arkansas 19 32 34 9 10 2 45
Kentucky 20 26 26 25 26 7 19
Iowa 21 43 6 20 3 17 40
Wisconsin 22 31 8 36 21 20 25
Wyoming 23 42 15 19 16 32 1
Vermont 24 20 19 47 3 41 43
Florida 25 22 43 23 27 25 4
South Carolina 26 37 32 7 15 18 33
New Mexico 27 13 24 37 46 23 23
Virginia 27 35 20 21 17 30 26
Mississippi 29 30 50 3 28 1 32
Michigan 30 23 17 50 39 4 14
North Dakota 31 48 7 32 9 33 17
Colorado 32 27 13 26 48 36 21
Connecticut 33 5 44 28 44 46 47
Rhode Island 34 7 30 45 45 45 37
Minnesota 35 38 9 44 12 28 46
Oklahoma 36 40 41 24 19 9 30
California 36 16 10 43 49 50 49
Pennsylvania 38 24 37 40 34 26 27
Massachusetts 39 21 18 48 38 47 34
Alaska 40 44 16 34 24 48 3
Texas 40 39 46 15 36 14 11
Delaware 42 41 31 41 19 34 13
New Jersey 43 14 49 42 41 42 50
Maryland 44 33 47 22 30 44 44
West Virginia 45 46 42 29 30 13 22
Nevada 46 34 39 33 50 35 7
Illinois 47 47 35 35 41 19 36
Louisiana 47 50 51 17 36 15 42
New York 49 29 48 49 46 37 48
District of Columbia 50 51 27 31 43 51 46
Hawaii 51 49 25 51 51 49 38

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