Top 20 US Cities for Real-Estate Investors Seeking Growing Economies


  • Danielle Hale says one of the biggest issues in the housing market right now is affordability. 
  • Housing supply remains low. August’s active inventory is still 47.8% below 2017 to 2019 levels. 
  • Affordability, growing economies, and low unemployment create investment opportunities. 

As of Friday, the average 30-year fixed mortgage rate was at 6.79%. It’s now more than doubled from 2021’s historic lows of 2.65%.

One could argue that today’s rates are closer to the norm than in the past few years: between 1971 and 2023, the average fixed 30-year rate was 7.18%, according to Trading Economics. But in 1971, the median sales price of houses sold in the US hovered at around $25,000 — about $180,000 in today’s inflation-adjusted dollars. According to Federal Reserve Economic Data, the median sales price was $416,000 in Q2. So, that 7% interest rate will cost a homebuyer substantially more. 

Between mortgage rates and property appreciation, buying a home takes up a more significant chunk of household budgets than it has over the last several years. And so affordability is really lacking in the market, says Danielle Hale, the chief economist at Realtor.com, a real-estate marketplace. 

“It’s, I think, an understatement to say that it has been an interesting year in real estate,” said Hale. The past few years have brought about many changes in the economic and financial landscape. And that context is important for the housing market because housing is such an interest rate-sensitive sector of the economy, she added. 

Homeowners with lower interest rates than what prevails now are choosing to stay put rather than swap their homes for something else. This means there is less supply but also less demand because they aren’t in the market for property either. 

New listings from July to August increased by 3.5%, according to Realtor’s Monthly Housing Trends Report, which tracks listings for sale. Yet, August’s active inventory is still 47.8% below 2017 to 2019 levels. 

“While the uptick in new listings is good news for home shoppers, inventory remains persistently low, even with record-high mortgage rates putting a damper on demand,” Hale wrote in an email. “The inventory crunch continues to put upward pressure on home prices, amplifying affordability concerns and shutting some potential buyers out of the market. However, we anticipate mortgage rates will gradually ease through the end of the year and, despite this month’s bump in home prices, we’ll be unlikely to see a new price peak this year.”

As for first-time homebuyers or those who want to shift from renting to buying, they are also more likely to remain on the sidelines for now. Rents are currently flat or declining on a year-over-year basis in some areas, Hale said. Additionally, record-high levels of multifamily construction expected to hit the market later this year and into 2024 will keep rents low and even declining, she added. 

But for those still in the market and looking for the right property to invest in or move into, Hale says you should consider supply and demand. Generally, longer listing times indicate a higher level of supply and shorter times indicate that supply and demand are well balanced because people are pouncing on homes when they hit the market, Hale said. 

Additional factors to consider include the unemployment rate in the area of interest, which should be low or dropping. This tends to indicate an increase in available jobs, Hale noted. People coming in with incomes are going to be looking for a place to live, whether they’re renting or trying to buy a home, which tends to mean that the housing market will do well going forward, she added.

The Emerging Housing Markets Index, which Realtor.com compiles in partnership with The Wall Street Journal, considers the aforementioned metrics. While the index doesn’t measure affordability, it’s a common theme among areas that pop to the top, Hale noted. It suggests that demand is high and supply is relatively limited in affordable areas, Hale said. This makes sense when you consider the broader economic context that prices are high, mortgage rates are high, and some people still have a fair amount of flexibility to look for an area where they can work remotely. She added that they’re probably prioritizing affordability because it’s so hard to find, especially in major US markets right now. 

The list below includes the top 20 most attractive markets based on data from the summer months. The list is based on a review of 300 metropolitan areas, highlighting markets with the lowest costs of living that aren’t yet overcrowded, and including home prices in up-and-coming economies with low unemployment rates.



Read More: Top 20 US Cities for Real-Estate Investors Seeking Growing Economies

2023-09-02 10:00:00

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