The three indicators that hold over all our recommendations for the top 10 real estate investment hotspots nationwide are population growth, job growth, and income growth. This article looks at the historical trends for these three indicators to arrive at our 10 best places to invest in Real Estate in the United States in 2021 and beyond. These indicators are not exclusive to our list. Based on these factors, you can also find other hotspots around the country or the world.
Though predicting the future is somewhat like looking into a crystal ball, historical trends are a valid indicator of possible future trends. The three indicators of population growth, income growth, and job growth do not shift on a dime. They have proven to be reliable indicators of real estate investment opportunities that build wealth. They are reliable as predictive indicators because trends take decades to change.
Best place to build wealth is where Population Grows, Income Grows, and Jobs Grow
As we have all observed, major events such as COVID-19 can cause ALL trends to shift overnight. COVID resulted in an immediate drop in Gross Domestic Product (GDP) as businesses all across the country either reduced services or completely shut down. With government stimulus and many businesses reopening after the shutdowns, there was an immediate reversal of the downward trend. The disruption in the overall indicators did not undermine the information gained from the historical trends.
As was expected, the country’s cities with positives in the three primary growth trend indicators that affect real estate values were the areas where real estate markets were least affected by COVID and the first to recover.
Impact of Covid-19 on Real Estate Sector
While the overall economy suffered due to COVID, the real estate market was one of the least affected and continues building wealth for investors even through the downturn. Rental income properties remain attractive investments. Though prices for multifamily apartments were predicted to decline substantially, that prediction has not yet materialized.
There remain many uncertainties as there has yet to be a decisive national policy regarding how the COVID pandemic will be handled regarding vaccine distribution and further economic stimulus to keep people in their homes. Nevertheless, multifamily rental properties remained the strongest sector through the 2008 recession. They will very likely continue to build wealth for investors through whatever comes of the COVID crisis.
Some real estate economists predict minimal fall-out in real estate markets nationwide and predict that Capitalization (CAP) rates and prices will stabilize throughout 2021.
Others, not as optimistic, forecast a general slowdown in the real estate rental business through 2022. Few real estate economists are predicting a complete market collapse like was experienced in 2008.
Real Estate Industry Predictions Post Covid-19
Unlike in 2008, there is an undersupply of real estate, both single-family and multifamily rental properties. Interest rates are historically low, keeping real estate purchases affordable. Most predict that interest rates will remain low through 2021 and possibly into 2022.
In all but one of our 10 best cities for investment properties list, housing costs remain below the national median real estate price. This trend of reasonable real estate prices continues even with population growth outperforming the national average in all the 10 cities mentioned below. So, we would say these are the best cities to invest in real estate in 2021 and beyond to build wealth.
Some predict that the employment rate will recover rapidly once the vaccine is widely distributed. With around 30% of businesses permanently closing down, one has to wonder about this rosy prediction. In their 2021 report, Emerging Trends in Real Estate, the Urban Land Institute and PwC (ULI/PwC) make the following prediction:
“Though real estate capital markets have settled, most anticipate overall real estate prices to fall 5-10% as income is curtailed for several years. Industrial properties, data centers, and single-family homes are expected to rise in value. At the same time, retail and hospitality will see the largest decline. The long-term outlook in the real estate sector hinges on the country’s ability to reign in COVID-19.”
Working remotely will likely continue with migration to smaller cities and the suburbs. The sunbelt will likely be the biggest winner as more higher-income earners have more options as to where they live. That might also result in a possible increase from rental income.
As in all crises throughout history, there have been losers and winners. The COVID crisis will be no exception. Though many real estate sectors suffered in the 2008 crash, most real estate sectors are expected to do well through the crisis and come out stronger, continuing to make real estate investments an excellent investment to wealth building.
