The Hottest Housing Markets of 2024: Where Pent-Up Demand Will Drive Sales
After a grueling year of skyrocketing mortgage rates and dwindling inventory, the U.S. housing market is poised for a dramatic comeback. According to the National Association of Realtors (NAR), 2024 is set to be a banner year for home sales, with falling interest rates expected to unleash a wave of pent-up demand from buyers and sellers alike.
For much of 2023, the market was in a state of paralysis. Mortgage rates on 30-year fixed loans surged to nearly 7.8% in late October, the highest in decades, effectively pricing out millions of prospective buyers. This affordability crisis, coupled with a persistent shortage of available homes, led to a sharp contraction in market activity. NAR data indicates that U.S. home sales were on track to plummet by approximately 18% in 2023, marking the most significant decline in at least 15 years. Fewer than four million homes were expected to change hands, the lowest volume since 2010, just as the nation was emerging from the shadow of the financial crisis.
Surprisingly, this lack of demand did not translate into a meaningful correction in home prices. With inventory remaining stubbornly low, sellers were able to maintain pricing power, exacerbating the affordability challenges for buyers who were already struggling with high borrowing costs.
However, the outlook for 2024 offers a glimmer of hope for all market participants. The NAR projects that the average 30-year fixed mortgage rate will fall to around 6.3% next year. While this is still higher than the ultra-low rates of the pandemic era, it represents a significant improvement from 2023 levels. The Federal Reserve is expected to implement four interest rate cuts in 2024, beginning in the spring, which should help ease borrowing costs and stimulate market activity.
“The decline in mortgage rates is expected to draw more buyers, including those returning to the market, consequently bolstering demand for housing,” NAR researchers noted in their recent report. “These lower mortgage rates will also ease the rate lock-in effect by enticing more existing homeowners to re-enter the market and list their homes.”
This anticipated improvement in affordability is expected to fuel a resurgence in housing market activity. The NAR forecasts a 19% increase in new home sales and a 13% rise in existing home sales for 2024. Such a rebound would create significant opportunities for real estate agents and other industry professionals. Moreover, sellers can anticipate continued home price appreciation, albeit at a more sustainable pace than the parabolic gains seen during the pandemic.
To identify the markets poised to benefit most from this projected turnaround, the NAR compiled a list of 10 metropolitan areas with the highest levels of pent-up demand. These cities, characterized by a combination of rising home prices in 2023, a substantial pool of renters who can afford to buy, and a significant number of prospective buyers who stand to re-enter the market if rates decline, are expected to experience a surge in transaction volume.
The NAR’s analysis considered 10 different factors across the 100 largest U.S. markets. Key variables included the year-over-year home price appreciation in the third quarter of 2023, the percentage of renters in each market who could afford to purchase a median-priced home, and the estimated share of buyers who would return to the market if mortgage rates fell to 6.5% or lower. Additional considerations encompassed job growth rates, income growth, and crime statistics.
Based on this comprehensive evaluation, the following 10 markets are identified as having the most significant pent-up demand heading into 2024:
Austin, Texas
Despite experiencing a notable cooling in home prices during 2023, with a 7.7% decline from the prior year, Austin remains a magnet for buyers. Approximately 18.9% of renters in the Austin metropolitan area currently possess the financial capacity to purchase a median-priced home. Looking ahead, the NAR projects that if mortgage rates were to fall to 6.5%, an additional 5.1% of households in the market would gain affordability, creating a substantial pool of potential buyers.
The Austin market is characterized by a unique dynamic: while housing costs have become a significant challenge, the city continues to attract high-earning Millennials, many earning over $100,000 annually, from other states. This influx of affluent renters, combined with the returning buyers, is expected to drive renewed activity in the local housing sector. Indeed, the Austin Board of Realtors has already observed a positive turnaround in sales activity, signaling the beginning of the anticipated rebound. The region’s robust job market and vibrant economy continue to underpin its long-term appeal, even as the housing market adjusts to higher interest rate realities.
