While high mortgage rates have had a cooling effect on the spring real estate market in the United States, there are still specific markets that continue to thrive. The driving force behind their success lies in the pursuit of affordable housing by homebuyers. In this blog post, we will explore the critical factor known as the “affordability advantage” and its role in making certain markets hotter than ever. We will examine the key elements contributing to the success of these markets, showcase examples of top-performing cities, and discuss the future outlook for home prices in these areas.
What Makes Today's Real Estate Market Hot: A Study for April 2023
In this analysis, Realtor.com® uncovers the key elements that contribute to the market's heat, driving high demand and quick sales. From affordability and location advantages to inventory scarcity and intense buyer competition, these dynamics shape the landscape of the real estate market, making it one of the hottest sectors to watch.
1. Analyzing Demand and Pace: Identifying the Hottest Markets
To determine the hottest markets, the Realtor.com® Hottest Markets List assesses two important variables: demand, measured by the number of views per listing, and pace, measured by the time listings spend on the market before being sold. Despite the sluggish national housing market, there are markets that continue to experience high demand and rapid sales. In April, Concord, NH claimed the top spot for the second time, with homes receiving 3.8 times more views than the national average and an average time on the market of just 17 days.
2. The Advantage of Affordability in the Northeast
One of the primary reasons for the success of many top markets on the Hottest Markets List is the “affordability advantage.” While the median home prices in Concord and Manchester, NH, surpass the national median, they are still considerably more affordable compared to neighboring Boston, which tops the list as the most expensive city. The proximity to high-cost cities, along with tax-friendly environments, makes these markets highly desirable.
3. Concentration of Thriving Northeastern Markets
The top five hottest markets in April, including Hartford, CT; Rochester, NY; and Springfield, MA, are all located in the Northeastern region. According to economist Hannah Jones, out of the 12 Northeast markets on the list, nine are clustered around the Boston area. This region showcases strong employment data and has outperformed the national employment growth rate. The combination of high housing demand and limited inventory continues to drive prices upward, compelling buyers to seek affordability in surrounding areas.
4. The Ascendancy of Midwest Real Estate
While the West and South regions failed to secure positions in the top 20 hottest markets, the Midwest has emerged as a promising area. Eight Midwestern cities made the list, attracting buyers with lower home prices that help counterbalance the impact of high mortgage rates. These Midwest markets received above-average views and experienced shorter durations on the market. Buyers are particularly drawn to the region's lower taxes and appealing home prices, resulting in a migration from neighboring areas.
5. Striking a Balance: Affordability and Inventory Challenges
Despite the affordability advantage in these hot markets, the demand from homebuyers is surpassing the available inventory. Although the national inventory has increased compared to the previous year, many of the hottest markets are facing slower inventory growth or even declines. Low inventory levels fuel intense competition among buyers, leading to bidding wars and subsequent increases in home prices. Even in markets with initially low prices, there have been significant year-over-year price increases.
The current real estate landscape underscores the significance of the affordability advantage in driving the hottest markets. Homebuyers are increasingly drawn to markets with lower home prices compared to neighboring expensive cities. The Northeast and Midwest regions have emerged as strong contenders, but finding the right balance between affordability and inventory remains a challenge. As prices continue to rise and inventory remains limited, buyers must act swiftly to secure favorable deals in these thriving markets.