Lately, there has been a glut of good news coming from the housing market. Home sales have experienced solid gains over the past three years, culminating in a 11.4 percent increase in single-family homes over the past 12 months, and recent data from the U.S. Commerce Department shows that housing construction is driving increased construction spending. Of course, these figures do not represent even growth across all markets, so let’s explore which housing markets have been booming and what experts project for the coming year.
A new report from realtor.com® details the hottest markets in the country in November. For the most part, Californian cities dominate the list’s top 20 with 12 of the top 20 markets on the list. The Colorado Front Range is represented twice in the top tier with both Denver and Boulder registering as hot national markets. The rest of the list is mostly populated by other warm weather climates (e.g.., Dallas, TX and Palm Bay, FL) and cities with strong, or growing, economies such as Boston, MA, and Nashville, TN. However, a close look at the list reveals a few surprises that may portend housing trends in 2016.
Given the abundance of sunny locales peppering the hottest market top 20 list, it is somewhat astonishing to see Midwestern cities like Detroit, MI, and Columbus, OH, so high on the list. However, a number of real estate predictions suggest that these types of cities are poised for growth in home sales in the coming years. What has changed that is suddenly making these cities such desirable locations for prospective home buyers?
The most evident reason is the decreasing affordability in popular destinations like those at the top of the hottest markets list. Years of growth and relatively strong economies have driven housing prices sky-high in places like San Francisco and Denver, to the point that real estate analysts are now beginning to see home buyers looking for affordable homes in the “Bargain Belt.” The Bargain Belt loosely refers to swaths of the country in the Midwest and the South like Charlotte, NC, or Grand Rapids, MI, but also may include cities that neighbor some booming hubs of commerce and technology, like Providence, RI. Some of these local economies are finally beginning to catch up to the hot markets, and combined with relatively slow growth over the past few years, are becoming regional nexuses for affordability. As a result, mid-size cities like Providence and St. Louis, MO, are expected to see substantial growth in the housing market in the coming years.
So what does this all mean for mortgage lenders? Although coastal cities are projected to experience some cooling, they should still be fairly hot markets, meaning mortgage lenders in those regions will continue to stay busy. As markets in the Bargain Belt continue to grow, mortgage lenders in recently stagnant markets may begin to see their business tick up. Overall, it should be an interesting year for housing.