Dreaming of homeownership in 2024? Be prepared! This blog post reveals the top 10 US housing markets where skyrocketing prices demand sky-high incomes to buy. When it comes to purchasing a home, the old adage rings true: it's all about location, location, location.

Yet, in today's real estate market, the cost of homeownership varies dramatically depending on where you plant your roots. Recent analysis from Realtor.com® unveils the stark reality that, in certain cities, the dream of homeownership demands a hefty income, sometimes soaring above $150,000.

According to Realtor.com Chief Economist Danielle Hale, several factors contribute to the soaring costs of homeownership. “It's desirable places to live, places that haven't built a lot of housing, and major cities that have a lot of higher-paying jobs,” she explains. The need for substantial income or significant equity is evident in these markets, reflecting the economic pulse of the regions.

Half of the 10 priciest housing markets identified by Realtor.com were nestled in the Golden State. Leading the pack is the San Jose metro area, situated in the heart of Silicon Valley. Boasting tech giants like Google, Apple, and Nvidia, this region is a beacon for innovation and prosperity. However, such prosperity comes at a price; prospective homebuyers in San Jose must earn a minimum of $361,000 to secure a foothold in the housing market.

Patrick Carlisle, chief market analyst for the Bay Area at Compass, sheds light on the realities of the San Jose market. “There aren't too many neighborhoods in the San Jose metro where you can buy a single-family home for $1 million anymore,” he shares. “It can buy you a two-bedroom condo or maybe a two- or three-bedroom townhouse in some areas.”

Top 10 Metros Requiring the Highest Incomes for Homeownership

To determine the income required for homeownership, the Realtor.com economics team delved into median home list prices across the 50 largest metropolitan areas. Factoring in a 20% down payment, a mortgage rate of 6.99%, and local taxes and insurance rates, the analysis ensured that prospective buyers wouldn't exceed spending 30% of their income on housing.

So, where are the top 10 cities where homeownership demands a substantial income?

1. San Jose, California

The crown jewel of Silicon Valley, San Jose tops the list with a median home list price of $1,467,000. To secure a piece of this vibrant market, prospective homeowners must boast a household income of at least $361,000.

2. Los Angeles, California

The glitz and glamour of Los Angeles come with a hefty price tag, with a median home list price of $1,192,000. Homebuyers in the City of Angels must earn a minimum of $298,000 to make their homeownership dreams a reality.

3. San Diego, California

Sunny skies and pristine beaches characterize San Diego's allure, but its housing market demands a median household income of $259,000 to afford a home priced at $1.05 million.

4. San Francisco, California

The picturesque streets of San Francisco beckon, but the median home list price of $1,027,000 requires a household income of $256,000 to navigate this competitive market.

5. Boston, Massachusetts

Rich in history and culture, Boston's median home list price of $870,000 necessitates a household income of $226,000 for aspiring homeowners.

6. New York, New York

The concrete jungle where dreams are made of, New York City boasts a median home list price of $769,000, demanding a household income of $218,000 to break into its housing market.

7. Seattle, Washington

Seattle's blend of tech innovation and natural beauty is undeniable, but with a median home list price of $775,000, prospective homeowners must earn $193,000 to call this city home.

8. Denver, Colorado

Embraced by the Rocky Mountains, Denver offers breathtaking views alongside a median home list price of $655,000, requiring a household income of $161,000 for homeownership.

9. Sacramento, California

Sacramento's affordability relative to its California counterparts is notable, yet a median home list price of $650,000 still demands a household income of $162,000 for homeownership.

10. Washington, D.C.

The nation's capital boasts historical significance and cultural richness, with a median home list price of $625,000. Prospective homeowners in Washington, D.C. must earn $159,000 to make their mark in this vibrant city.

These figures paint a vivid picture of the economic realities facing homebuyers in these metropolitan areas. As housing prices continue to climb, the pursuit of homeownership remains a lofty goal for many, underscoring the importance of strategic financial planning and prudent decision-making in today's competitive real estate market.

Whether it's the allure of Silicon Valley or the cultural vibrancy of New York City, the journey towards homeownership is undeniably influenced by the economic underpinnings of each region. As home prices continue to soar, prospective buyers must carefully weigh their options and plan strategically to achieve their homeownership goals in these competitive markets.

