The Hottest Housing Markets in 2024: Where pent-up Buyer Demand Is Set to Explode
The US housing market is teetering on the edge of a dramatic reversal. After two years of sluggish sales, the National Association of Realtors (NAR) predicts a significant rebound in 2024, driven by falling mortgage rates that will lure buyers back into the fold. This shift is expected to create a surge in activity across the country, but some markets are poised to benefit more than others.
In 2023, the NAR reported that US home sales were on track to plummet by approximately 18%, marking the largest decline in at least 15 years. Fewer than four million homes changed hands, the lowest figure since 2010, just before the recovery from the financial crisis. The primary culprit? Soaring mortgage rates. The 30-year fixed rate peaked near 7.8% in late October, pushing affordability to its lowest point in decades.
Surprisingly, this weakened demand didn’t translate into lower home prices. Instead, with limited inventory, sale values continued to climb, exacerbating the financial strain on prospective buyers. However, the outlook for 2024 offers a glimmer of hope. The NAR projects that the Federal Reserve will cut interest rates four times next year, starting in the spring, bringing the average 30-year fixed mortgage rate down to 6.3%. While still high by historical standards, this represents a significant improvement that is expected to reignite the market.
“The decline in mortgage rates is expected to draw more buyers, including those returning to the market, consequently bolstering demand for housing,” the NAR wrote in a 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 projected to lead to a significant resurgence in housing market activity. The NAR forecasts a 19% increase in new home sales and a 13% rise in existing property sales, creating a windfall for real estate agents and potential opportunities for sellers.
To identify the markets most likely to benefit from this pent-up demand, the NAR analyzed the 100 largest metropolitan areas in the US. They evaluated factors such as home price growth in the third quarter of 2023, the percentage of renters who could afford to buy a median-priced home, and the projected share of buyers who might re-enter the market if rates fall to 6.5%. Additional considerations included job growth, income growth, and crime rates.
Based on this analysis, the NAR has identified 10 metropolitan areas where home transactions are expected to explode after a period of dormancy. These “sleeping giants” represent the epicenters of pent-up buyer demand.
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 Rates Fall: 5.1%
Despite a recent dip in home prices, Austin remains a magnet for high-earning Millennials, with a notable influx of those making over $100,000 relocating from other states. While the city’s housing costs continue to be a challenge, the combination of returning buyers and this demographic shift is expected to fuel significant growth in the local housing market. The Austin Board of Realtors has already observed a positive turnaround in home sales activity, signaling that the market is waking up.
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 Rates Fall: 4.9%
Dallas boasts one of the fastest-growing job markets among the 100 largest metro areas, with job creation exceeding the previous year by more than 4%. With 22% of its renters able to afford the median-priced home, the city is well-positioned to capitalize on the expected decline in mortgage rates, which should stimulate housing activity.
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 Rates Fall: 4.7%
Dayton stands out for its affordability and abundant options for first-time buyers, who can afford more than half of the available listings. A robust job market is expected to enable more renters to transition to homeownership in the coming year, further energizing the market.
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 Rates Fall: 5.6%
The Research Triangle area, including Durham and Chapel Hill, leads with the highest share of potential “returning” buyers, accounting for 6% of households that could regain affordability if mortgage rates drop. While the area faces a shortage of listings accessible to first-time buyers, strong wage growth, with average earnings rising by 13 percentage points from the previous year, is a significant tailwind.
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 Rates Fall: 5.3%
Harrisburg is already an attractive market for more than 30% of its renters, and it’s also drawing high-earning renters from other states. The anticipated decline in mortgage rates is expected to boost both inventory and buying activity as existing homeowners, many of whom have surpassed the average tenure of 15 years, decide to sell their properties.
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 Rates Fall: 4.3%
Rounding out the Texas Triangle trio on this list, Houston’s combination of affordability, strong job growth, and wage increases is poised to drive market activity in 2024. The noteworthy aspect here is the fourfold increase in wages, outpacing the national level, which further enhances buying power for residents.
Nashville, Tennessee
2023 Home Price Growth: 0.7%
Share of Renters Who Can Afford a Median-Priced Home: 13.8%
Share of Returning Buyers If Rates Fall: 4.6%
The anticipated resurgence of “returning” buyers is also expected to fuel growth in Nashville. The strong job market continues to attract high-earning Millennials, but the city faces a significant shortage of listings at price points affordable to first-time buyers, which could temper the extent of the rebound.
Philadelphia, Pennsylvania
2023 Home Price Growth: 4.6%
Share of Renters Who Can Afford a Median-Priced Home: 21.5%
Share of Returning Buyers If Rates Fall: 4.7%
Philadelphia is set for a boost driven by pent-up demand from both buyers and sellers as the rate lock-in effect begins to ease. A substantial 44% of homeowners in the area have exceeded the average tenure of 17 years, indicating a large pool of potential sellers. Additionally, first-time buyers have twice as many affordable purchase options compared to most other markets.
Portland, Maine
2023 Home Price Growth: 12.3%
Share of Renters Who Can Afford a Median-Priced Home: 20.2%
Share of Returning Buyers If Rates Fall: 4.9%
Portland has attracted the second-highest number of Millennial renters earning over $100,000, surpassed only by San Jose. The city boasts the lowest violent crime rate among the 100 largest metro areas, making it a highly desirable location. However, fewer than 10% of listings are within reach for first-time buyers. With about 42% of homeowners having exceeded the average tenure, there is significant potential for inventory to increase as these rate-locked sellers list their homes.
Washington, DC; Arlington/Alexandria, Virginia
2023 Home Price Growth: 3.4%
Share of Renters Who Can Afford a Median-Priced Home: 15.8%
Share of Returning Buyers If Rates Fall: 4.8%
Recognized for its high teleworking population, this area has witnessed a notable decline in the proportion of remote workers, plummeting by 21 percentage points in 2022. This expected return to the office is anticipated to drive increased demand in the market. Furthermore, one in five listings in this region falls within the budget range for first-time buyers.
Factors Driving the Rebound
The NAR’s analysis underscores the critical role of mortgage rates in unlocking pent-up demand. The current rate lock-in effect, where existing homeowners with low mortgage rates are reluctant to sell and take on a new, higher-rate loan, has severely constrained inventory. As rates decline, this