Dallas, Texas
Rounding out the Texas Triangle’s presence on this list, Dallas stands out for its exceptionally strong economic fundamentals. Among the 100 largest metro areas analyzed, Dallas boasted the second-fastest-growing job market, with the local economy adding more than 4% additional jobs compared to the previous year. This robust employment growth has been a key driver of housing demand, even in a high-rate environment.
Affordability in Dallas is more favorable than in many other major metropolitan areas. Roughly 21.5% of renters in the Dallas market can afford to buy a median-priced home, a testament to the city’s relatively lower cost of living compared to coastal hubs. Furthermore, with an estimated 4.9% of households poised to re-enter the market if mortgage rates decline, Dallas is well-positioned for a significant pickup in sales activity in 2024. The combination of a thriving job market and improving affordability creates a compelling value proposition for buyers, suggesting that housing demand will remain resilient in the coming year.
Dayton, Ohio
Dayton emerges as a standout market for affordability and first-time homebuyers. The city offers a wealth of budget-friendly options, with first-time buyers able to afford more than half of the available listings in the market. This accessibility is a critical factor in a year where affordability is paramount for a large segment of the population.
The job market in Dayton has also shown strength, providing a stable economic foundation for potential homebuyers. With 30.6% of renters currently able to afford a median-priced home, and an additional 4.7% expected to join their ranks if mortgage rates fall, Dayton presents a particularly attractive opportunity for those seeking to make the transition to homeownership. The city’s combination of low entry barriers and a supportive job market positions it well for a surge in buyer activity in 2024, making it a prime example of a market where pent-up demand is likely to be unleashed.
Durham/Chapel Hill, North Carolina
The Research Triangle region, a hub of innovation and education, is well-represented on this list with the inclusion of the Durham/Chapel Hill metropolitan area. This market is characterized by a significant pool of “returning” buyers, with an estimated 5.6% of households regaining the ability to purchase a home if mortgage rates were to decline. This suggests that a substantial number of prospective buyers were priced out during the recent period of high interest rates and are eagerly awaiting more favorable conditions.
While the Durham/Chapel Hill market faces a shortage of affordable listings for first-time buyers, the region’s robust wage growth helps to offset this challenge. Average earnings have risen by an impressive 13 percentage points from the previous year, enhancing the purchasing power of residents. Despite the limited inventory, the combination of returning buyers and growing incomes positions the Research Triangle for a strong rebound in housing market activity in 2024, as pent-up demand finds an outlet.
Harrisburg, Pennsylvania
Harrisburg combines affordability with a growing influx of high-earning renters, creating a dynamic market poised for growth. Already, more than 30% of renters in the Harrisburg area can afford to purchase a median-priced home, providing a solid base of potential buyers. However, the market is also attracting an increasing number of high-income renters from other states, drawn by the region’s favorable cost of living and quality of life.
The anticipated decline in mortgage rates is expected to further stimulate activity in Harrisburg. With existing homeowners increasingly willing to sell as rates ease, both inventory and overall buying activity are projected to increase. Notably, a significant portion of homeowners in the area, 42%, have already surpassed the average tenure of 15 years, suggesting that a considerable wave of sellers may be looking to downsize or relocate. This confluence of factors—strong existing affordability, an influx of new buyers, and a potential supply increase from long-time owners—positions Harrisburg for a robust housing market in 2024.
Houston, Texas
The third member of the Texas Triangle to make this prestigious list, Houston offers a compelling combination of affordability, job growth, and wage increases that are expected to drive market activity in 2024. Houston’s housing affordability for renters surpasses that of most major markets across the country, making it an attractive destination for buyers seeking value.
What sets Houston apart is the remarkable growth in wages, which have outpaced the national level by a factor of four. This significant increase in earning potential has enhanced the purchasing power of residents, even in the face of rising home prices. With 23.8% of renters currently able to afford a median-priced home, and an additional 4.3% expected to re-enter the market if mortgage rates decline, Houston is well
