Due to rising mortgage rates and existing homeowners’ reluctance to give up their sub-4% interest rates, a large portion of the housing market is still locked in place. As a result, a market that is “hot” today is more likely to have reverted to the fundamentals of demand, supply, and relative affordability.
However, it will probably be these housing markets where we witness a resurgence of more listings along with multiple bids and bidding wars after inflation has been better controlled and mortgage rates recede below 6%. The most informed buyers and sellers will be in the greatest position to seize opportunities when the time is perfect.
The U.S. News Housing Market Index, which takes into account a wide range of data factors, offers a straightforward yet thorough way to rank the covered metropolitan statistical areas (MSAs) on a scale of 1-100, from freezing to scorching. This interactive platform offers a data-driven snapshot of the housing markets nationally and is designed to work on computers and laptops but not tablets or phones. Although the index is periodically updated around the end of each month, this ranking uses data from June 2023.
Hottest Housing Markets Overall
The following MSAs, listed from first to fifth, are the hottest housing markets, with totals for the Housing Market Index reaching up to 72.9 compared to a national value of 66.6 in June:
- Denver, Colorado – 72.9
- Durham-Chapel Hill, North Carolina – 71.3
- Raleigh, North Carolina – 70.3
- Charlotte, North Carolina – 70.2
- Cape Coral-Fort Meyers, Florida – 69.3
Although the COVID-19 pandemic brought about unusually low mortgage rates and a demand for larger homes, these housing markets undoubtedly benefited from these factors, they have nonetheless maintained their popularity as workers have returned to their offices and mortgage rates have gradually trended up to the highest levels in more than 20 years. The majority of these MSAs also entice residents with the allure of a larger city’s services and amenities without the drawbacks of megacities like New York, Los Angeles, or Chicago.
The Hottest Housing MSA Overall
The Denver MSA has a variety of advantages, including minimal rental vacancies, low mortgage delinquencies, and a generally favorable ratio of building permits to job growth. While a very low ratio of building permits to new household growth will continue to put a floor under home prices and increase pressure on rents until more housing inventory is released, a very low housing supply of just 1.4 months in June dampened builder morale.
The Denver MSA’s overall Housing Market Index increased from a value of 72.9 in June to 73.3 in July, an increase of 2.0% year over year. On the same scale of 1-100, the three subindices for July’s demand, supply, and financial aspects are also determined.
- Demand HMI – 74.4 (74.4 in June)
- Supply HMI – 51.9 (50.7 in June)
- Financial – 93.5 (93.5 in June)
Denver’s job market is still strong, adding 19,400 jobs year through June 2023 (at a rate of 1.2% versus a national increase of 2.7%), despite some dips in specific industries and annual job growth that is less than half that of the national average. According to the Bureau of Labor Statistics, Denver experienced job growth in the government, leisure, hospitality, and services sectors the most over the previous year, with an unemployment rate of 2.8% compared to 3.7% nationally in June. Trade, transportation, utilities, financial activities, and information all suffered losses at the same time.
The balance of construction permits in the Denver MSA has been gradually shifting away from single-family homes as more multifamily dwellings have been constructed in recent years for both sale and rental purposes. Through June, this pattern persisted, with permits for single-family homes declining to 634 units and those for multifamily homes rising to 1,098.
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Monthly single-family permits are anticipated to keep down to the mid-400 range until November 2023, while multifamily permits are anticipated to drop below 800 before rising to about 830.