the hottest U.S. housing markets
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By Patrick S. Duffy | Published on August 21, 2023
Much of the housing market remains frozen in place as mortgage rates trend up and existing homeowners remain reluctant to give up their sub-4% interest rates. This means a "hot" market today is more likely one that has returned to the basic fundamentals of demand, supply and relative affordability.
However, as soon as inflation has been better tamed and mortgage rates retreat below 6%, it will likely be these markets in which we’ll see a return of more listings along with multiple offers and bidding wars. Buyers and sellers armed with the most research will be in the best position to pounce when the timing is right.
Because the U.S. News Housing Market Index incorporates a wide array of data points, it provides a simple yet comprehensive way to rank the covered metropolitan statistical areas (MSAs) from shivering to scorching on a scale of 1-100. Designed to work on desktops and laptops but not on tablets and phones, this interactive platform provides a data-driven overview of the housing market nationwide. While this particular ranking leverages data from June 2023, the index is regularly updated toward the end of each calendar month.
Key Findings:
The hottest housing markets continue to include MSAs in Colorado, North Carolina, Florida and Texas that were also popular during the pandemic.
In June 2023, three of the top five hottest markets were in North Carolina, including Durham, Raleigh and Charlotte, primarily due to high scores for buyer demand and relative affordability. While that didn't stop first-ranked Raleigh in December 2022 from being replaced by Denver in June, Raleigh still came in third.
Markets to watch which improved the most between May and June of 2023 include Durham, Greeley, Colorado, and Detroit. Durham’s HMI score jumped 10.6 points to 71.3 primarily due to a rapid increase in its demand index.
The most resilient markets that improved between December 2022 and June 2023 were led by Greeley, San Jose and Miami. Greeley’s HMI score rose 11.0 points to 66.4 mostly due to an improving demand index.
Hottest Housing Markets Overall
With Housing Market Index totals ranging up to 72.9 versus a national value of 66.6 in June, the following MSAs are the hottest housing markets ranked from first to fifth:
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
While these markets certainly benefitted from unusually low mortgage rates and the desire for more living space during the COVID-19 pandemic, they have still managed to hold onto their popularity even as workers have returned to offices and mortgages have gradually trended up to the highest rates in over 20 years. Most of these MSAs also offer the lure of the services and amenities of a larger city without the disadvantages of the behemoths such as New York, Los Angeles or Chicago.
The Hottest Housing MSA Overall
The Denver MSA has a mix of strengths: low mortgage delinquencies, low rental vacancies and a relatively healthy ratio of building permits to job growth. However, an extremely low housing supply of just 1.4 months in June subdued builder sentiment, and a 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.
The overall Housing Market Index of 73.3 for the Denver MSA rose 2.0% year-over-year through July, and improved from a reading of 72.9 in June. The three subindexes covering demand, supply and financial factors for July are also calculated on the same scale of 1-100.
Demand HMI – 74.4 (74.4 in June)
Supply HMI – 51.9 (50.7 in June)
Financial – 93.5 (93.5 in June)
Despite some declines in certain sectors and annual job growth less than half that of the national average, the job market in Denver remains healthy, gaining 19,400 jobs year-over-year through June 2023 (a rate of 1.2% versus a national increase of 2.7%). With a low unemployment rate of 2.8% versus 3.7% nationally in June, the Bureau of Labor Statistics shows most of job gains in Denver over the previous year in the areas of government, leisure and hospitality and services. At the same time, there were losses in the areas of financial activities and information as well as trade, transportation and utilities.
Due to more multifamily homes being built for sale and for rent in recent years, the mix of building permits in the Denver MSA has been gradually tilting away from single-family homes. This trend continued through June, with single-family permits falling to 634 units while those for multifamily homes rose to 1,098.
Looking ahead for the forecast period through November 2023, monthly single-family permits are predicted to continue falling to the mid-400 range, while those for multifamily homes will fall below 800 before rebounding to approach 830.
Although rising recently, the median sales price in the Denver MSA fell 2.1% year-over-year to $597,000, but was still 40% higher than the overall U.S. median sales price. This compares to a national annual decline of 0.5% to $426,000. In both cases, the falling sales prices are not due to lack of demand but falling affordability due to higher mortgage rates.
Up from 1.2 months a year ago, the supply timeline of homes for sale in Denver at 1.4 months in June was still below the national level of 1.8 months. In both cases, however, because a healthy supply timeline is closer to four to six months, it’s likely that prices will remain high until more supply is released for sale.
The median rent in Denver rose 3.8% year-over-year to $2,091, higher than the national median rent of $2,054 but rising by a similar annual percentage rate.
With more households forced to rent as mortgage rates have risen, vacancy rates for rental properties in Denver have trended down over the past year to 4.1%. This is below the 5.0% equilibrium level for supply and demand for rental markets, and also lower than the national vacancy rate of 6.4%.
In June, the rate of mortgage delinquencies of 1.8% in the Denver MSA was just over half that of the national rate of 3.1%, and is remaining stable. The rate of foreclosures at just 0.1% remains very low and is well below the national level of 0.4%.
The U.S. News Housing Media Analysis tool interprets the sentiment from over 500 U.S. housing news articles each month. Filters allow you to tailor media results to your region, time period, source or keyword.
In the case of the Denver MSA for the month of July, the most popular keywords include “real estate pricing,” “price,” “apartment" and “mortgage,” suggesting that interest from local households in new places to buy or live remain high.
In terms of place popularity keywords for July, “Denver” is followed somewhat distantly by “Seattle,” “San Francisco, “United States,” “Dallas” and “Los Angeles.”
Another U.S. News tool helps to understand and synthesize large volumes of housing-related media. This system then translates language into “sentiment” at the end of each business week ranging from -1 (negative) to +1 (positive).
According to the 4,154 articles above shown that mention Denver through August 2023, they have an average sentiment of 0.04, which is more positive than the national article average of 0.00, and sentiment is trending up.