Southern, Midwest Housing Markets in U.S. Best Poised for Tech Growth

Based on new Zillow research, U.S. housing markets in the Midwest and South are most ripe for tech growth, with Oklahoma City, Kansas City and Jacksonville leading the way.

Silicon Valley and Seattle might seem like the obvious places for tech start-ups to set up shop and large companies to site new offices. But a confluence of factors such as rampant home-price growth and a seeming saturation of companies competing for the same limited pool of tech talent have led some companies to look toward other options.

Using a variety of data sources - including from Zillow, LinkedIn, Ookla and the U.S. Census - we zeroed in on five dimensions that determine a market's potential for tech growth:

• Housing affordability
• Market 'hotness'-- does the market have the ability attract people?
• Demographics and labor market dynamics indicating a robust economy
• A ready or potential pool of talented and available tech workers
• The appeal of living in the market based on factors like commute times

What we found are - while not necessarily places that would be top of mind when thinking of tech markets - cities with untapped potential for tech companies to grow.

The top-10 markets for future tech growth are:

1. Oklahoma City
2. Kansas City
3. Jacksonville
4. Indianapolis
5. Cincinnati
6. San Antonio
7. Memphis
8. Austin
9. Louisville
10. Columbus

 
The Oklahoma City and Kansas City metros both score well for affordability -- where typical-income earners are spending a relatively smaller share of their income on housing - livability, and the availability of a tech-skilled workforce.

A number of southern markets such as Jacksonville, Fla., San Antonio and Austin join Cincinnati in the top 10 in terms of market hotness. Robust rents and/or home value growth, as well as more people searching into the area than searching out, suggest these places are poised for growth and an influx of people.

The analysis also shows that traditional tech hotspots often fell toward the bottom of the list because of eroding affordability and quality of life. Lack of affordability is a major concern for tech hubs: Los Angeles and the Bay Area have the worst affordability rankings of all markets examined in this study. Chicago -- not typically thought of as a tech hub -- also was near the bottom of the 42-market ranking.

Here are the highest- and lowest-ranking markets in each category of analysis:

Affordable markets:

• Highest scores: Kansas City, Raleigh, Salt Lake City
• Lowest scores: Chicago, Los Angeles, Detroit