Buying a house is a big decision and a big commitment. All the inspection fees, points, mortgage application fees and mortgage insurance costs add up fast, and they don’t cover furniture, linens for the new guest room or even paint for the walls. That’s one of the reasons for the “five-year rule,” the maxim that it’s best to stay in a purchased home for at least five years before selling.
And although U.S. home prices have risen in the long term, the last decade has shown that path is sometimes full of twists, turns, dizzying heights and steep, abrupt falls. Today, home prices are stabilizing and increasing in most areas of the U.S. The National Association of Realtors reported a 6 percent rise in the median value of a single-family home in the U.S. from the fourth quarter of 2013 to the fourth quarter of 2014.
But home prices aren’t the only factor in selecting a place to buy. Economic and job growth matter, too, as do availability and affordability of housing. And don’t forget real estate taxes. For the 60 biggest metro areas in the U.S., we looked at all these factors, in addition to recent price increases, to determine the 12 Best Places to Buy a Home. For the economic and job growth metrics, we took the long view: the compound annual growth rate in each metro area over a 10-year period.
Specifically, we examined:
- Long-term economic growth, in terms of the compound annual growth rate in inflation-adjusted GDP from 2003 to 2013.
- Long-term job growth, in terms of the compound annual growth rate in the total number of jobs from 2003 to 2013.
- Availability of relatively new housing, as measured by the percentage of total housing units built in 2000 or later.
- Cost premium, as measured by the ratio of the local median home value to the local median income. Comparing the price of a home to the buyer’s annual income is a common way to determine affordability. Exact recommendations vary, but a home that costs about three times the buyer’s annual income generally is considered affordable.
- Recent price increases, as measured by the percentage change in median sale prices from 2012 to 2014. Recent increases indicate buyers might see the value of their homes increase soon after buying.
- Real estate taxes, as measured by real estate taxes paid per capita.
For everything except the cost premium and real estate tax numbers, higher numbers are better. Lower cost-premium numbers indicate homes are more affordable.
So where are the lucky buyers living? For starters, four of them are in Texas. Here’s the list of the Top 12 spots.
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1. Austin, TX
The capital of Texas boasts the highest long-term job growth and the second-highest economic growth numbers among the Top 12. It also has the second-highest share of recent construction. Yet homes remain affordable, with median prices slightly higher than three times median incomes. The only drawback? Real estate taxes, which are higher in Austin than anywhere else in the Top 12.
Metro population: 1,943,299
Long-term annual economic growth: 4.1%
Long-term annual job growth: 3.1%
Percentage of housing units built in 2000 or later: 33.1%
Cost premium: 3.2
Recent price increases: 16.8%
Real estate taxes paid per capita: $911
2. Houston, TX
Four of the Top 12 spots belong to metro areas in Texas, and Houston actually outperforms Austin in many ways: cost premiums are lower, prices recently have increased more and real estate taxes are lower. However, there’s less recent construction in Houston, and economic growth — while healthy — is slower than in Austin.
Metro population: 6,490,180
Long-term annual economic growth: 3.5%
Long-term annual job growth: 2.4%
Percentage of housing units built in 2000 or later: 27.6%
Cost premium: 2.5
Recent price increases: 20.4%
Real estate taxes paid per capita: $726
3. Raleigh, NC
Raleigh, which recently topped our list of the Top 12 Hot Spots for Tech Startups, offers relatively low real estate taxes combined with solid economic and job growth numbers. Cost premiums are higher here than in Austin and Houston, and recent prices haven’t risen as much.
Metro population: 1,242,974
Long-term annual economic growth: 3%
Long-term annual job growth: 2.4%
Percentage of housing units built 2000 or later: 32.3%
Cost premium: 3.3
Recent price increases: 10.7%
Real estate taxes paid per capita: $493
4. Las Vegas, NV
The real estate market in Las Vegas has been prone to some of the higher highs and lower lows, with median prices maxing out above $300,000 in 2007 and bottoming out around $110,000 in 2012, according to Trulia. However, recent price increases are second highest among the Top 12. Plus, long-term economic and job growth are reasonable, there’s lots of new construction, affordability remains good and real estate taxes are lower than anywhere else in the Top 12.