The housing market is a moving target, and navigating it successfully requires staying informed. Fortunately, recent data from Realtor.com sheds light on current trends, giving us a clear picture of factors like inventory levels, pricing strategies, and how sellers are behaving.

One of the most notable trends observed in the recent data is the 30.4% increase in the number of homes actively for sale compared to the previous year. This marks the sixth consecutive month of growth, indicating a significant shift in the market dynamics. Additionally, the total number of unsold homes, including those under contract, has surged by 20.0% year-over-year, reflecting a robust level of activity within the market.

April saw a 12.2% uptick in the number of newly listed homes compared to the same period last year, suggesting a heightened level of activity among sellers. Despite this increase in inventory, the median price of homes for sale remained stable at $430,000, showcasing a degree of resilience in the face of changing market conditions.

While the median list price did not experience a significant increase, the cost per square foot continued to rise, driven by factors such as rising mortgage rates. This has led to a scenario where the affordability gains witnessed earlier in the year have been overshadowed by a resurgence in housing costs. The data also highlights the impact of inflation and employment trends on mortgage rates, underlining the interconnected nature of economic factors in shaping the housing market.

A closer examination of regional trends reveals interesting dynamics, particularly in the South. Sellers in this region have been listing homes at a higher rate compared to the previous year, leading to an increase in the availability of affordable housing options. However, despite this positive trend, the time homes spend on the market is gradually approaching pre-pandemic levels, signaling a potential shift in the balance between supply and demand.

The trend of increasing inventory persisted in April, with 30.4% more homes actively for sale compared to the same period last year. This sustained growth marks the sixth consecutive month of annual inventory expansion, indicating a positive trajectory within the housing market. Notably, the inventory of homes actively for sale during the first four months of the year reached its highest level since 2020, signifying a notable shift in supply dynamics.

Despite the improvement in inventory levels compared to recent years, there is still ground to cover to reach pre-pandemic norms. Inventory in April was 35.9% lower than typical levels observed between 2017 and 2019. However, this represents a slight improvement from the previous month's 37.9% gap, suggesting a gradual return to equilibrium. As inventory continues to inch closer to historical averages, the market is showing signs of resilience and recovery.

An intriguing aspect of the recent data is the notable growth in homes priced between $200,000 and $350,000. This segment witnessed a remarkable 41.0% increase in inventory compared to the previous year, surpassing even the high growth rate observed in the preceding month. This surge in availability is primarily driven by the emergence of smaller and more affordable homes, particularly in the Southern region.

The South has emerged as a focal point for increased housing availability, with a significant uptick in inventory observed in this region. This trend aligns with broader market dynamics, as sellers in the South have been listing homes at a higher rate compared to other regions. The influx of affordable housing options in the $200,000 to $350,000 price range has contributed to a more balanced supply-demand equation, offering buyers greater choice and flexibility.

The latest data sheds light on the performance of pending listings, a key indicator of future market activity. In April, the number of homes under contract but not yet sold increased by 6.3%, mirroring the growth rate observed in the previous month. This steady uptick in pending listings comes against the backdrop of rising inflation and mortgage rates, fueled by expectations of a delayed adjustment to the primary policy rate by the Federal Reserve.

Looking ahead, there are indications that the pace of growth in pending listings may taper off in the coming months. This could potentially translate into a slowdown in existing-home sales, following a 4.3% dip recorded in March. The interconnected nature of pending sales and overall market performance underscores the importance of monitoring these early indicators to anticipate future trends accurately.

In a promising development for the market, sellers exhibited increased activity in April, with newly listed homes surpassing last year's levels by 12.2%. This sustained growth in listing activity marks the sixth consecutive month of expansion, signaling a shift from the prolonged period of declines observed previously. Notably, a significant proportion of sellers, approximately three-quarters, have expressed a desire to purchase a new home, indicating a nuanced response to prevailing market conditions.

However, the market may face headwinds in the form of elevated mortgage rates in the coming months. If rates remain high, there is a possibility of reverting to the pattern of limited inventory that characterized the market in recent years. For buyers, this could translate into a more challenging environment for finding suitable properties, particularly as summer approaches.

Bottom Line: The housing market remains a complex dance with the economy. While a rise in listings and seller activity hints at a shift, mortgage rates hold the key to the market's next move. Staying alert and flexible will be crucial for both buyers and sellers to navigate this ever-changing landscape.

