10 Hot Spots Where Locals Are Least Likely To Be Able To Afford a Home
The ongoing COVID-19 pandemic has deepened divisions in American society, including the classic gap between the haves and have-nots, especially when it comes to real estate.
Soaring home prices are continuing to push homeownership further out of reach for many buyers. Last year, the median list price for homes grew by 7.2%, while wages increased only by about 3.7% for those lucky enough to have jobs, according to Realtor.com® and U.S. Department of Labor data.
In fact, wage growth may be even lower, as low-wage workers were more likely to get laid off, skewing the data toward the higher-paid workers who remain. And while home prices are expected to zoom up 11% this year compared with last, it’s likely most folks won’t be receiving similarly large raises.
Given the competitive market, the data team at Realtor.com wanted to see where locals could be at the biggest risk of being priced out. These are places with the biggest discrepancies between home price growth and local salaries.
What we found is that the gap is especially vast in smaller, more remote places where investors and wealthier people (particularly from urban areas on the coasts), emboldened by new work-from-home rules or seeking second homes, are paying top dollar. Many are vacation areas where people are now able to remain full time, and one (Jones County in Mississippi) was made famous by the popular HGTV show “Home Town.” But locals in these places aren’t seeing enough of a boost in their paychecks to be able to afford the newly exorbitant prices.
“Now, more Americans have flexibility around where they live and work, and that’s put these lesser-known markets on the map,” says Ali Wolf, chief economist at real estate research firm Zonda. “Those relocating while continuing to work from home are often bringing a higher wage and some home equity with them. This has helped pushed home prices up far faster than the growth of local incomes.”
Some economists say an influx of buyers could be helpful in the long run, especially if these new arrivals are pouring money into the local economy. But for now, it’s caused a housing crunch in places that may have already been under economic stress.
“The jury is still out on what this means long term,” Wolf says. “Ultimately, though, some locals will get hurt as rising home prices and rents strain their budgets.”
To come up with this list, we looked at weekly wages by county during the last three months of 2020 compared with the same period in 2019, using Labor Department data. Then we compared the change in real estate list prices in more than 3,000 counties across the U.S. over the same period. To ensure accuracy, we made sure there were more than 30,000 households in each of those counties and that each county had at least 12 listings per month. To ensure geographic diversity, we limited this list to one county per state.
So where are we seeing the biggest gap between wages and home prices? Let’s take a look:
County seat: Santa Barbara, CA
Median list price in July: $1.7 million
Home price change: 65.5%
Wage change: 7.6%
Santa Barbara County has become a perfect escape for Californians who love the scenic, oceanfront area about 90 miles north of Los Angeles but were unable to relocate before the pandemic. People from San Francisco and Los Angeles have flocked to the county in the past year or so, sending home prices up a mind-boggling 65% from the end of 2019 to the end of 2020. Homes here aren’t cheap, either, with the median price reaching $1.7 million in July, according to Realtor.com data.
Popular communities include the picturesque town of Montecito, CA, which has seen a wave of famous residents move in—Prince Harry and Meghan Markle, Oprah Winfrey, and Ariana Grande, to name a few. Recently, there have even been reports of design darlings Chip and Joanna Gaines eyeing properties in the area. Yet sales of these massive, luxury homes are only part of the reason prices have grown so much.
Landlocked between the Pacific Ocean and the Santa Ynez Mountains, the county just doesn’t have enough space to build more homes and keep up with demand. Some who work in the area, especially in the service sector, can’t afford to buy a home here and have to commute over an hour to get to their jobs.
Recently, however, things have begun to slow a bit. And once people begin to return to the office full time, that may take some pressure off, according to Peter Rupert, an economics professor at the University of California, Santa Barbara.
“It’s never going to be affordable in Santa Barbara,” says Rupert. But “this is not a sustainable market.”
County seat: Bozeman, MT
Median list price in July: $979,900
Home price change: 65%
Wage change: 18.3%
Bozeman, the county seat of Gallatin County, is one of the trendiest markets in the country right now. When the pandemic hit and suddenly people prioritized space and outdoor activities, many headed to Bozeman. A nature lover’s paradise, Bozeman has become one of the country’s fastest-growing small cities.