Metro population: 2,069,681
Long-term annual economic growth: 1.1%
Long-term annual job growth: 1.6%
Percentage of housing units built in 2000 or later: 35.6%
Cost premium: 2.9
Recent price increases: 47.7%
Real estate taxes paid per capita: $322
5. San Antonio, TX
Like its Texas compatriots on our list, San Antonio scores well across the board and offers buyers a low cost premium combined with attractive recent price increases. Real estate taxes per capita are lower here than in the other Texas cities, too.
Metro population: 2,328,652
Long-term annual economic growth: 2.6%
Long-term annual job growth: 2%
Percentage of housing units built 2000 or later: 26.3%
Cost premium: 2.5
Recent price increases: 14.2%
Real estate taxes paid per capita: $626
6. Dallas, TX
Dallas’ economic numbers are essentially the same as San Antonio’s. However, Dallas’ recent price increases and real estate taxes are higher, and the cost premium is slightly higher here than in San Antonio.
Metro population: 6,954,330
Long-term annual economic growth: 2.6%
Long-term annual job growth: 2.1%
Percentage of housing units built 2000 or later: 24.9%
Cost premium: 2.6
Recent price increases: 18.2%
Real estate taxes paid per capita: $761
7. Charlotte, NC
Charlotte scored better than Raleigh did on some metrics, a lower cost premium and higher recent price increases, but its long-term economic growth has been slower and there’s been less recent construction.
Metro population: 2,380,314
Long-term annual economic growth: 2.2%
Long-term annual job growth: 1.8%
Percentage of housing units built in 2000 or later: 27.6%
Cost premium: 3.1
Recent price increases: 23.8%
Real estate taxes paid per capita: $460
8. Orlando, FL
The Theme Park Capital of the World also is a good place to buy a house. Orlando scores well across the board, particularly in terms of recent price increases and real estate taxes.
Metro population: 2,321,418
Long-term annual economic growth: 1.4%
Long-term annual job growth: 1.9%
Percentage of housing units built in 2000 or later: 27.7%
Cost premium: 3.1
Recent price increases: 34.3%
Real estate taxes paid per capita: $436
9. Atlanta, GA
Atlanta outscores the rest of the Top 12 in terms of recent price increases, but similar to those in Las Vegas, its median prices took a deep dive during the recession. The cost premium and real estate taxes are good for buyers, but long-term economic growth is lower here than in other places in the Top 12.
Metro population: 5,614,323
Long-term annual economic growth: 0.9%
Long-term annual job growth: 1.4%
Percentage of housing units built in 2000 or later: 27.8%
Cost premium: 2.9
Recent price increases: 57.3%
Real estate taxes paid per capita: $481
10. Phoenix, AZ
Real estate taxes paid per capita are lower in Phoenix than almost anywhere else in the Top 12. Only Las Vegas’ number is lower. With economic and job growth looking reasonable and affordability doing the same, though, Phoenix still is an attractive option.
Metro population: 4,489,109
Long-term annual economic growth: 1.5%
Long-term annual job growth: 1.5%
Percentage of housing units built in 2000 or later: 29%
Cost premium: 3.1
Recent price increases: 34.5%
Real estate taxes paid per capita: $343
11. Portland, OR
Portland beats the rest of the Top 12 on economic growth, but its cost premium also is the highest. Median home prices are almost 4.5 times the median income. Also, real estate taxes per capita are the third highest among the Top 12.
Metro population: 2,348,247
Long-term annual economic growth: 5.2%
Long-term annual job growth: 1.2%
Percentage of housing units built in 2000 or later: 17.4%
Cost premium: 4.4
Recent price increases: 22.8%
Real estate taxes paid per capita: $734
12. Salt Lake City, UT
Affordability is a little better in Salt Lake than in Portland, as are job growth and recent construction. However, recent prices haven’t risen as quickly as in the Rose City, and economic growth is slower.
Metro population: 1,153,340
Long-term annual economic growth: 3%
Long-term annual job growth: 1.8%
Percent of housing units built 2000 or later: 18.5%
Cost premium: 3.7
Recent price increases: 16.8%
Real estate taxes paid per capita: $400
Data sources: U.S. Census Bureau, U.S. Bureau of Economic Analysis, National Association of Realtors