Real Estate Sectors that have been the most affected Due to Covid 19
Real Estate Sectors that have been the most affected Due to Covid 19
The real estate sectors that are not doing well are hospitality, office, and retail. There may be some excellent buying opportunities in these sectors in the months to come. Many are singing the swan song for these sectors. Still, there is no evidence that people are ready to give up hands-on shopping experiences for nothing but online. Though online shopping has transformed retail, most shopping, even with COVID social distancing standards in place, is still being conducted in brick and mortar real estate retail establishments.
Hospitality will return as soon as travel restrictions are removed. Many people are experiencing intense “cabin fever” and are chomping at the bit with strong urges to get out and go. Experts are predicting that “revenge travel” trend is picking up and people in the US and all over the world are itching to travel. Hospitality will likely experience a surge after vaccines become widely available and COVID is contained.
The office real estate sector will see adjustments but not as radical as some of the earlier predictions. As work from home (WFH) became the norm, particularly for those in higher income brackets, some predicted the real estate office sector’s demise. As COVID has raged on, the isolation of WFH has dampened the desire for many to work from office. The office real estate sector will change but how, remains uncertain.
Some office space will likely be converted to distribution centers or warehouses.
Some real estate office sectors will remain but will reconfigure the space, permanently creating more space between employees. This will call for increasing square footage per employee and a demand for more space, not less.
Ventilation upgrades are expected, creating employment opportunities in the heating and ventilation industry.
There remains uncertainty in the real estate markets with no clear understanding of what will happen with COVID. Still, real estate is certain to remain an attractive long term investment. Few experienced real estate investors are exiting the market. A few have moved to the sidelines observing what will come. Still, most are active and vigorously looking for opportunities that can be conservatively underwritten.
Best Places to Invest in Real Estate in the US
Dallas, Texas has a 12% population growth rate since 2000. Dallas is considered a business-friendly city with a 95.1 cost of living index, 4.9 points below the national average. As per our analysis, Dallas comes in 6th from the lowest cost of living city.
Dallas provides a central location nationwide with superior access to the USA and the world through its major transportation network. Dallas has a diverse, well educated, and skilled population. It is considered by ULI/PwC to be a city that is a magnet to both people and companies and is growing faster than the average USA city.
ULI/PwC ranks Dallas in the top 10 for overall real estate prospects and will continue to be bring in more rental income through real estate investment properties.
9th Place in Population Growth – Atlanta Georgia
Ninth on our list is Atlanta Georgia, that has had a 17% population growth rate from 2000 to 2020. Atlanta has a cost of living index score of 99.10% placing them 9th in our cost of living index rankings. For the fifth year in a row Area Development, has ranked Georgia number one in Site Selection to do business.
Atlanta is the capital and hub of Georgia and the home to the busiest airport in the world. Hartsfield-Jackson Atlanta International Airport serves 150 USA destinations and more than 75 international destinations in 50 countries.
Atlanta is home to 30 fortune 500/1000 companies. Atlanta ranked 17th in 2018 on the Milken Institute Best-Performing Cities Where America’s Jobs are Created and Sustained with a solid economic base. Hard hit by COVID, Atlanta dropped to 29th in 2020.
8th Place in Population Growth – Houston Texas
Houston Texas comes in at 8th place in population growth. It has an 18% growth rate since 2000. Houston has moved well beyond its roots in the oil and gas industries to become the USA’s fourth most populous city. It is an ethnically diverse city with 146 languages spoken by residents, and 90 nations have consular representation. Houston is second only to New York City as home to Fortune 1000 companies. Houston has a cost of living index of 95.5, ranking them 3rd on our affordability list and an excellent city for investors with good property values.
7th Place in Population Growth – Boise
Ranking 7th in population growth since 2000 is Boise Idaho, with a growth rate of 22%. Boise has a cost of living index score of 92.90, placing them second only to Charlotte in terms of affordability on our best cities to invest in Real Estate list. Boise, near the Rocky Mountains, provides its residents with ample outdoor recreation opportunities combined with a vibrant city cultural center.