The housing market continues to be a tale of two cities, with expensive coastal areas experiencing a surge in home values, while more affordable markets see a more balanced approach. This trend is highlighted in the latest Zillow March 2024 Market Report, revealing a clear link between limited inventory and skyrocketing prices.

The report paints a picture of a market heavily influenced by location. Homebuyers in the priciest U.S. metropolitan areas, particularly those on the West Coast, are facing fierce competition and ever-increasing prices. San Jose, the leader of the pack, witnessed a staggering 3.3% monthly appreciation in home values. San Francisco, Seattle, San Diego, and Los Angeles followed closely behind, all boasting a monthly growth rate exceeding 2%.

What's driving this surge in these specific locations? The answer lies in a combination of factors. Firstly, these coastal metros are major tech hubs, where many homeowners benefit from historically low mortgage rates secured before recent interest rate hikes. Secondly, these areas have seen minimal inventory recovery since the pandemic began. Remember, these markets were already quite competitive pre-pandemic, leaving them with a lower baseline of available homes. With demand still outstripping supply, bidding wars are commonplace, further pushing prices upwards.

Meanwhile, a different story unfolds in Southern U.S. metros. Here, a more balanced market is emerging. Existing inventory levels have either grown or nearly recovered to pre-pandemic levels. This growth is partly fueled by a robust influx of new construction, providing much-needed options for move-up buyers. Cities like New Orleans, San Antonio, Tampa, Orlando, and Jacksonville exemplify this trend. These areas boast a significantly slower, yet still healthy, appreciation rate of just over 0.5% per month.

The impact of rising inventory is evident. It has eased the intense competition that plagued these markets earlier and brought price appreciation under control. In fact, New Orleans and San Antonio are the only two major markets where buyers currently have more choices than they did pre-pandemic. Florida metros, while not experiencing a buyer's market, haven't seen significant inventory decline either.

This trend of a divided market extends nationwide. In areas with recovering inventory levels, buyers are gaining some leverage in negotiations. Nationally, the average home sold in March spent only 13 days on the market, significantly faster than the pre-pandemic norm of 21 days. However, this doesn't paint the whole picture. Well-priced and attractive listings in competitive markets can still fly off the shelves within days, especially as buying activity intensifies in the spring and summer months.

On the flip side, the report also reveals listings languishing on the market. The median age of all listings on Zillow currently sits at 43 days. This indicates that some sellers, particularly those in more affordable markets, might be struggling to attract buyers.

Nationally, Home Values Reach New Heights

The median home value in the U.S. has reached a staggering $355,696, reflecting a significant 42.4% increase compared to pre-pandemic levels. This translates to a hefty monthly mortgage payment of $1,851, assuming a 20% down payment. This figure represents a staggering 108% increase since before the pandemic, more than doubling the financial burden for homebuyers.

Market Divergence: Expensive vs. Affordable Areas

The data reveals a clear distinction between expensive coastal metros and more affordable areas in the South. On the one hand, expensive West Coast metros like San Jose, San Francisco, Seattle, San Diego, and Los Angeles continue to witness explosive growth. Monthly appreciation rates in these areas exceeded 2%, with San Jose leading the pack at a staggering 3.3%. This surge is attributed to a combination of factors, including:

• High Demand, Low Inventory: These tech hubs have perennially strong housing demand. However, the pandemic exacerbated the issue by further limiting available inventory. With more buyers vying for a limited number of homes, bidding wars and skyrocketing prices became commonplace.
• Locked-in Mortgage Rates: Many homeowners in these areas secured historically low mortgage rates before recent interest rate hikes. This financial advantage allows them to compete more aggressively in bidding wars.

In contrast, Southern metros are experiencing a more balanced market. Here, a combination of factors is tempering the appreciation rate:

• Inventory Recovery: Existing inventory levels in Southern metros have grown or nearly recovered to pre-pandemic levels. Additionally, a robust influx of new construction has provided more options for move-up buyers, alleviating some of the pressure on existing homes.
• Price Sensitivity: As affordability concerns mount, buyers in these areas are becoming more price-sensitive. This is leading to a more balanced market where negotiations are more commonplace.

