Affordability is a chief concern among buyers at the moment as interest rates continue to rise while outsized price tags have been sidelining buyers left and right.
But, according to Realtor.com, hope is to be had as there are still relative bargains to be had, as long as you’re looking in the right place and their new report highlights some of the areas slated to see the strongest growth in the coming year. These markets are not only poised to see the strongest combined growth in home sales and listing prices in the coming year, but up to this point they have seen lower price increases, a relatively smaller affordability crunch than other markets across the U.S.
The cities revealed to have the highest relative odds of outperforming the market are concentrated east of the Mississippi, and are traditionally smaller-tier cities with strong local ties to manufacturing, healthcare, government, and education.
Home sales across the top 10 markets are forecasted to grow by 5.2% year-over-year in 2022, whereas the national homes sale projection is for declining sales (-14.1%). Additionally, average home prices in the top 10 are expected to increase 7.3%—compared to 5.4% for the U.S. as a whole.
Due to a litany of reasons—many of which have to do with their inherently smaller size—these areas offer relatively affordable options because these did not see booms that the higher populated metropolitan areas saw. In the top 10 markets, about 23% of housing inventory is affordable at the median income level, compared to just 17% of affordable homes nationally. Better affordability offers some insulation from the impact of rising mortgage rates.
"As many households keep a close watch on their spending, we expect these top housing markets to be in relatively high demand," says Danielle Hale, Realtor.com’s Chief Economist. "We've seen lower price increases, more general affordability and more use of government-backed mortgage products for veterans, first-time and minority buyers in these top markets, providing opportunities for all home buyers to stretch their homebuying dollars. Many of these areas flew under the radar in the pandemic frenzy, and are now well-positioned to bubble up with solid job prospects without the big-city price tag.”
While it’s true that these cities saw growth over the past two years, the growth they saw last year was about 10.5% while the top-100 performing metropolitan areas saw a rate of 12.6%
Click here to see Realtor.com’s list of cities to watch.