ULI/PwC considers Boise a niche market not as diverse as the multitalented large metro areas but with a dominant economic driver that supports stable economic growth. Boise has a lively downtown, diversity in leisure, and culture with a stable economic base. With positive in-migration and comparatively less property values, Boise offers a considerable upside for newcomers. Many investors looking to build wealth are finding opportunities in Boise.
6th Place in Population Growth – Phoenix Arizona
6th in terms of population growth in our list, Phoenix had a 23% growth rate since 2000. Phoenix is the only state capital with over 1 million population and is the 5th largest city in the USA. Phoenix has a cost of living index score of 95.20, ranking them 7th on our affordability list.
Phoenix, located in the Sonoran Desert, receives an annual rainfall of 3 to 16 inches with an average of 334 days of sunshine each year and 100 plus days of temperatures of 100 degrees. This makes Phoenix the capital for Snowbirds, sun seeker fleeing the winter cold to the north.
Outgrowing its economic roots of copper, cattle, cotton, citrus, and climate, Phoenix is now home to four Fortune 500 companies: Freeport-McMoRan, Avent, Republic Services, and Insight Enterprises. Phoenix, with increasingly high tech employment opportunities. Once home to retirees, Phoenix is now attracting a younger and more trendy population.
5th Place in Population Growth – Tampa Florida
Tampa Florida takes 5th place in the percentage of growth since 2000, with a rate of 27%. Tampa has a cost of living score of 95.8, ranking 8th most affordable city on our list of best places to invest in Real Estate. Tampa, on the gulf coast, is home to Florida’s largest seaport. The international airport offers nonstop service to 90 plus domestic and international destinations.
Tampa is home to 20 corporate headquarters with over $1 billion in annual revenue, eight of which are Fortune 1000 companies. 500 foreign-owned companies representing more than 40 nations are established in the city.
Florida has no state income tax. Though humid, temperatures have never exceeded 90 degrees. Many investors looking to build their wealth are looking to Tampa for investment opportunities.
4th Place in Population Growth –Denver Colorado
Our top 10 cities to invest in Real Estate, places Denver, Colorado, in fourth on our list of fastest-growing cities with a 27% growth rate since 2000. With a cost of living index of 113.0, Denver tops the list as the most expensive city. Denver’s cost of living is 13 points above the national average.
Nevertheless, with the highest per cap income on our list with a 75% increase in per cap income since 2000, Denver continues to attract a young and talented workforce. Denver has one of the most walkable downtowns in the USA. There are three major sports stadiums within a mile radius of downtown Denver. It also hosts the nation’s second-largest performing arts center, three colleges, an assortment of art and cultural museums, a mint, and a river offering whitewater rafting.
Denver has 300 days of sunshine a year with winters that are dryer than experienced in Phoenix. The average January daily temperature hovers around 45 degrees. 30 days of January golfing are not unusual.
The major industry sectors are aerospace, broadcast and telecommunications, healthcare and wellness, financial services, bioscience, energy, and IT-software.
Tech firms cite Denver as one of the nations’ largest clusters of internet and telecommunications services. The Denver economy is also bolstered by the energy sector that supports about 150,000 workers and accounts for $11.4 billion. The Cleantech industry is experiencing rapid growth and is ranked 4th in the nation.
3rd Place in Population Growth – Durham North Carolina
Durham North Carolina takes 3rd place as one of the fastest growing cities in the US. Since 2000 Durham has experienced a growth rate of 43%. On the cost of living index, Durham comes in 4th with a score of 93.9. Being in the heart of the research triangle, it is no wonder that Durham is growing so rapidly.
Three leading universities provide Durham with a talented pipeline, a highly efficient technology ecosystem, life sciences, and manufacturing.
Durham has come a long way from its roots as a tobacco and textile hub to transforming into an entrepreneurial haven. Entrepreneurs and startups in high tech and life sciences attract national attention from the public sector, Silicon Valley investors, and talented individuals worldwide.
