The housing market has been quite turbulent across the board but there are bright spots for certain parts of the country. Some of the top spots include the Northeast and Midwest which are among the top metro areas for housing. Danielle Hale, Realtor.com Chief Economist, breaks down the ranking and gives insight into what the housing market may look like headed into 2024.
Hale states: "Our top housing market list comes into two major groupings essentially. Affordable markets in the Northeast and Midwest, like Toledo, like Rochester, New York, and then you've also got a pocket of markets that are expected to do well in Southern California, where home sales have really been sluggish as a result of high home prices and high mortgage rates. They've not only had a rough 2023 but also a rough 2022. We expect to see that area begin to bounce back as mortgage rates turn the corner, more convincingly, which we expect them to do in 2024, and that reduction in mortgage rates is going to help improve conditions for buyers in Southern California."
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Video Transcript
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JULIE HYMAN: Steep housing prices making the dream of buying a home unattainable for many Americans. But there is some optimism for some areas across the country in 2024. Realtor.com recently out with its top housing markets for next year. And joining us now realtor.com chief economist Danielle Hale.
Danielle, it's good to see you. I guess we're all moving to Toledo, Ohio, for the second year in a row, it seems, according to what you guys are looking at. I mean, it is interesting the persistence of strength in some of these areas. What's driving it?
DANIELLE HALE: Yeah. I think that's right. We have seen the affordable markets in the Midwest and the Northeast, not the biggest cities, but the secondary markets where homes are more affordable really do well in this housing market, where home prices continue to remain high nationwide. And high mortgage rates are really stretching buyers purchasing power, in some cases, to the breaking point, except not so much in these areas, where buyers dollars really stretch further and buying a home does still feel possible.
JOSH LIPTON: And, Danielle, what are some cities or metro areas that maybe took a hit this year that you all think, you look in your crystal ball, you look out at 2024, and you think they may be poised here to bounce back?
DANIELLE HALE: Yeah. So our top housing markets list comes into two major groupings essentially, affordable markets in the Northeast and Midwest, like Toledo, like Rochester, New York. And then you've also got a pocket of markets that are expected to do well in Southern California, where home sales have really been sluggish as a result of high home prices and high mortgage rates. They've had a rough-- not only rough 2023, but also rough 2022.
And so we expect to see that area begin to bounce back as mortgage rates turn the corner more convincingly, which we expect them to do in 2024. And that reduction in mortgage rates is going to help improve conditions for buyers in Southern California. We're not going to see a return to pandemic levels of home sales activity. But we are going to see a nice bounce back in those markets.
JULIE HYMAN: Danielle, what are people doing in these places? In other words, right, are people moving to a place like Toledo and looking for a job because it's affordable? Or is it expansion from nearby other cities where people can maybe telework? What phenomenon is driving? You know, because, obviously, people still need jobs when they're in these various places.
DANIELLE HALE: Yeah. It's really a mix. Some of these markets do have homegrown local buyers that are able to take advantage of stronger employment conditions in the area. But a lot of times, it's people coming from nearby markets. So in Toledo, you might get buyers from Chicago, for example. In Rochester, you see a lot of buyers relocating from New York City, sometimes even Boston, looking for affordability and trying to find more space for their real estate dollar.
You'll notice that the top market in Southern California, for example, is the Oxnard-- Thousand Oaks metro area, which is just outside of the LA area. So again we see that theme of people looking for affordability, maybe willing to tackle a longer commute in order to get there, so that they can find a place to live that still falls within their budget. And this is especially true as hybrid work remains the norm in many markets. Even though we're not seeing as much full remote work as we did in previous years, hybrid work enables people to tackle those longer commutes. So that they can get more affordability from the housing market.
JOSH LIPTON: And there was a good story in The Journal this week that had a lot of people talking. And the piece said how home ownership in this country is now a pipe dream for more Americans, they're words. That just the math for buying a home between the high prices and the high rates, it just-- it doesn't work anymore for a lot of Americans. What was your response to that, Danielle?
DANIELLE HALE: Yeah. So buying a home has become more challenging. It's one of the reasons why, even though we do expect an improvement in affordability in 2024, we don't expect to see a huge uptick in home sales nationwide. Some of these markets will see home sales go up. But nationwide, we're expecting just a 0.1% increase over what we saw in 2023.
And for context, we expect sales in 2023 to tally the lowest that they have at least since 2008 and possibly even stretching all the way back to the mid '90s. So it's a tough place to buy a house right now. Some people look at the overall home ownership rate and think, oh, the overall homeownership rate continues to be relatively high, people must be doing OK. But if you drill down and look at the homeownership rate by age, you can see that an aging demographic population is masking real significant challenges for younger potential buyers, who are not yet homeowners, but who likely aspire to be.
And so, you know, I think The Journal is probably hit on some real significant challenges in the market and the stress that it's causing a lot of younger households.
JOSH LIPTON: All right. Danielle, thanks so much for joining us today and giving us that outlook for what to expect next year. Appreciate it.
