Amazon HQ2 Finalists Lead List of Housing Markets Expected to Overperform in 2019

A more pronounced slowdown is expected in major Southern California markets as Silicon Valley continues its above-average gains

News provided by

Zillow, Inc.

Dec 04, 2018, 08:00 ET

SEATTLE, Dec. 4, 2018 /PRNewswire/ -- A handful of metro areas that spent the past year competing for Amazon's second headquarters – including Washington, D.C., one of the winners – are expected to see their home-value growth outpace the nation in the coming year, according to the 2018 Q4 Zillow® Home Price Expectations Surveyⁱ.

The quarterly survey, sponsored by Zillow and conducted by Pulsenomics LLC, asked more than 100 real estate economists and investment experts for their predictions about the U.S. housing market, including which three markets they believe are most likely to outperform the U.S., and which three are most likely to underperform in 2019.

Denver, Washington, D.C., Atlanta and Dallas ranked as the four markets most likely to outperform the national average rate of home value appreciationⁱⁱ. All four were on Amazon's final list of 20 candidates before it selected the New York City and the Washington, D.C., metros to split the planned headquarters. Boston and Nashville, two other HQ2 finalist metros, also made the respondents' top-10 list. Denver, Boston and Washington, D.C., so far this year have lagged behind the national average rate.

Las Vegas and Phoenix were the two non-HQ2 finalist markets deemed most likely to outperform the nation, followed by San Jose, where home values already have grown nearly 18 percent this year alone. Nationwide, home values have increased 7.7 percent through the first ten months of 2018.

The average expected home price appreciation rate for next year is 3.8 percent, down from 4.2 percent in the previous quarter. Also, the panel's expected annual growth rate over the next five years ticked down to 3.4 percent.

Last week, Zillow predicted areas that missed out on HQ2 would see more economic growth as other companies recognize the value in their proposals, led by investments from high-tech companies, as they are priced out of traditional tech hubs.

"Amazon ultimately selected two of the country's most prominent hubs of commerce for their second and third headquarters, but many of the candidate cities that were not ultimately selected could see spillover gains in 2019," said Zillow senior economist Aaron Terrazas. "The groundwork that they undertook to entice Amazon will also be attractive for smaller employers increasingly strained by high and rising costs in traditional tech hubs. As mortgage rates rise, communities that can offer affordable workforce housing and reasonable commutes are likely to be long-term winners and should expect their housing markets to outperform the nation."

But courting Amazon and its expected 50,000 jobs didn't guarantee a rosy 2019 outlook. Chicago, also on the HQ2 short list, was considered the metro most likely to underperform against the national market. Chicago has struggled relative to most other markets to recover from the housing bust over the past decade, with home values still more than 13 percent below their pre-recession peaks. Baltimore was just ahead of Chicago on the list of expected underperformers.

The panelists also were pessimistic about San Diego and Los Angeles, where home value growth has outpaced the national average over the past few years, but has dipped below the national average so far this year. An equal number predicted the San Francisco market to overperform and to underperform. All three of those California metros are vulnerable to rising mortgage rates, tax code changes and affordability concerns.

"Early this year, our panel weighed Amazon's HQ2 criteria and pegged Northern Virginia as a favorite to win the sweepstakes. However, not one of the more than 100 experts surveyed predicted New York would win – and several identified it as the least likely choice among the 20 finalist locations," said Terry Loebs, founder of Pulsenomics. "Of course, at that time, it was impossible to know that Amazon would choose multiple cities – or just how generous certain contestants would be with tax breaks and other financial inducements. Having landed their prize, the government officials in the HQ2 markets now must be prepared to manage infrastructure challenges and address quality-of-life concerns. We'll see how they do."

Metropolitan Area	Year-to-Date Home Value Growth	Votes to Overperform	Votes to Underperform	Net Score
United States	7.7%	N/A	N/A	N/A
Denver, CO	6.2%	26	5	+21
Washington, DC	3.5%	28	9	+19
Atlanta, GA	13.1%	20	3	+17
Dallas, TX	10.9%	21	7	+14
Las Vegas, NV	14.7%	22	11	+11
Phoenix, AZ	7.5%	16	6	+10
San Jose, CA	17.9%	16	10	+6
Boston, MA	5.9%	10	5	+5
Nashville, TN	9.7%	5	0	+5
Houston, TX	6.5%	11	7	+4
Riverside, CA	5.3%	7	4	+3
Seattle, WA	7.1%	15	12	+3
Austin, TX	6.5%	1	0	+1
Boise, ID	13.9%	1	0	+1
Charlotte, NC	11.1%	1	0	+1
Minneapolis, MN	6.9%	6	5	+1
Provo, UT	14.6%	1	0	+1
Tampa, FL	9.7%	9	8	+1
Portland, OR	4.8%	6	6	0
San Francisco, CA	9.6%	7	7	0
Hartford, CT	1.4%	0	1	-1
Miami, FL	7.8%	11	12	-1
New York, NY	5.2%	16	19	-3
Pittsburgh, PA	6.7%	6	10	-4
Detroit, MI	9.3%	7	12	-5
Philadelphia, PA	4.5%	7	13	-6
Saint Louis, MO	5.9%	5	16	-11
Los Angeles, CA	5%	5	17	-12
San Diego, CA	5.4%	12	25	-13
Baltimore, MD	4.5%	5	19	-14
Chicago, IL	5.2%	5	21	-16

Zillow
Zillow is the leading real estate and rental marketplace dedicated to empowering consumers with data, inspiration and knowledge around the place they call home, and connecting them with great real estate professionals. In addition, Zillow operates an industry-leading economics and analytics bureau led by Zillow Group's Chief Economist Dr. Svenja Gudell. Dr. Gudell and her team of economists and data analysts produce extensive housing data and research covering more than 450 markets at Zillow Real Estate Research. Zillow also sponsors the quarterly Zillow Home Price Expectations Survey, which asks more than 100 leading economists, real estate experts and investment and market strategists to predict the path of the Zillow Home Value Index over the next five years. Launched in 2006, Zillow is owned and operated by Zillow Group, Inc. (NASDAQ:Z and ZG), and headquartered in Seattle.

Zillow is a registered trademark of Zillow, Inc.

Pulsenomics
Pulsenomics LLC (www.pulsenomics.com) is an independent research firm that specializes in data analytics, new product and index development for institutional clients in the financial and real estate arenas. Pulsenomics also designs and manages expert surveys and consumer polls to identify trends and expectations that are relevant to effective business management and monitoring economic health. Pulsenomics LLC is the author of The Home Price Expectations Survey™, The U.S. Housing Confidence Survey, and The U.S. Housing Confidence Index. Pulsenomics^®, The Housing Confidence Index™, and The Housing Confidence Survey™ are trademarks of Pulsenomics LLC.

ⁱ This edition of the Zillow Home Price Expectations Survey surveyed 114 experts between Nov. 5, 2018 and Nov. 19, 2018. The survey was conducted by Pulsenomics LLC on behalf of Zillow, Inc.

ⁱⁱ Amazon's HQ2 announcement occurred Nov. 14, which was during the survey period.

SOURCE Zillow, Inc.