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Where to invest in real estate: The 10 hottest tech meccas beyond Silicon Valley

January 21, 2021, 11:50 AM UTC

This article is part of Fortune‘s quarterly investment guide for Q1 2021.

The nation is 10 months into a forced work-from-home experiment, and for most industries the jury is still out as to whether this will replace (or permanently alter) in-person office work. But for tech companies, the verdict is in: Remote work isn’t going away. A number of Silicon Valley companies, like Twitter and VMware, have already announced they will give staff the option to permanently stay remote even once the pandemic ends. Other tech companies, like Facebook, are allowing staff to apply to transition to remote employment.

These techies aren’t transitioning to remote work simply out of convenience. Even a $200,000 salaried software engineer might struggle to buy real estate in tech meccas San Jose and San Francisco, where median home prices are $1.2 million and $995,050, respectively. For an increasing number of white-collar workers, well-paid remote jobs mean more affordable digs.

These outbound tech workers could cause a housing boom in less costly tech hubs—and already are. And while some may chase quaint beach or ski towns, our research finds many COVID-19 migrants are remaining in metropolitan areas. Real estate investors in these places will make a pretty penny. That’s why Fortune set out to find the American tech hubs most likely to benefit from this tech migration in 2021 and beyond.

Our analysis focused on the 100 largest metropolitan areas in the country. In all, we weighted eight metrics, including tech job availability, tech job growth, forecasted home price appreciation, home affordability, and population growth. (Scroll to the bottom of the article for a full breakdown of the methodology.*)

The hottest cities for tech

It’s no secret that Austin is a growing tech hub. But what gets missed is just how fast it’s growing, even among other tech markets. From 2016 to 2019, the number of tech jobs in Austin soared 32%, according to Fortune’s analysis of U.S. Bureau of Labor Statistics data. When you combine the proliferation of tech jobs in Austin with its $420,000 median home price tag—a discount, compared to Silicon Valley—and the fact it has no state income tax or capital gains tax (big selling points for tech workers accumulating pre-IPO equity) you can see why it came in at No. 1 on our list.

Since the onset of the pandemic, the relocations from the Bay Area to Austin have only intensified. Look no further than Oracle, a pillar of Silicon Valley, announcing that it is moving its headquarters from Redwood City, Calif., to Austin.

“Housing inventory slowly disappeared all last year, but with the Oracle stuff, that literally set off a freaking firestorm. Since, my phone has been ringing off the hook,” said Jason Bernknopf, a real estate agent at austinrealestate.com. “What’s happened the past month I’ve never seen in Austin before: 60 offers on one property [in December]. Everything is going 20% above list price.”

Who is driving up the price? Bernknopf points to people directly from the Bay Area. He says relocating Californians make up seven in 10 of his phone calls right now.

Even before COVID-19, it was anticipated Austin would accelerate its tech sector growth. Texas Gov. Greg Abbott told Fortune that’s because of the U.S. Army Futures Command, which back in 2018 was established and headquartered in Austin. The Army Futures Command will spend tens of billions in an effort to modernize the Army’s operations and war-fighting abilities to better protect the nation. It’s the largest Army reorganization effort in more than 40 years.

“Wherever you see the U.S. military [go] you see private sector growth and it grow rapidly around it,” Abbott said. As a result of the Army Futures Command, Abbott says, “we’re seeing massive growth in A.I., cybersecurity, and robotics within a one-hour radius of Austin.”

Denver, like Austin, for years has seen a steady inflow of tech jobs and Bay Area expats. The pandemic only sped that up, putting Denver No. 9 on our list. In a WFH world, it doesn’t hurt to be a short drive from ski slopes and hikes on Insta-worthy snowcapped mountains.

“There is no normalcy. This year was the craziest start to the Denver real estate market in its history,” said Ryan Penn, owner and associate broker of 360dwellings Real Estate in Denver. “We have historic low inventory and historically low interest rates. Sellers aren’t selling; they have nowhere to go. It’s a case of too good of a market.”

For investment opportunities in Denver and other tech hubs, Penn says, look at the condominium market. While single-family homes are selling like hotcakes from the city core through the exurbs, the condo market isn’t seeing the same frenzy. Once the pandemic is tamed, Penn expects, buyers will return in masses to the condo markets in search of that urban lifestyle.

The most affordable tech hubs we expect to soar in the near future are all in the Midwest, including Pittsburgh (No. 2); Columbus (No. 6); and Grand Rapids (No. 10). The median home prices in Pittsburgh ($239,500), Columbus ($306,250), and Grand Rapids ($299,950) are around one-fourth of the cost for a median-price home in San Jose ($1.2 million).

The other tech hubs that made our list are Atlanta (No. 3); Philadelphia (No. 4); Charlotte (No. 5); Raleigh (No. 7); and Orlando (No. 8). Surprisingly, the South—not the West—at four had the most tech hubs that made our ranking.

Over the course of the pandemic, home prices in tech hubs and non–tech hubs alike have surged as older Americans have stayed put—thus restricting supply—and buyers jumped at historic low interest rates. Frank Nothaft, chief economist at CoreLogic, told Fortune he expects housing to stay hot for all of 2021.

*Notes on methodology: To find the best tech hubs for real estate investment, we looked at the following metrics for the 100 largest metropolitan areas in the U.S.:

  • Home affordability, or the ratio of median list price (realtor.com) to median household income (U.S. Census Bureau)
  • Employment in technology jobs (U.S. Bureau of Labor Statistics)
  • Three-year growth in technology jobs—excluding metros where tech jobs declined (U.S. Bureau of Labor Statistics)
  • Three-year population growth (U.S. Census Bureau)
  • Housing market’s Hotness Score (realtor.com)
  • Projected 2021 home sale growth (realtor.com)
  • Projected 2021 home price growth (realtor.com)

Explore Fortune’s Q1 investment guide: