The 10 Hottest Real Estate Markets in the US as Home Sales Surge in 2024
Next year is shaping up to be a pivotal moment for the housing market. After two challenging years marked by rising interest rates and tight inventory, the National Association of Realtors (NAR) projects a significant rebound in home sales for 2024. This anticipated surge is primarily driven by falling mortgage rates, which are expected to entice buyers back into the market after a period of hesitation.
The current landscape has been defined by a dramatic slowdown. In 2023, US home sales were on pace to decline by approximately 18%, marking the most significant drop in at least 15 years. Fewer than four million homes are expected to change hands, a level not seen since 2010, just before the recovery from the Great Recession. This slump can be largely attributed to the sharp rise in mortgage rates, with the rate on a 30-year fixed mortgage peaking near 7.8% in late 2023.
Despite the cooling demand, home prices have remained stubbornly high. This counterintuitive trend is a direct result of the severe housing shortage. With limited inventory, even a decrease in buyer activity hasn’t led to substantial price drops, putting further strain on potential homeowners.
However, the outlook for 2024 offers a ray of hope for buyers, sellers, and realtors alike. The NAR forecasts that the average 30-year fixed mortgage rate will fall to around 6.3% in the coming year. While this is still elevated compared to recent years, it represents a significant improvement that is expected to unlock pent-up demand. The Federal Reserve is projected to cut interest rates four times in 2024, beginning in the spring, which should help ease borrowing costs.
“The decline in mortgage rates is expected to draw more buyers, including those returning to the market, consequently bolstering demand for housing,” the NAR noted 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 poised to revitalize the housing market. The NAR projects a 19% increase in new home sales and a 13% rise in existing home sales, creating new opportunities for realtors and potential price appreciation for sellers.
To identify the markets most likely to benefit from this resurgence, the NAR has compiled a list of 10 metropolitan areas with the strongest pent-up demand. These cities are poised to experience a significant uptick in home transactions after a period of relative dormancy.
The selection process involved analyzing 10 factors across the 100 largest US markets. Key metrics included home price appreciation in Q3 2023, the percentage of renters who can afford to buy a median-priced home, and the projected share of returning buyers if mortgage rates drop to 6.5%. Additional considerations encompassed job growth, income growth, and crime rates.
Here are the 10 metropolitan areas identified by the National Association of Realtors 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 stands out as a market with one of the largest pools of potential “returning” buyers. If mortgage rates decline to 6.5% in 2024, an estimated 5.1% of all households in the Austin metro area could gain the financial capacity to purchase a median-priced home.
Despite the current housing affordability challenges, Austin continues to attract high-earning Millennials from out of state. Many of these individuals, earning over $100,000 annually, are choosing to rent in Austin while awaiting more favorable market conditions. While the local housing market has shown sensitivity to price changes, this influx of affluent renters, combined with the anticipated return of budget-constrained buyers, is expected to drive renewed activity. Early indicators from the Austin Board of Realtors already point to a positive turnaround in home sales.
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%
The Dallas metropolitan area boasts one of the fastest-growing job markets among the 100 largest US metros, with job creation exceeding the previous year by over 4%. This robust economic environment, coupled with 22% of renters having the financial means to afford a median-priced home, suggests that housing activity will increase significantly as mortgage rates fall in 2024.
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 offers a compelling combination of affordability and accessibility for first-time homebuyers. A substantial portion of the available listings in this market are within reach for these buyers, with more than half of all properties being affordable. Furthermore, the area’s strong job market is expected to enable more renters to transition into homeownership in the coming year.
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 Research Triangle region, including Durham and Chapel Hill, is a hotbed of economic activity. This metro area leads the nation with the highest percentage of “returning” buyers, accounting for 6% of households that will regain affordability if interest rates drop. While the area faces a shortage of affordable listings for first-time buyers, strong wage growth, with average earnings rising by 13 percentage points year-over-year, is helping to bridge the gap.
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 is attractive not only for its general affordability, which enables over 30% of renters to purchase a home, but also for its ability to draw high-earning renters from other states. As mortgage rates are anticipated to decline in 2024, both inventory levels and buyer activity are expected to increase. A significant factor contributing to this potential is the high rate of homeownership tenure; 42% of homeowners in the area have already surpassed the average ownership period of 15 years, suggesting a greater likelihood of them listing their homes for sale.
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%
Rounding out the trio of Texas metros on this list, Houston is poised for a boost in market activity in 2024, driven by a combination of affordability, strong job growth, and rising wages. Housing affordability for renters in Houston is better than in most markets across the country. What’s particularly noteworthy is the fourfold increase in wages in Houston, significantly outpacing the national average, which further enhances purchasing power for potential buyers.
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 Mortgage Rates Fall: 4.6%
Nashville is expected to see market growth fueled by the anticipated resurgence of “returning\” buyers. The city’s strong job market continues to attract many Millennial renters earning over $100,000. However, Nashville faces a significant challenge in terms of inventory, with a severe shortage of listings in the price ranges that first-time buyers can afford.
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 Mortgage Rates Fall: 4.7%
The Philadelphia market 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 this area have surpassed the average tenure of 17 years, indicating a strong likelihood of increased listings as they decide to sell. For first-time buyers, the availability of affordable purchase options in Philadelphia is twice as plentiful compared to most other areas nationwide.
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 Mortgage Rates Fall: 4.9%
Following San Jose, Portland has attracted the second-highest number of Millennial renters earning over $100,00
