The 10 Hottest Real Estate Markets Poised for a Comeback in 2024
After a sluggish 2023 marked by sky-high mortgage rates and buyer frustration, the U.S. housing market is bracing for a dramatic turnaround. The National Association of Realtors (NAR) forecasts a significant rebound in home sales for 2024, driven by easing interest rates and a surge in pent-up demand. This shift is expected to create windfalls for realtors and provide much-needed relief for buyers and sellers alike.
For prospective homebuyers, 2023 presented a perfect storm of challenges. Mortgage rates on 30-year fixed loans peaked near 7.8% in October, reaching levels not seen in decades. This surge, fueled by the Federal Reserve’s aggressive interest rate hikes, effectively priced out a significant portion of the market. Despite the cooling demand, home prices remained stubbornly high due to a persistent lack of inventory, compounding the financial stress for many would-be buyers.
The NAR’s latest report paints a stark picture of the current landscape. Home sales are on pace to plummet approximately 18% in 2023, marking the most substantial decline in at least 15 years. Fewer than four million homes are projected to change hands this year, a level not witnessed since 2010, just as the nation was beginning its recovery from the 2008 financial crisis.
A Glimmer of Hope: Declining Rates and Rising Activity
However, the outlook for 2024 offers a much brighter perspective. The NAR projects that the average 30-year fixed mortgage rate will fall to 6.3% next year. While this rate remains elevated compared to historical lows, it represents a significant improvement from the current levels. The Federal Reserve is expected to implement four interest rate cuts in 2024, beginning in the spring, which should help alleviate some of the pressure on the housing 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 researchers noted in their report. This anticipated influx of buyers could finally help to absorb some of the excess inventory that has plagued the market.
Furthermore, the easing of mortgage rates is expected to alleviate the “rate lock-in effect,” a phenomenon where existing homeowners are hesitant to sell their current properties because doing so would mean giving up their low-interest-rate mortgages. As rates decline, more homeowners will likely feel comfortable listing their homes, thereby increasing market supply.
The NAR anticipates that improvements in affordability will lead to a significant resurgence in housing market activity. Projections indicate that new home sales will rise by 19%, while existing home sales are expected to grow by 13%. This increased transaction volume is poised to create substantial windfalls for realtors across the country. Additionally, the NAR predicts that sellers will enjoy home price gains, though these are expected to be more moderate than in previous years.
10 Cities Poised for a Comeback
To identify the markets most likely to benefit from this anticipated rebound, the NAR compiled a list of 10 metropolitan areas exhibiting the strongest pent-up demand. These cities are described as “sleeping giants” where home transactions are expected to surge after a period of dormancy. The selection process involved analyzing 10 factors across the 100 largest U.S. markets, including home price growth in the third quarter of 2023, the percentage of renters who can afford to buy a median-priced home, and the projected return of buyers if mortgage rates fall to 6.5% or lower. Other critical considerations included job growth, income growth, and crime rates.
Here are the 10 metropolitan areas projected to experience significant housing market activity in 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 Rates Fall: 5.1%
Austin stands out due to its exceptionally large pool of “returning” buyers. If interest rates drop to 6.5% in 2024, an estimated 5.1% of all households in the Austin metro area will once again have the financial means to afford the median-priced home. Despite the ongoing housing affordability challenges, the region is witnessing a notable influx of high-earning Millennials (earning over $100,000) relocating from other states. While Austin’s housing market has proven sensitive to market fluctuations, the combination of these incoming high earners and returning buyers is expected to fuel significant growth in local housing activity. According to the Austin Board of Realtors, the market has already shown positive signs of a turnaround.
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. The local economy has demonstrated impressive strength, creating over 4% more jobs compared to the previous year. With 22% of renters in Dallas able to afford a median-priced home, housing activity is expected to increase substantially as mortgage rates decline in 2024. This robust job growth provides a solid foundation for continued housing market expansion.
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 distinguishes itself through its combination of affordability and a wealth of options for first-time homebuyers. A significant portion of buyers in this market can afford to purchase more than half of the available listings. Furthermore, the strong job market in the Dayton area is expected to enable more renters to make the transition to homeownership in the coming year. This combination of affordability and job growth positions Dayton for a robust housing market recovery.
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 region, which includes Durham and Chapel Hill, is a notable contender for housing market growth. The Durham metro area leads the nation with the highest share of “returning” buyers, accounting for 6% of households that can once again afford a home. While the area faces a shortage of affordable listings for first-time buyers, it has experienced tremendous wage growth, with average earnings rising by 13 percentage points year-over-year. This wage growth, combined with the influx of returning buyers, is expected to drive significant activity in the local housing market.
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 offers a compelling combination of affordability and an ability to attract high-earning renters from other states. Already affordable for more than 30% of its renters, the market is poised for further growth as mortgage rates decline. Both inventory and buying activity are expected to increase as existing homeowners, many of whom have already surpassed the average tenure of 15 years, decide to list their homes. The anticipated rise in listings, coupled with sustained buyer demand, should create a dynamic market in 2024.
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%
Yet another market within the Texas Triangle to make the list, Houston is positioned for a strong housing market performance in 2024. The combination of housing affordability, robust job growth, and rising wages is expected to boost activity in this market. While housing affordability for renters in Houston surpasses that of most markets across the country, the most noteworthy trend is the fourfold increase in wages, which is outpacing the national level. This economic strength provides a solid foundation for housing market expansion.
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 expected to drive market growth in Nashville in the coming year. Similar to Austin, the city’s strong job market is attracting many high-earning Millennials. However, Nashville faces a significant challenge in the form of a severe housing shortage, particularly in the price ranges affordable to first-time buyers. This supply-demand imbalance could create upward pressure on prices, even as overall market activity increases.
Philadelphia, Pennsylvania
2023 Home Price Growth: 4.6%
Share of Renters Who Can Afford a Median-Priced Home: 21.5%
