The Hottest Real Estate Markets to Watch in the US as Home Sales Surge in 2024
The real estate landscape in the United States is poised for a dramatic transformation in 2024. After a sluggish 2023 marked by soaring mortgage rates and subdued buyer activity, the National Association of Realtors (NAR) predicts a significant rebound. This resurgence is expected to be driven by falling interest rates, easing affordability constraints, and a surge in pent-up demand across several metropolitan areas.
The Turning Tide: What’s Fueling the 2024 Rebound?
The housing market has weathered a challenging period. In 2023, US home sales were projected to plummet by approximately 18%, marking the steepest decline in at least 15 years. Fewer than four million homes were expected to change hands, a level not seen since 2010. The primary culprit behind this downturn was the sharp rise in mortgage rates. The rate on a 30-year fixed mortgage peaked near 7.8% in late October 2023, pushing the dream of homeownership out of reach for many prospective buyers.
Despite the drop in demand, home prices remained stubbornly high. This paradox was attributed to a chronic shortage of housing inventory, which exacerbated affordability challenges for financially strained buyers. However, the outlook for 2024 presents a much brighter picture.
The NAR projects a significant decrease in mortgage rates, with the 30-year fixed rate expected to settle around 6.3% on average. This moderation is anticipated to be a direct result of Federal Reserve interest rate cuts, which are forecast to begin in the spring of 2024.
“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 improvement in affordability is expected to trigger a resurgence in housing market activity. The NAR predicts a 19% increase in new home sales and a 13% rise in existing home sales, creating substantial opportunities for realtors and potentially stabilizing home prices.
The 10 Markets Poised for Explosive Growth in 2024
To identify the areas most likely to benefit from this market turnaround, the NAR analyzed the 100 largest metropolitan areas in the U.S., focusing on regions with the highest levels of pent-up demand. The analysis considered ten key factors, including year-over-year home price appreciation in Q3 2023, the percentage of renters who can afford a median-priced home, and the potential influx of returning buyers if mortgage rates fall to 6.5% or lower. Additional metrics included job growth, income growth, and crime rates.
Here are the ten metropolitan areas expected to lead the charge in 2024:
Austin, Texas
Austin’s real estate market is characterized by a dynamic mix of high-earning millennials relocating from out of state and returning buyers eager to capitalize on improving affordability. While the city experienced a -7.7% decline in home prices in 2023, it retains one of the largest pools of “returning” buyers, with 5.1% of households projected to regain affordability if rates drop to 6.5%. Despite the cost of living, Austin’s robust job market and influx of tech-savvy professionals continue to fuel demand. Home sales activity has already shown positive signs, according to the Austin Board of Realtors.
Dallas, Texas
The Dallas metroplex stands out for its burgeoning job market, which expanded by over 4% year-over-year, making it the second-fastest-growing job market among the 100 largest metros. With 22% of renters able to afford a median-priced home, Dallas is well-positioned to benefit from lower mortgage rates in 2024. The combination of job growth, improving affordability, and a significant pool of returning buyers suggests a substantial increase in housing activity.
Dayton, Ohio
Dayton offers a compelling proposition for first-time homebuyers due to its affordability and diverse housing stock. More than half of the listings in Dayton are accessible to first-time buyers, a rarity in today’s market. The region’s strong job market further enhances its appeal, with the potential to convert more renters into homeowners as mortgage rates decline. Dayton’s 9.1% home price growth in 2023, coupled with 4.7% returning buyer potential, underscores its attractiveness.
Durham/Chapel Hill, North Carolina
The heart of North Carolina’s Research Triangle, Durham/Chapel Hill, leads the nation with the highest share of “returning\” buyers, at 6%. This metro area boasts impressive wage growth, with average earnings up 13 percentage points year-over-year, helping to offset affordability challenges. Although the supply of entry-level homes is limited, the influx of high-earning professionals and the potential return of sidelined buyers are expected to drive significant market activity in 2024.
Harrisburg, Pennsylvania
Harrisburg presents an attractive blend of affordability and opportunity. Over 30% of renters in this market can already afford a median-priced home, and the influx of high-earning renters from other states is further stimulating demand. With 42% of homeowners having exceeded the average tenure of 15 years, there is significant potential for inventory to increase as these homeowners decide to sell. The anticipated decline in mortgage rates is expected to accelerate both buying activity and new listings.
Houston, Texas
Rounding out the “Texas Triangle\” metros on this list, Houston’s appeal lies in its robust job and wage growth, which have outpaced the national average. Affordability remains a key strength, with 23.8% of renters able to purchase a median-priced home. The noteworthy aspect of Houston’s economic story is the quadrupling of wages, which empowers more residents to enter the housing market. The potential for 4.3% of buyers to return if rates drop further suggests a dynamic year ahead.
Nashville, Tennessee
Nashville’s \”Music City\” charm continues to attract a significant number of Millennial renters earning over $100,000. A strong job market supports this influx, although the area faces a notable shortage of listings affordable to first-time buyers. However, the anticipated resurgence of \”returning\” buyers, coupled with the region’s economic vitality, is expected to drive market growth. The potential for 4.6% of buyers to return to the market offers a glimpse of the pent-up demand waiting to be unleashed.
Philadelphia, Pennsylvania
Philadelphia is poised for a significant boost in 2024 as the rate lock-in effect begins to wane. A substantial 44% of homeowners in this market have surpassed the average tenure of 17 years, creating a potential wave of inventory as these owners decide to sell. For first-time buyers, Philadelphia offers twice as many affordable purchase options compared to most metro areas. The anticipated return of buyers, driven by easing affordability, is expected to invigorate the market.
Portland, Maine
Portland, Maine, has emerged as a magnet for high-earning Millennial renters, rivaling San Jose in its appeal to this demographic. The city also boasts one of the lowest violent crime rates among the 100 largest metro areas, enhancing its attractiveness as a place to live and work. While fewer than 10% of listings are currently within reach for first-time buyers, the 42% of homeowners who have exceeded the average tenure present a significant opportunity for inventory growth. The potential for 4.9% of buyers to return to the market could reshape the local housing landscape.
Washington, D.C.; Arlington/Alexandria, Virginia
The Washington, D.C. metropolitan area, including the Arlington/Alexandria corridor, is set for a revitalization as the remote work trend recedes. A notable 21% decline in the proportion of remote workers in 2022 is expected to drive increased demand as more people return to their offices. While affordability remains a challenge, with 15.8% of renters able to afford a median-priced home, the potential for 4.8% of buyers to return to the market, combined with the return-to-office dynamic, suggests a significant uptick in activity. Furthermore, one in five listings in this area falls within the budget range for first-time buyers, offering a glimmer of hope for those seeking entry-level homes.
Factors to Watch in 2024
As the housing market embarks on its anticipated recovery, several factors will play a crucial role in shaping its trajectory. The Federal Reserve’s monetary policy decisions will be paramount, with the timing and magnitude of interest rate cuts directly influencing mortgage rates and affordability. The pace of new home construction will also be a key determinant of supply levels, potentially alleviating the chronic shortage that has plagued the market.
Furthermore, regional economic trends will continue to drive demand in the identified metro areas. Job growth, income levels, and migration patterns will all influence housing market dynamics. The \”rate lock-in\” effect, where existing homeowners are hesitant to sell due to higher mortgage rates, will gradually ease as rates decline, potentially unlocking a significant pool of inventory.
Conclusion: A Year of Opportunity
The year 2024 promises to be a watershed moment for the U.S. housing market.
