The hottest real estate markets of 2021

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After nearly two years of unprecedented competition, the housing market is finally showing signs of cooling. While inventories remain low and demand is still high, home sales and home price growth have started to slow this spring.

One of the main reasons for the fall in demand is the rise in mortgage interest rates. At the start of the COVID-19 pandemic, the Federal Reserve launched aggressive stimulus measures to stave off an economic downturn that pushed interest rates to historic lows and made home buying more affordable. But amid concerns about high inflation, the Fed recently changed tack and started raising rates. The average interest rate on 30-year fixed-rate mortgages rose from a low of 2.65% in January 2021 to now over 5% — and could potentially rise further into the end of 2022.

Increased borrowing costs discourage buyers and lower buying budgets, especially for those who may not have the income, credit history, or equity to qualify for the lowest interest rates. But home prices themselves are also a major factor leading to reduced interest in real estate.

Prices have risen steadily over the past decade, but the jump in prices since early 2020 has been particularly strong. In early 2020, the median home selling price in the U.S. was $288,000, and by early 2021 that number had increased 14% to $329,000. By early 2022, the median home price had risen another 16% to $376,000 — up from $424,000 as of April this year. The pace of these increases has begun to crowd out buyers, particularly first-time homebuyers, who have not been able to take advantage of the appreciation in their home and whose wage growth or ability to save for a down payment may not have kept pace with price growth.

The Mountain West and Southeast regions have seen some of the sharpest increases in real estate prices. In neighboring Arizona, Idaho, and Utah, the median home selling price each increased more than 25% in 2021, while Nevada and Tennessee also saw increases of more than 20%. Many of these locations are booming as people leave pricier states like California in search of more affordable places — but this leads to competition and higher prices.

Home prices are just one metric that shows how intense the US housing market is. In many places, homes spend less time on the market and are selling above list price more often. For example, in fast-growing Washington, the average home spent 7.8 days on the market in 2021, and nearly three in five homes (58.2%) sold above asking price. Similarly, the median home in Nebraska spent 8.4 days on the market last year, while Alaska led the percentage of homes that sold above supply statewide at 60.9%.

The locations with the hottest real estate markets of 2021 not only share rapidly rising prices, but also less time in the market for homes and more homes selling above list price. The cities that share these traits are among the fastest growing and most economically prosperous parts of the US in states like California, Colorado and Texas. While the real estate market may be cooling elsewhere in the US, these attractive locations could continue to face stiff competition — and high prices — in the future.

The data used in this analysis is from Redfin. To determine the locations with the hottest real estate markets of 2021, Construction Coverage researchers calculated a composite index that includes year-on-year change in median selling price, median number of days on market, percentage of homes sold above supply, and… Average Considered Sale-to-List Percentage. In the event of a tie, the location with the greater one-year change in median selling price was ranked higher. With the exception of the one-year change in selling price measured between December 2020 and December 2021, all other statistics reflect data from January to December 2021.

Here are the hottest real estate markets of 2021.

The hottest major real estate markets of 2021

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15. Phoenix, AZ

  • Composite score: 54.98
  • Average selling price: $379,140
  • 1-year change in mean selling price: +30.3%
  • Average days on the market: 26.8
  • Percentage of houses sold above the question: 50.5%
  • Average Sale-to-List Percentage: 101.2%

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14. Portland, OR

  • Composite score: 57.98
  • Average selling price: $528,341
  • 1-year change in mean selling price: +6.9%
  • Average days on the market: 10.1
  • Percentage of houses sold above the question: 56.5%
  • Average Sale-to-List Percentage: 103.0%

Photo Credit: Lucky Photographer/Shutterstock

13.San Diego, CA

  • Composite score: 60.03
  • Average selling price: $757,937
  • 1-year change in mean selling price: +14.5%
  • Average days on the market: 11.5
  • Percentage of houses sold above the question: 57.4%
  • Average Sale-to-List Percentage: 102.2%

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12. San Francisco, CA

  • Composite score: 60.23
  • Average selling price: $1,455,994
  • 1-year change in mean selling price: +9.3%
  • Average days on the market: 24.2
  • Percentage of houses sold above the question: 62.1%
  • Average Sale-to-List Percentage: 108.2%