New Listings Show Tentative Recovery, But Fall Short

New listings increased in March by 15.5% compared to February, suggesting a potential uptick in seller activity. However, this is tempered by the fact that new listings are still 25.4% lower than pre-pandemic levels. Much of the progress made in February to close the inventory gap seems to have stalled.

There are regional variations in seller activity. Markets like San Jose, Dallas-Fort Worth, and Tampa are witnessing a significant increase in new listings compared to last year. This could be due to a combination of factors, including:

• Seasonal Trend: Spring is typically a busy season for real estate, and this uptick could be a reflection of that seasonal pattern.
• Market Equilibrium: In some areas, particularly those with a more balanced market, sellers may be feeling more confident about listing their homes as competition eases slightly.

Conversely, some major metros like Boston, Pittsburgh, and Washington D.C. haven't seen a significant increase in new listings compared to last year. This could be due to:

• Affordability Concerns: Rising mortgage rates and home values may be discouraging some potential sellers who are concerned about affordability for buyers.
• Inventory Adequacy: In some markets, existing inventory levels may be sufficient to meet current demand, leading some sellers to hold off.

Total Inventory Shows Improvement, But Gap Remains

Total inventory, which refers to the number of active listings at any given time, also saw an increase in March. It rose by 7% compared to February and 12.2% compared to last year. However, despite this growth, total inventory remains a significant 36.4% lower than pre-pandemic levels.

The data reveals a mixed picture across different regions. Markets like Tampa, Dallas, and Orlando have seen the most significant year-over-year growth in total inventory. This could be attributed to factors such as:

• New Construction: A robust new construction industry in these areas may be helping to replenish inventory levels.
• Relocation: In-migration to these areas could be driving up the number of homes available for sale.

On the other hand, some major metros like New York City, Las Vegas, and Buffalo have seen a decline in total inventory compared to last year. This could be due to:

• Strong Demand: In these markets, high buyer demand may be quickly absorbing available listings, leading to lower overall inventory levels.
• Relocation Trends: Out-migration from these areas could be reducing the number of homes available for sale.

Competition Heats Up, But Not For All Listings

The data paints a picture of a two-tiered competition landscape. Well-priced and attractive listings are flying off the shelves, with homes typically selling in just 13 days in March. This is faster than pre-pandemic norms but slightly slower compared to the peak frenzy of 2021 and 2022. This trend is likely to continue in April and May as buyer activity intensifies during the spring selling season.

However, the story is different for listings that are overpriced or lack proper marketing. The median age of all listings on Zillow sits at 43 days, indicating that these homes are languishing on the market. This highlights the importance of sellers strategically pricing and effectively showcasing their properties to attract buyers in a competitive environment.

Price Cuts on the Rise, But Some Areas Still See Bidding Wars

Sellers are increasingly resorting to price cuts, with over 20% of listings experiencing reductions in March. This represents the highest rate for this time of year since 2018 and reflects a shift from the extreme seller's market conditions of the past few years. Price cuts are most prevalent in Phoenix, Jacksonville, San Antonio, Orlando, and Nashville, suggesting a cooling market in some areas.

On the flip side, bidding wars are still a reality in expensive coastal markets like San Jose and San Francisco. Here, a staggering 69.4% and 62.7% of homes, respectively, sold above their asking price in February. This trend extends to other major metros like Hartford, Boston, and Los Angeles, where a significant portion of homes continues to attract offers exceeding the list price.

Newly Pending Sales Show Mixed Signals

Newly pending listings, which represent homes under contract, increased by 17.7% in March compared to February. However, compared to last year, there's only a marginal increase of 0.1%. This suggests a potential slowdown in buyer activity, although seasonal trends could be at play.

Rental Market Continues to See Steady Growth

The rental market shows continued signs of growth, with asking rents rising by 0.6% month-over-month in March. This is slightly above the pre-pandemic average for this time of year. Rents are also up 3.6% compared to last year. While most major metros are experiencing rent increases, some areas like Pittsburgh, Cleveland, Salt Lake City, Charlotte, and Milwaukee are seeing slower growth. On the other hand, cities like Providence, Louisville, Cleveland, Hartford, and Boston are witnessing the most significant annual rent increases.

As the winter fades away and temperatures start to rise, the U.S. housing market is gearing up for the critically important spring homebuying season. This period between March and June typically accounts for over a third of annual home sales as warmer weather and the end of the school year motivate many buyers to make their move.

