The housing market has been struggling across the United States over the past few years, but according to Realtor.com, there is hope for the future. The website’s National Housing Market Forecast for 2024 predicts that affordability will begin to improve with reduced mortgage rates and decreasing home prices. In another report, Realtor.com identified housing markets expected to see the strongest recovery from significant sales declines in 2023.
Top Housing Markets of 2024
Realtor.com ranks the largest 100 cities by expected growth rates for sales and prices and selects the top 10 areas for 2024, all located in the Midwest, Northeast, and Southern California regions. Although the same criteria were used to determine all the markets on the list, the report notes that the top markets are driven by two distinct trends. In the urban areas of the Midwest and Northeast, the driving factor is “affordability in a national housing market that has become too expensive.” In the Western areas, these are the regions that “took a significant hit in 2023 and are expected to bounce back after interest rates decrease over the year.”
Why Do the Midwest and Northeast Markets Lead?
According to Realtor.com, the Midwestern and Northeastern cities are on the list primarily because the cities “offer affordable housing options compared to larger urban centers, making homeownership more achievable.” The site even found that as of October 2023, all these urban areas—except Worcester, Massachusetts—had average listed prices below the national average. (However, Worcester was still 41.8 percent cheaper than the nearby Boston area, from which most home seekers come outside the city).
The report also points out that the Midwestern and Northeastern cities are less sensitive to the impact of rising mortgage rates, as a higher percentage of homeowners in these areas live in homes without a mortgage. Among the top 10 housing markets, Toledo, Ohio ranks first with 41.2 percent of homeowners owning their homes outright, followed by Rochester, New York (39.8 percent), and Grand Rapids, Michigan (38.4 percent).
Quality of life is another factor putting these urban cities at the forefront, with a range of recreational, educational, and employment opportunities. In fact, according to the report, unemployment rates in all of these areas (except Toledo) are expected to match or be lower than the national unemployment rate of 4.2 percent by the end of 2024.
Why Do Southern California Markets Lead?
Although the top cities in Southern California do not rank well in terms of physical availability, they “are expected to see a 13.1 percent increase in sales in 2024, compared to an average decline of 4.1 percent for other cities on the top 100 list in California.”
Growth is growth, but context is important for understanding here. Despite a significant improvement from 2023 figures, these major California cities (Oxnard, San Diego, Riverside, Bakersfield, and Los Angeles) are still expected to have historically low sales levels. “National figures expect sales in these California cities to be about 25 percent below normal rates from 2017 to 2019,” the report notes.
Compared to the Midwestern and Northeastern cities, these Southern California markets are more sensitive to the impact of rising mortgage rates and interest rates. However, the report explains that government-backed loan products can help buyers secure homes in these markets. “From January to August 2023, Federal Housing Administration (FHA) loans, specifically designed to assist first-time homebuyers or minority consumers, played a significant role, making up 15.8 percent of total financed sales in these major markets,” the report states. “Note that Bakersfield, California had the highest percentage of buyers using FHA loans at 26.7 percent, followed by Riverside, California at 22.9 percent. In the broader context, the average prevalence of FHA loans among financed buyers was 15.0 percent across the top 100 markets.”
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In the same time frame, San Diego emerged as a leader with 16.5 percent of VA loans, nearly double the big market average for the top 100 at 9.1 percent.
These market changes do not mean a return to “normal”
It is important to note that these results and forecasts do not mean we are heading back to a pre-pandemic market. According to the report, only three cities out of the expected 100 are anticipated to have sales above the average from the years immediately prior to the pandemic: Scranton, Pennsylvania (ranked 13), Toledo, Ohio (ranked 1), and El Paso, Texas (ranked 14). “Historically, these cities have been less prone to severe boom and bust cycles, and their growth has been relatively moderate in the pre-pandemic period and even at the pandemic peak,” the report states.
You can find the full report on the best housing markets from Realtor.com here.
Market changes do not mean a return to “normal”
It is important to note that these results and forecasts do not mean we are heading back to a pre-pandemic market. According to the report, only three cities out of the expected 100 are anticipated to have sales above the average from the years immediately prior to the pandemic: Scranton, Pennsylvania (ranked 13), Toledo, Ohio (ranked 1), and El Paso, Texas (ranked 14). “Historically, these cities have been less prone to severe boom and bust cycles, and their growth has been relatively moderate in the pre-pandemic period and even at the pandemic peak,” the report states.
You can find the full report on the best housing markets from Realtor.com here.
Source: https://www.realsimple.com/top-housing-markets-2024-8414324
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