Sales of newly built, single-family homes in January moved 19% higher than a year ago, as home buyers sought more options under a lean number of existing homes for sale.

Newly built single-family home sales increased 4.3% last month over December 2020, reaching a seasonally adjusted annual rate of 923,000, the U.S. Department of Housing and Urban Development and U.S. Census Bureau reported Wednesday.

“Historically low mortgage rates and solid demand spurred an increase in new home sales in January,” says Chuck Fowke, chairman of the National Association of Home Builders. “However, rising affordability issues are looming this year, particularly increasing building material costs, including lumber, which is adding $24,000 to the price of a typical newly built home. Builders also cite rising regulatory issues as a potential concern.”

As existing-home inventory remains at all-time lows, more buyers are considering new home construction, says Robert Dietz, chief economist of the National Association of Home Builders. “Though rising building and development costs, combined with recent increases in mortgage interest rates, threaten to exacerbate existing affordability conditions,” he says. “Builders are exercising discipline to ensure home prices do not outpace buyer budgets.”

Inventories of new homes also remain tight at just a four-month supply at the current sales pace. New-home inventories are 6.3% lower than January 2020.

The median sales price for a new home was $346,400 in January, up 5.3% from a year earlier.

New-home sales rose by the highest amounts in the Midwest last month, up 12.6% annually. New-home sales also posted a 6.8% increase in the West and a 3% increase in the South. The only region of the U.S. to post a decline in new home sales in January was the Northeast, where new home sales fell 13.9% annually.

Landlords continue to see prices rise for luxury single-family rentals as the pandemic-fueled recession impacts socioeconomic groups unevenly.

Overall, single-family rental growth ended 2020 strong, rising 3.8% in December 2020 compared to a year prior, according to CoreLogic’s Single-Family Rent Index, which measures rent changes in single-family rental homes, including condos.

Rent growth in the low-priced tier (properties with rent prices less than 75% of a region’s median) remains below yearly pre-pandemic levels. The pandemic has disproportionately affected low-wage workers. Rent prices for low-end tier properties were down 3.5% in December 2020 compared to December 2019.

On the other hand, higher-priced rentals (properties with rent prices greater than 125% of a region’s median rent) rose 2.4% year-over-year. Phoenix saw the highest year-over-year rent growth in December, an increase of 10.7% year over year, followed by Tucson, Ariz. (up 9.5%) and Charlotte, N.C. (7.1%). The metro area that posted the largest annual decline in rent prices was Boston, down 7.2%. But researchers note that likely was due to the area’s large number of colleges and students continuing to do virtual learning in their hometowns during the pandemic.

“As states begin managing the administration of vaccines as well as mitigating continuing unemployment concerns, rent prices will likely continue to experience mixed growth rates in metros across the nation,” CoreLogic notes.

Double-digit annual price increases are occurring in housing markets across the country as buyer demand soars. But which housing markets are showing the strongest performance?

U.S. News & World Report examined 96 metro areas to identify the top housing markets for 2021. They factored in year-over-year gains in median home sales prices, the markets with some of the lowest drops in inventory (meaning more supply is available), median days on the market, and more.

The following are the markets that topped its list:

1. Seattle

• Median home price: $565,710
• Year-over-year price growth: 16.19%
• Year-over-year inventory growth: -8.36%
• Median days on market until pending: 21

2. Tucson, Ariz.

• Median home price: $256,980
• Year-over-year price growth: 16.05%
• Year-over-year inventory growth: -20.72%
• Median days on market until pending: 26

3. Sacramento, Calif.

• Median home price: $475,792
• Year-over-year price growth: 14.01%
• Year-over-year inventory growth: -23.94%
• Median days on market until pending: 22

4. Cincinnati

• Median home price: $207,865
• Year-over-year price growth: 13.78%
• Year-over-year inventory growth: -22.21%
• Median days on market until pending: 24