However, this year's spring market is shaping up to be a challenging one for both buyers and sellers due to persistently low affordability levels. According to Freddie Mac, affordability is currently near a 30-year low, largely due to elevated mortgage rates that have shown no signs of retreating despite hopes for a March rate cut from the Federal Reserve.

The latest data indicates affordability constraints are weighing on home sales activity. Total home sales (existing and new) in February ticked up 8.1% from January but remained 2.2% below last year's level. Existing home sales make up the bulk at 87% of total sales, rising 9.5% month-over-month to a seasonally adjusted 4.38 million units. Still, that figure is 3.3% lower than in February 2023.

Housing affordability has become so strained that an increasing number of buyers are being pushed into the new home market, where prices are typically higher but supply is more abundant than the existing home inventory. New home sales clocked in at 662,000 units in February, up a robust 5.9% from a year earlier even as they dipped slightly (0.3%) from January's pace.

With demand for new construction strengthening, homebuilders are feeling increasingly optimistic. Single-family housing starts surged 35.2% year-over-year in February, and permits for future construction climbed 29.5%. The National Association of Home Builders' Housing Market Index, a measure of builder confidence, continued its upward trajectory to hit 51 in March – the highest reading since last July and above the neutral 50 level for the first time since then.

Rising construction activity hasn't prevented home prices from pushing higher though. The Federal Housing Finance Agency's Purchase-Only Home Price Index showed prices up 6.3% from a year ago in January, even as they ticked down 0.1% on a month-over-month basis.

The combination of high prices and elevated mortgage rates continues to weigh heavily on affordability and buyer demand. Mortgage rates held steady in March, averaging 6.8% for the month according to Freddie Mac's Primary Mortgage Market Survey. While overall mortgage applications increased 3.9% from February, they remained down 10.2% versus last year according to data from the Mortgage Bankers Association.

Purchase applications saw a 3.2% monthly uptick, but the high cost of financing appears to be contributing to rising mortgage delinquency rates as some homeowners struggle to keep up with their payments. Total mortgage delinquencies rose to 3.9% in Q4 2023, up 26 basis points from Q3. Conventional mortgage delinquencies climbed to 2.6%, while FHA and VA loan delinquencies jumped to 10.8% and 4.1% respectively.

Even as demand has cooled amid affordability pressures, housing supply remains extremely tight. This persistent imbalance between supply and demand continues to put upward pressure on home prices and shuts many would-be buyers out of the market entirely when coupled with today's elevated mortgage rates.

As the spring market kicks into high gear, it's evident that both buyers and sellers face significant obstacles. Prospective purchasers must grapple with eroding affordability and steep borrowing costs, while sellers enjoy strong pricing leverage but limited inventory turnover.

Ultimately, a meaningful rebound in home sales may prove elusive until either mortgage rates or home prices – or perhaps both – begin retreating from current levels that have simply become unsustainable for too many households. For now, it appears the spring homebuying season could underwhelm compared to years past with affordability acting as the biggest headwind.

Predictions for 2024 and 2025

Housing Market Outlook

Freddie Mac's baseline scenario for the housing market remains subdued, with a particular focus on home sales. Despite solid housing demand driven by Millennial first-time homebuyers, several challenges persist. These challenges include high mortgage rates and a lack of available homes for sale.

• Housing Demand: Demand for housing remains solid, primarily due to a significant share of Millennial first-time homebuyers entering the market.
• Challenges: High mortgage rates and a shortage of homes for sale pose significant challenges to prospective buyers.
• Expected Persistence: These challenges are expected to persist in 2024, particularly in the absence of significant rate cuts.
• Impact: The rate-lock effect is anticipated to persist, keeping total home sales volume below five million in 2024.
• Price Forecast: Despite solid demand and lean inventory, Freddie Mac forecasts a modest increase in home prices, expecting a 0.5% rise in both 2024 and 2025.

Mortgage Market Outlook

In the mortgage market, Freddie Mac anticipates some shifts in dollar volumes of mortgage origination in 2024, primarily influenced by market dynamics.