This mountain region is just 90 minutes from Yellowstone National Park. There are also several ski resorts in the area. Part of Big Sky, another celebrity hot spot, is also located in Gallatin County.
These newcomers, many with higher incomes, are driving prices up at a rate much quicker than local incomes are rising. That’s putting a burden on locals, who are struggling to find affordable housing.
Over the past year and a half, Americans from across the country have been scooping up homes, for both year-round use and vacation properties. In fact, the city has become more recently known as “Boz Angeles” because of the number of Southern Californians deciding to put down roots there.
But the recent housing crunch has gotten so bad, some locals have been forced to live in RVs or campers.
County seat: Augusta, GA
Median list price in July: $165,500
Home price change: 48.8%
Wage change: 11.7%
Lured by job opportunities and a strong economy, more people have been moving to Augusta and Richmond County in the past few years. However, economists there say wages in this northeast part of the state, near the South Carolina border, still haven’t caught up.
In 2020, the U.S. Army opened its Cyber Command headquarters in Fort Gordon, bringing its hackers and cybersecurity experts to one place. That’s enticed a lot of folks from the DC area and driven a need for more homes. Richmond County is also just an hour and a half away from the capital of South Carolina, so it’s a good option for people working there who need affordable housing.
“It’s becoming a more desirable place to live,” says Rick Franza, dean of the James M. Hull College of Business at Augusta University. “We have a strong economy that’s also buffered from some of the impacts of recessions.”
To keep up with demand, homebuilders have been breaking ground at a feverish pace.
In the Augusta metro area, building permits for single-family homes rose 38% in the first half of this year compared with the previous one, according to data from the Selig Center for Economic Growth at the University of Georgia. But that’s not enough to offset the number of people moving in. Those numbers might have been even higher if not for a shortage of building materials and construction workers.
Watch: A Look at the Hottest ZIP Codes in America for Real Estate in 2021
County seat: Laurel, MS
Median list price in July: $184,900
Home price change: 35.6%
Wage change: 1.6%
Jones County’s seat, Laurel, MS, is known nationally as the location of the hit HGTV show “Home Town.” Launched in 2016, the show follows husband and wife team Erin and Ben Napier as they restore historic homes in this charming, Southern town. The low-key lifestyle highlighted on the show as well as affordable housing have drawn people from all over the country to the area.
“It’s basically an infomercial every week for that town,” says Darrin Webb, the former state economist for Mississippi. He is currently a senior economist at Premier Insights, a consulting firm based in the Jackson, MS, area.
That’s at least part of the reason why home prices have jumped 36% from the end of 2019 to the end of 2020 while wages remained little changed. Hattiesburg, MS—the closest big city and home to Camp Shelby Army base—is about an hour’s drive and was one of the few metro areas to see job growth during the coronavirus pandemic. But with the increase in working from home, even more people have been able to make the move.
County seat: Pine Bluff, AR
Median list price in July: $99,900
Home price change: 40.7%
Wage change: 10.2%
Locals in this corner of Arkansas have investors to thank for rising home prices. About an hour south of Little Rock, Jefferson County has faced significant economic challenges for a long time, according to Michael Pakko, chief economist at the Arkansas Economic Development Institute at the University of Arkansas. Furloughs and layoffs caused the unemployment rate in the county to hit 7.5% in June, compared with 5.9% nationally.
Even though locals are finding it hard to afford a home, investors lured by low prices are swooping in.
Laura Branson, a real estate agent at Century 21 United in Pine Bluff, says she’s seen an increase in people from out of state looking to buy properties and flip them or turn them into rentals. She’s recently worked with buyers from Alabama and as far away as Colorado looking to invest here.
More work opportunities have been coming to the area, including a casino and the recent expansion of a Tyson poultry plant, but these are all lower-paying jobs.
The Pine Bluff metro area, which includes the county’s largest city, has among the lowest wages in the state, Pakko says, so people looking for better pay have moved elsewhere.
“The city itself is losing population over time, so there’s not really a housing shortage,” he adds.