5. Boston

• Median home price: $535,850
• Year-over-year price growth: 14.59%
• Year-over-year inventory growth: -17.33%
• Median days on market until pending: 31

6. San Francisco

• Median home price: $895,760
• Year-over-year price growth: 12.93%
• Year-over-year inventory growth: 18.65%
• Median days on market until pending: 29

7. Wichita, Kan.

• Median home price: $174,430
• Year-over-year price growth: 13.67%
• Year-over-year inventory growth: -18.38%
• Median days on market until pending: 29

The nation’s leading land brokers report both an increase in business and an uptick in land values as rural land grew in demand last year, according to a new survey of more than 100 land brokers nationwide conducted by the National Land Realty, a real estate land brokerage. 2021 is poised to be another strong year for land purchases, the report says.

More than half of the surveyed brokers reported an increase in their business in 2020 over 2019. More than 60% of brokers reported seeing an increase in land values, particularly recreational land and farmland.

“Investors rediscovered a safe haven in land real estate in 2020, which made for a very good year for land sales, with record-breaking volume in the second half of the year,” says Jason Walter, CEO of National Land Realty. “And with all of the traumatic events of 2020, people are looking to not only invest in land outside of the city, but they are also wanting to live on the land they buy, to be able to breathe the fresh COVID-free air and reconnect with the great outdoors.”

Indeed, brokers reported that the majority of the most recent buyers of land are coming from urban or suburban areas.

Nearly 90% of the brokers surveyed believe that land sales will continue to perform strongly over the next year to 18 months, according to the survey. “And more than 75 percent of [land brokers] believe their business will grow at least 5 percent, if not more than 10 percent, in that same time frame,” adds Jason Burbage, president of National Land Realty.

The biggest challenges in 2021 moving forward, land brokers say, will center around geopolitical risk (nearly 24%), followed by financing or interest rate risk (20%) and COVID-related issues (17%).

Mortgage Rates Rise to 3-Month High

The 30-year fixed-rate mortgage reversed course this week, moving up to a 2.81% average. That marks its highest point since mid-November, Freddie Mac reports.

“Economic spending has improved, due to the most recent stimulus, but supply chain shortages are causing downstream inflation, leading to higher mortgage rates,” says Sam Khater, Freddie Mac’s chief economist. “While there are multiple temporary factors driving up rates, the underlying economic fundamentals point to rates remaining in the low 3 percent range for the year.”

Indeed, mortgage rates continue to hover near record lows. The all-time low for the 30-year fixed-rate mortgage was 2.65%, set in January.

Freddie Mac reports the following national averages with mortgage rates for the week ending Feb. 18:

• 30-year fixed-rate mortgages: averaged 2.81%, with an average 0.7 point, rising from last week’s 2.73% average. Last year at this time, 30-year rates averaged 3.49%.
• 15-year fixed-rate mortgages: averaged 2.21%, with an average 0.7 point, increasing from last week’s 2.19% average. A year ago, 15-year rates averaged 2.99%.
• 5-year hybrid adjustable-rate mortgages: averaged 2.77%, with an average 0.2 point, dropping from 2.79%. A year ago, the average ARM averaged 3.25%.

Freddie Mac reports average points along with commitment rates to better reflect the total upfront cost of obtaining the mortgage.

High-Tech Corridors Are Driving Economic Growth

Technology is driving new economies. A strengthening tech corridor helped Provo-Orem, Utah, top a new index on best economic performance among large cities in the U.S., according to the newly released 2021 Milken Institute’s Best-Performing Cities Index. A high-tech industry presence also helped drive job growth and economic performance for Idaho Falls, Idaho, which topped the list as the best-performing economy for a small city.

The annual index measures economic vitality in 200 large metro areas and 201 small metro areas, factoring in job creation, wage growth, and innovation industry metrics. This year’s index also reflects how the pandemic has impacted economies nationwide. This year Milken added housing affordability and broadband access among its variables.