• Purchase Origination: Higher home prices are expected to drive up the dollar volumes of purchase origination. However, subdued home sales and a significant share of cash purchases will limit overall purchase origination volumes.
• Refinance Activity: Refinance volumes are forecasted to remain low unless there is a substantial drop in mortgage rates, unlocking rate-locked homeowners. Given the projection of minimal rate decreases, refinance activity is expected to stay constrained in 2024.
• Total Originations: With both purchase and refinance segments facing constraints, Freddie Mac foresees total originations to remain low for the year.

February defied expectations in the US housing market, with home prices surging 6.4% year-over-year according to the Case-Shiller Index. This marks the eighth consecutive month of gains, highlighting the housing market's unexpected resilience even with higher mortgage rates. February witnessed a remarkable acceleration in home price appreciation, with prices soaring by 0.6% on a non-seasonally adjusted basis.

This surge far exceeds the 0.2% average increase observed between 2015 and 2019 during the same period. Even amidst last spring's fervent housing market, February's monthly spike was only 0.2%, highlighting the exceptional growth witnessed this year.

Delving deeper into the data, the 10-city and 20-city composite indexes both reported their eighth consecutive month of annual increases in February, up by 8% and 7.3%, respectively. Notably, metro areas such as New York and Chicago, included in the 10-city index, have demonstrated robust housing market performance since mid-2022, driven partly by the resurgence of urban living and office presence.

Meanwhile, several metros, particularly in the Northeast, have experienced substantial home price appreciation, with cities like Camden, New Jersey; Hartford, Connecticut; Syracuse, New York; Newark, New Jersey; and Providence, Rhode Island, leading the pack with annual increases exceeding 10%.

Compared to the peak levels observed in 2006, the 10-city and 20-city composite indexes have surged by 48% and 55%, respectively. Adjusted for inflation, which has shown signs of easing, the indexes reveal a 1% and 6% increase, respectively, compared to their 2006 levels. Nationally, home prices have escalated by 15% (adjusted for inflation) since the pre-recession peak, underscoring the remarkable resilience and growth of the housing market over the past decade and a half.

Challenges Persist Amidst Soaring Home Prices

Despite the remarkable surge in home prices, the housing market continues to face challenges exacerbated by higher mortgage rates and affordability concerns. While the US CoreLogic S&P Case-Shiller Index reports a robust 6.4% year-over-year gain in February, the road to normalizing housing markets remains tumultuous, mirroring broader economic indicators.

While indicators such as home sales and inventories show signs of improvement compared to the lows of the previous year, higher mortgage rates present a significant hurdle to affordability, deterring potential buyers. Although new listings have surged in many markets, the imbalance between supply and demand persists, propelling home price growth to startling heights.

Examining various housing market indicators, including days on market and sales-to-list-price ratios, reveals a landscape reminiscent of the previous year. This suggests that stabilizing mortgage rates and moderating home price appreciation are crucial for market equilibrium. However, the persistent disparity between buyers and sellers underscores the resilience of home price growth, which continues to outpace expectations.

Regional Insights and Performance

The CoreLogic S&P Case-Shiller Index highlights regional disparities in housing market performance. Metro areas such as New York and Chicago, included in the 10-city index, have witnessed relatively stronger housing markets since mid-2022, driven partly by urban revitalization efforts and the return to offices.

Conversely, metros in the Northeast, particularly those surrounding New York City, have experienced substantial home price appreciation, with cities like Camden, New Jersey; Hartford, Connecticut; and Syracuse, New York, leading the charge. However, challenges persist in more affordable Midwestern metros, where elevated mortgage rates have exacerbated affordability concerns.

Market Outlook and Affordability Challenges

Looking ahead, achieving a more balanced housing market will require concerted efforts to address affordability challenges and stabilize mortgage rates. While the S&P CoreLogic Case-Shiller Index reflects resilience in home prices, it also underscores ongoing headwinds facing potential homebuyers.

Rising home prices, coupled with elevated borrowing costs, pose significant affordability challenges, particularly in areas where additional homeownership costs, such as insurance and property taxes, are on the rise. In response, some existing homeowners may opt to sell their properties, especially second homes or investments, to mitigate these escalating costs.

While February witnessed another surge in home prices, challenges persist in the housing market. Addressing affordability concerns and stabilizing mortgage rates are essential for fostering a more sustainable and equitable housing market. As stakeholders navigate these challenges, attention to regional dynamics and policy interventions will be crucial in shaping the future trajectory of the housing market.