County seat: Saint Clairsville, OH
Median list price in July: $175,000
Home price change: 32.5%
Wage change: 2.7%
Part of the Wheeling, WV, metro area, Belmont County was once big in coal mining. Nowadays, its economy relies largely on natural gas drilling. That’s bringing some new workers to the area, but not enough to offset years of population decline, says Brian Lego, a research assistant professor in West Virginia University’s Bureau of Business and Economic Research. However, those who are coming to the region are taking higher-paying jobs, such as lawyers or engineers within these companies.
“You’re still seeing net out-migration in these places, but people are coming in and they have money to burn,” Lego says.
Another factor driving up home prices is the lack of available homes. The total number of homes in the region has steadily declined over the past 10 years or so, according to an economic report this spring from WVU. As older homes become obsolete, they’re not being replaced by newer homes, since fewer people are moving in. Even as low mortgage interest rates are putting homes more in reach for some, the increase in demand is sending prices higher.
“As you get more and more people interested in buying homes, you’re juicing up home prices,” Lego says.
County seat: Amarillo, TX
Median list price in July: $215,000
Home price change: 36.8%
Wage change: 9.1%
Situated in the northern panhandle of the state, Amarillo was originally a big ranching area. Over the past decade, the area has experienced a surge in job opportunities, including at a Tyson beef-processing plant. In the past year or so, more people have been drawn to the affordable cost of living and abundance of space, so that’s driven prices higher.
The current housing market is a boon for sellers, but with more homes going over list price, local buyers have become wary of overspending. Instead, investors are moving in and buying homes.
Last year, Millionacres, a Motley Fool company, ranked Amarillo as one of the 10 best places to buy a rental property. Factors included the amount of affordable housing, wage, and population growth, as well as how much investors can make from rent.
County seat: Elizabethton, TN
Median list price in July:
Home price change: 37.1%
Wage change: 11.1%
Another nature lover’s paradise on this list, Carter County is filled with parks, lakes, and hiking spots, including access to the Appalachian Trail. Its county seat is Elizabethton, but the closest big city is Johnson City—which ranked No. 8 in our most recent WSJ/Realtor.com’s Emerging Housing Markets Index. The index looks at the next hot housing markets by factoring in demand and prices, as well as the strength of local economies, the number of well-paying jobs, and the amenities that make a place desirable.
A flood of buyers from other parts of the state as well as the rest of the country has caused home prices to skyrocket here. And because there are few homes on the market, buyers are willing to pay up to get more space. Those coming from larger cities aren’t batting an eyelash at prices that may be out of reach for many locals.
County seat: Milford, PA
Median list price in July: $289,000
Home price change: 36.6%
Wage change: 11.5%
Technically part of the New York metropolitan area, Pike County has seen an influx of buyers who don’t need to go into the office every day. During the pandemic, many expanded their home searches and landed here, drawn by the affordable housing stock and proximity to New York City. About 90 minutes by car, it’s a doable commute once offices reopen, especially with many people on a hybrid schedule.
While prices here have risen 36.6%, and wages haven’t exactly caught up, the increased demand for homes can be a boon for people who have lived in the area for a long time.
“For the majority of us, the biggest asset we have is our home, and here folks are having the opportunity to cash in,” says Sataijit Ghosh, a professor of economics at the nearby University of Scranton. “Even if you don’t sell and cash in on this particular real estate market, you can perhaps take great comfort to see the house values are going up in your area.”
County seat: Boone, NC
Median list price in July: $595,000
Home price change: 33.4%
Wage change: 9.7%
Nestled in the Appalachian Mountains, Watauga County has long been a popular vacation area for people looking to get away from it all. But there’s also plenty to do in the county seat of Boone, a funky college town that’s home to Appalachian State University.
White-collar workers suddenly able to work from anywhere moved to the area, as did those nearing retirement. With more buyers coming to the area and boosting demand, prices are rising accordingly.
While these new prices may not be as expensive as what buyers would expect in Raleigh or Charlotte, locals’ wages haven’t been able to keep up with this rapid price growth. Boone’s economy relies heavily on tourism, and those jobs typically pay less than some other industries.
“Idyllic areas like Boone are attracting more outsiders with higher incomes, and prices are rising to meet the newfound demand,” says economist Wolf.