Durham is home to the largest science park in the USA. The park provides a vibrant work and research community for over 200 global companies that employ over 50,000 high-tech employees. 80% of the companies are multinational and provide a combined payroll of $2.9 billion.
With a year-round mild climate, affordability, and easy access to all major hubs throughout the USA and the world, Durham will continue to grow, thrive, and build wealth for investors throughout the coming decades.
2nd Place in Population Growth – Charlotte North Carolina
The runner-up for the fastest growing cities on our best cities for real estate investments list is Charlotte, North Carolina. Since 2000 Charlotte experienced a growth rate of 59%. Charlotte ranks number one as the most affordable place to live with a cost of living score of 92.4. An impressive 7.2 points below the national average.
Charlotte is home to the headquarters of Bank of America, Trust, and the East Coast operations centre for Wells Fargo. These three giant banking institutions and several other leading financial institutions make Charlotte the second-largest banking centre in the USA.
Though the financial industry dominates, Charlotte has a diverse economy. Six other Fortune 500 companies make their home in Charlotte: Honeywell, Nucor, Lowe’s Duke Energy, Sonic Automotive, and Brighthouse Financial.
Charlotte is the hub of the nation’s motorsports industry, with 75% of the NASCAR industry’s race teams, employees, and drivers based nearby. Forbes names Charlotte among its list of Best Places for Business and Careers.
All these factors point that, there’s tremendous potential for growth and property values will likely rise in the coming decades. And, eventually making an attractive investment to a Real Estate Investor’s portfolio.
1st Place in Population Growth – Raleigh North Carolina
Raleigh North Carolina, is the fastest-growing city on our list, with an impressive 68% growth rate since 2000. On the cost of living index, Raleigh takes 5th place with a score of 94.6 — 5.4 points lower than the national average. These factors alone make Raleigh an attractive location for Real Estate Investment properties.
Raleigh is the capital of North Carolina. With three tier-one research universities in the region, Raleigh is considered the second most educated city in the country. This correlates with higher levels of innovation and a strong high-tech industry. Raleigh leads the country on nearly every measure of economic success.
Raleigh leads the way in Cleantech and sustainable industries. It’s home to over 2,000 companies developing, supplying, and supporting sustainable technologies for the global market.
What can we infer on Where to Invest in Real Estate in the foreseeable future
All ten of our top 10 real estate investment hotspots significantly outgrew the national averages in population growth, income growth, and job growth. Indications are strong that investment properties in these cities will continue to build wealth. With Denver being the one exception, the cost of living in all the other 9 areas remains lower than the national average. These cities are some of the most affordable cities in the US with some of the best employment opportunities and increasing income.
With more renters, rentals will continue to be in high demand, which will drive property values upward and vacancy rates down. Consequently, increasing the rental income. With housing prices lower than the national average, real estate values in most of these cities will increase, creating equity wealth building opportunities for investors.
With 30% or more businesses shutting their doors permanently due to COVID-19, it is almost certain that the economy will see a retraction. There will likely be a significant increase in government spending in attempts to stimulate the economy. Federal Reserve will most likely keep interest rates low to bolster the economy hard hit by COVID. These two factors will not remove real estate investment risk, but they will reduce the risk that would otherwise be there without the stimulus.
Whether slight or significant, the economic downturn will provide openings for real estate investors ready to take advantage of opportunities that downturns always bring. Real estate investing has stood the test of time as the best place for investors looking for wealth-building opportunities. Based on our analysis, the 10 cities in the US mentioned in this article will be prime real estate investment hotspots for the forseeable future.
I hope the article has been informative. So, where are the regions of the country that you are doing your Real Estate Investing? Why have you chosen the regions you’ve chosen? How is the real estate market in your region of the country? Please let me know in the comments below.
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About the author - Dr. Allen Lomax
With careers in academia, podcasting, and real estate investing, Dr. Allen Lomax inspires us to break open our minds’ secrets to discover individual and universal well-being. Through passive real estate investments, he helps enlightened investors create time freedom to live abundantly in all life’s areas.