A stubborn lack of inventory and high mortgage rates kept many prospective homebuyers at bay for most of 2023.
Homeowners are holding on to their homes – and the sub-5% mortgage interest rates – instead of selling their homes to buy another at today’s elevated rates. With 85% of homeowners locked into pandemic-era low interest rates, it’s not surprising that existing home sales were down 15% year over year in October. Housing inventory was down 6% during the same timeframe.
But with mortgage rates steadily dropping over the past six weeks, averaging 7% for a 30-year fixed mortgage, down from nearly 7.8% at the end of October, experts believe 2024 could be the year that prospective homebuyers finally catch a break.
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Five of this year’s top 10 metro areas are in Southern California, which is projected to perform better than the state as a whole. These markets will see an estimated average sales growth of 13.1% in 2024, compared to a sales decline of 4.1% for other California areas in the top 100, according to an analysis by Realtor.com. The other five markets offer relative affordability compared to the national median home price – especially in the Midwest and Northeast.
“Now that we’re seeing the beginning of an affordability turnaround, home buyers are still looking for markets where they can capitalize on lower prices,” says Realtor.com Chief Economist Danielle Hale. “Even in some of the more expensive markets, we’ll see double-digit sales growth as sales start to rebound from their historic lows, helped by mortgage rates which are expected to finally relent.”
Greater percentage of homeowners without a mortgage
The top markets in Midwestern and Northeastern states are more affordable, with all of the top five markets in those areas except for Worcester, Massachusetts, showing median listing prices lower than the national average. In these areas, 37.9% of homeowners live in homes without a mortgage, which insulates them from the impact of higher interest rates. Their local economies are fueled by education, health care and manufacturing, which, except for Toledo, Ohio, are projected to have strong enough job growth to keep unemployment below the estimated national average of 4.2% at the end of 2024. These areas also have a high quality of life, with recreation, culture and education that’s appealing to homeowners, according to the report.
The California dichotomy
Five California metros have made the top 10 list of housing markets but none are in the Bay Area or among Northern Californian metros. The top five Californian metros are Oxnard, San Diego, Riverside, Bakersfield and Los Angeles. These five areas are expected to have sales growth of 13%, on average, in 2024, compared to an average decline of 4% for other Californian metros in the largest 100 list.
However, these top California metros are still predicted to have historically low sales levels despite large improvements over depressed 2023 numbers. Mirroring national figures expected to total roughly 25% below 2017-2019 norms, sales in these Californian metros are also expected to be 20% to 35% lower than the typical pre-pandemic year from 2017 to 2019.
2023 top housing markets
1. Toledo, Ohio
November 2023 median home price: $200,000Forecasted 2024 home sales change: +14%Forecasted 2024 home price change: +8.3%Forecasted 2024 combined sales and price change: +22.3%
2. Oxnard, California
November 2023 median home price: $1,037,000Forecasted 2024 home sales change: +18.0%Forecasted 2024 home price change: +3.3%Forecasted 2024 combined sales and price change: +21.3%
3. Rochester, New York
November 2023 median home price: $239,000Forecasted 2024 home sales change: +6.2%Forecasted 2024 home price change: +10.4%Forecasted 2024 combined sales and price change: +16.6%
4. San Diego
November 2023 median home price: $995,000Forecasted 2024 home sales change: +11.0%Forecasted 2024 home price change: +5.4%Forecasted 2024 combined sales and price change: +16.3%
5. Riverside, California
November 2023 median home price: $585,000Forecasted 2024 home sales change: +13.8%Forecasted 2024 home price change: +2.0%Forecasted 2024 combined sales and price change: +15.8%
6. Bakersfield, California
November 2023 median home price: $385,000Forecasted 2024 home sales change: +13.4%Forecasted 2024 home price change: +2.3%Forecasted 2024 combined sales and price change: +15.7%
7. Springfield, Massachusetts
November 2023 median home price: $350,000Forecasted 2024 home sales change: +10.5%Forecasted 2024 home price change: +4.2%Forecasted 2024 combined sales and price change: +14.7%
8. Worcester, Massachusetts
November 2023 median home price: $475,000Forecasted 2024 home sales change: +9.1%Forecasted 2024 home price change: +4.8%Forecasted 2024 combined sales and price change: +13.9%
9. Grand Rapids, Michigan
November 2023 median home price: $390,000Forecasted 2024 home sales change: +6.1%Forecasted 2024 home price change: +7.2%Forecasted 2024 combined sales and price change: +13.3%
10. Los Angeles
November 2023 median home price: $1,150,000Forecasted 2024 home sales change: +9.2%Forecasted 2024 home price change: +3.5%Forecasted 2024 combined sales and price change: +12.7%
Swapna Venugopal Ramaswamy is the housing and economy reporter for USA TODAY. Follow her on Twitter @SwapnaVenugopal