Photo credit: Roschetzky Photography / Shutterstock

11. Austin, Texas

  • Composite score: 60.35
  • Average selling price: $556,187
  • 1-year change in mean selling price: +17.9%
  • Average days on the market: 32.1
  • Percentage of houses sold above the question: 59.5%
  • Average Sale-to-List Percentage: 105.2%

Photo Credit: Andrew Zarivny/Shutterstock

10. Denver, CO

  • Composite score: 60.90
  • Average selling price: $532,913
  • 1-year change in mean selling price: +12.5%
  • Average days on the market: 7.0
  • Percentage of houses sold above the question: 54.1%
  • Average Sale-to-List Percentage: 102.4%

Photo Credit: Timothy Milan Kuret/Shutterstock

9. Fort Worth, Texas

  • Composite score: 61.15
  • Average selling price: $298,230
  • 1-year change in mean selling price: +25.0%
  • Average days on the market: 18.8
  • Percentage of houses sold above the question: 53.8%
  • Average Sale-to-List Percentage: 101.7%

Photo credit: Tim Roberts Photography / Shutterstock

8. Mesa, AZ

  • Composite score: 62.43
  • Average selling price: $387,210
  • 1-year change in mean selling price: +30.7%
  • Average days on the market: 23.6
  • Percentage of houses sold above the question: 55.5%
  • Average Sale-to-List Percentage: 101.8%

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7.Anaheim, CA

  • Composite score: 63.38
  • Average selling price: $751,873
  • 1-year change in mean selling price: +21.5%
  • Average days on the market: 29.6
  • Percentage of houses sold above the question: 68.5%
  • Average Sale-to-List Percentage: 102.5%

Photo Credit: Sean Pavone/Shutterstock

6. Raleigh, NC

  • Composite score: 64.40
  • Average selling price: $357,438
  • 1-year change in mean selling price: +22.2%
  • Average days on the market: 34.4
  • Percentage of houses sold above the question: 65.8%
  • Average Sale-to-List Percentage: 103.6%

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5. Arlington, Texas

  • Composite score: 65.33
  • Average selling price: $284,259
  • 1-year change in mean selling price: +20.0%
  • Average days on the market: 17.1
  • Percentage of houses sold above the question: 61.1%
  • Average Sale-to-List Percentage: 102.5%

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4.Oakland, CA

  • Composite score: 68.15
  • Average selling price: $886,746
  • 1-year change in mean selling price: +2.6%
  • Average days on the market: 15.2
  • Percentage of houses sold above the question: 77.0%
  • Average Sale-to-List Percentage: 114.5%

Photo Credit: Andrew Zarivny/Shutterstock

3. Sacramento, CA

  • Composite score: 74.20
  • Average selling price: $452,630
  • 1-year change in mean selling price: +13.6%
  • Average days on the market: 8.9
  • Percentage of houses sold above the question: 68.9%
  • Average Sale-to-List Percentage: 103.3%

Credit: Jacob Boomsma/Shutterstock

2. Aurora, CO

  • Composite score: 85.65
  • Average selling price: $432,727
  • 1-year change in mean selling price: +23.3%
  • Average days on the market: 5.1
  • Percentage of houses sold above the question: 68.8%
  • Average Sale-to-List Percentage: 103.4%

Credit: Uladzik Kryhin/Shutterstock

1.San Jose, CA

  • Composite score: 86.70
  • Average selling price: $1,234,465
  • 1-year change in mean selling price: +23.3%
  • Average days on the market: 11.6
  • Percentage of houses sold above the question: 79.0%
  • Average Sale-to-List Percentage: 107.4%

Detailed results and methodology

The data used in this analysis is from Redfin’s data center. To determine the locations with the hottest real estate markets of 2021, the researchers calculated a composite index that took into account year-on-year change in median selling price, median number of days on market, percentage of homes selling above supply, and average sale -list percentage. In the event of a tie, the location with the greater one-year change in median selling price was ranked higher. With the exception of the one-year change in selling price measured between December 2020 and December 2021, all other statistics reflect data from January to December 2021. To improve relevance, only cities with at least 100,000 inhabitants were included. In addition, cities were divided into cohorts based on population size: small (100,000–149,999), medium (150,000–349,999), and large (350,000 or more). Note that only locations with complete monthly data for all considered fields for 2021 were included in this analysis.

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