The Hottest Housing Markets Poised for a Surge in 2024
After two sluggish years marked by skyrocketing mortgage rates, the U.S. housing market is bracing for a dramatic comeback. According to a new forecast from the National Association of Realtors (NAR), home sales are expected to rebound strongly in 2024, luring buyers back into a market that has been largely dormant. With mortgage rates projected to ease from their recent peaks, a wave of pent-up demand is set to sweep across the nation, revitalizing sluggish markets and creating unprecedented opportunities for buyers, sellers, and real estate professionals alike.
In 2023, the housing market experienced one of its most challenging periods in recent memory. Home sales plummeted by an estimated 18%, marking the steepest decline since the aftermath of the 2008 financial crisis. Fewer than four million homes changed hands, the lowest volume since 2010. This dramatic slowdown was primarily driven by the Federal Reserve’s aggressive interest rate hikes, which pushed the average rate on a 30-year fixed mortgage to nearly 7.8% by late October 2023. For prospective buyers, these elevated rates created an affordability crisis, making homeownership an unattainable dream for millions.
Surprisingly, the sharp decline in demand did not lead to a significant drop in home prices. Instead, with inventory levels remaining stubbornly low, sale values continued to climb in many markets, further exacerbating the financial strain on potential buyers. The persistent shortage of available homes, coupled with high interest rates, created a perfect storm that stifled market activity and left many would-be homeowners on the sidelines.
However, the outlook for 2024 offers a beacon of hope. The NAR projects a significant easing of mortgage rates, with the average 30-year fixed rate expected to fall to around 6.3% by the end of the year. This represents a substantial improvement from the recent peaks and is anticipated to restore a degree of affordability to the market. The Federal Reserve is expected to implement four interest rate cuts in 2024, beginning in the spring, further alleviating pressure on mortgage rates and encouraging buyer participation.
“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 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 projected improvement in affordability is expected to trigger a resurgence in housing market activity. The NAR forecasts a 19% increase in new home sales and a 13% rise in existing property sales in 2024. Such a rebound would create a windfall for real estate professionals, while sellers could also benefit from modest home price appreciation.
The Nation’s Hottest Markets: Where Demand Is Set to Explode
To identify the areas poised to benefit most from this market turnaround, the NAR compiled a list of the 10 metropolitan areas with the strongest pent-up demand. These “sleeping giants” have experienced a period of relative dormancy but are now positioned for explosive growth as mortgage rates decline.
The NAR’s analysis considered ten key factors across the 100 largest U.S. markets, including:
Home price appreciation in Q3 2023: The rate at which home prices have risen year-over-year.
Renter affordability: The percentage of renters who can afford to purchase a median-priced home.
Returning buyer potential: The share of households that would regain affordability if mortgage rates dropped to 6.5%.
Job growth rate: The pace of employment expansion in the local economy.
Income growth rate: The increase in average household earnings.
Crime rate: A measure of public safety and quality of life.
Based on this comprehensive analysis, here are the 10 metropolitan areas identified as having the most significant pent-up demand heading into 2024:
Austin, Texas
2023 Home Price Growth: -7.7%
Share of Renters Who Can Afford a Median-Priced Home: 18.9%
Share of Returning Buyers If Mortgage Rates Fall: 5.1%
Austin, Texas, is experiencing a remarkable surge in demand despite recent price corrections. The metropolitan area boasts one of the largest pools of “returning” buyers, with over 5% of households expected to regain affordability if mortgage rates drop to 6.5%. While housing costs remain a challenge, the city is attracting a significant influx of high-earning Millennials (earning over $100,000) from other states, drawn by its vibrant economy and quality of life. According to the Austin Board of Realtors, home sales activity has already shown a positive turnaround, signaling the beginning of a new growth cycle. This combination of returning buyers and relocating high-earners is expected to fuel significant activity in the Austin market throughout 2024.
Dallas, Texas
2023 Home Price Growth: 1.9%
Share of Renters Who Can Afford a Median-Priced Home: 21.5%
Share of Returning Buyers If Mortgage Rates Fall: 4.9%
Dallas, Texas, stands out with the second-fastest-growing job market among the 100 largest metro areas. The local economy has demonstrated remarkable resilience, creating more than 4% additional jobs compared to the previous year. This robust job growth, coupled with favorable affordability conditions, is poised to drive increased housing activity. With 22% of renters able to afford a median-priced home, Dallas offers a more accessible entry point into homeownership compared to many other major markets. As mortgage rates decline in 2024, the combination of a thriving job market and improving affordability is expected to unleash a wave of pent-up demand, making Dallas a prime market for real estate investment.
Dayton, Ohio
2023 Home Price Growth: 9.1%
Share of Renters Who Can Afford a Median-Priced Home: 30.6%
Share of Returning Buyers If Mortgage Rates Fall: 4.7%
Dayton, Ohio, represents one of the most affordable markets on the list, offering a wealth of opportunities for first-time homebuyers. More than half of the available listings in Dayton are within reach for these buyers, making it an attractive destination for those seeking to enter the housing market. Furthermore, Dayton’s strong job market will enable more renters to transition to homeownership in the coming year. The combination of high affordability and a growing economy positions Dayton for significant growth in 2024, as prospective buyers take advantage of the favorable market conditions.
Durham/Chapel Hill, North Carolina
2023 Home Price Growth: 2.6%
Share of Renters Who Can Afford a Median-Priced Home: 18.8%
Share of Returning Buyers If Mortgage Rates Fall: 5.6%
The Durham/Chapel Hill area, located in the heart of North Carolina’s Research Triangle, is poised for a significant rebound. This metropolitan area boasts the highest share of “returning” buyers on the list, with a remarkable 6% of households gaining the ability to afford a median-priced home if mortgage rates fall to 6.5%. While the market faces a shortage of affordable listings for first-time buyers, the tremendous wage growth—with average earnings rising by 13 percentage points from the previous year—is helping to bridge the affordability gap. As mortgage rates decline, the influx of returning buyers combined with strong wage growth is expected to create a surge in housing activity in this dynamic region.
Harrisburg, Pennsylvania
2023 Home Price Growth: 8.5%
Share of Renters Who Can Afford a Median-Priced Home: 32.1%
Share of Returning Buyers If Mortgage Rates Fall: 5.3%
Harrisburg, Pennsylvania, offers a compelling combination of affordability and economic opportunity. The area is already affordable for over 30% of its renters, providing a strong foundation for market growth. Moreover, Harrisburg is attracting high-earning renters from other states, drawn by its favorable cost of living and quality of life. With the anticipated decline in mortgage rates in 2024, both inventory and buying activity are expected to increase further. Notably, 42% of homeowners in Harrisburg have already surpassed the average tenure of 15 years, indicating that a significant pool of existing homeowners may be ready to sell their properties as rates ease, adding much-needed inventory to the market.
Houston, Texas
2023 Home Price Growth: 3.7%
Share of Renters Who Can Afford a Median-Priced Home: 23.8%
Share of Returning Buyers If Mortgage Rates Fall: 4.3%
Houston, Texas, the third Texas market to make the list, is set for a significant boost in 2024. The city’s combination of affordability, strong job growth, and robust wage increases positions it as a prime market for real estate activity. While housing affordability for renters in Houston surpasses that of most markets across the country, the noteworthy aspect is the fourfold increase in wages, outpacing the national level. This substantial wage growth, coupled with a healthy job market, is expected to drive increased demand as mortgage rates decline, creating a fertile environment for both buyers and sellers.