“The pandemic has had an outsized impact on cities where the economic effects of the current recession are exacerbated by high housing costs,” says Kevin Klowden, executive director of the Milken Institute Center for Regional Economics and California Center. “By measuring for factors such as jobs, wages, and high-tech growth, the Best-Performing Cities Index offers analysis of how metro areas have fared based on the resilience of their local economy. And by incorporating data designed to gauge inclusivity, it provides important insights into how cities will be prepared to meet challenges and opportunities for future growth post-pandemic.”

Provo-Orem has benefited from the tech sector’s out-migration from more expensive coastal areas of California, the study notes. It has attracted tech giants like Qualtrics, Vivint, and Smart Citizen. Meanwhile, coastal California markets such as San Jose and San Francisco, which usually top Milken’s list, placed at number 24 and 22, respectively, on the 2021 rankings. High housing costs and a decline in short-term job growth led to their lower rankings this year, the survey notes.

Overall, the researchers note that large cities in the intermountain West and South are outperforming several areas along the coasts due to higher levels of short-term job growth and more affordable housing.

“As we discovered through our rankings, cities perform best when they pursue innovative strategies that allow high-tech industries to grow while still providing affordable costs of living,” says Misael Galdamez, senior policy analyst in the Milken Institute Center for Regional Economics. “This alignment provides a foundation for metro areas to become more resilient to economic shocks.”

The following large U.S. cities topped the 2021 Milken Institute Best-Performing Cities Index:

1. Provo-Orem, Utah
2. Palm Bay-Melbourne-Titusville, Fla.
3. Austin-Round Rock, Texas
4. Salt Lake City, Utah
5. Raleigh-Cary, N.C.
6. Boise, Idaho
7. Phoenix-Mesa-Chandler, Ariz.
8. Nashville-Davidson-Murfreesboro-Franklin, Tenn.
9. Ogden-Clearfield, Utah
10. Huntsville, Ala.
11. Denver, Aurora-Lakewood, Colo.
12. Fort Collins, Colo.
13. Seattle, Bellevue-Kent, Wash.

The following small U.S. cities topped the 2021 rankings:

1. Idaho Falls, Idaho
2. Logan, Utah-Idaho
3. The Villages, Fla.
4. St. George, Utah
5. Daphne-Fairhope-Foley, Ala.
6. Coeur d’Alene, Idaho
7. Sioux Falls, S.D.
8. Sebastian-Vero Beach, Fla.
9. Gainesville, Ga.
10. Charlottesville, Va.
11. Punta Gorda, Fla.
12. Bellingham, Wash.
13. Bend, Ore.

Renters are being drawn to smaller markets due to their lower costs and the opportunity for more space amid the pandemic—but they may now be facing rising rental rates.

“Although rents across the U.S. have been growing at a slower pace since the onset of COVID-19 and the major tech hubs continue to see declines, some markets are seeing rents grow by double digits,” says Danielle Hale, realtor.com®’s chief economist. “Many of the same factors that attract home buyers to an area—highly rated schools, job opportunities, affordability, and quality of life—attract renters. Like homeowners, the pandemic has given many renters the freedom to work remotely, and the rental trends reflect that reality.”

The U.S. median rent in January eked out a 0.8% increase to $1,442, which is still below the pre-COVID growth rate of 3.2%, according to realtor.com®’s January Rental Report, released Thursday. January, however, marked the first month since July 2020 that rental growth did not slow further, the report notes.

The report also notes that seven of the top 10 metros with the largest rent increases last month were also among the metros where home prices increased more than 5% year-over-year. Those metros included New Orleans; Sacramento, Calif.; Rochester, N.Y.; Cleveland; Riverside, Calif.; Cincinnati; and St. Louis, Mo. Also, four of the top 10 markets with the largest annual rent increases are located in the Midwest, an area of the country that tends to offer more affordability than coastal regions.