America’s ‘Inhospitable’ Housing Market Has Driven Buyers to One City That’ll Surprise You

Fall’s lower temperatures come with slower home sales—particularly as high interest rates cast a chill in the air.

But according to a new Realtor.com® report on America’s Hottest Housing Markets of August 2023, competition for housing—measured by views per listing and days on the market—is still shockingly heated in certain places.

“Despite waning demand, many markets, especially affordable markets, saw demand outstrip supply, leading to surprisingly competitive conditions,” says Hannah Jones, economics data analyst at Realtor.com, in her analysis. “The country’s hottest markets suffered this fate.”

And many of these preeminently popular markets might surprise you, particularly No. 1: Rochester, NY.

This unassuming city next to the Great Lake of Ontario might not be on most peoples’ radar, but cash-strapped homebuyers have taken note of its modest median list price, which came in at $250,000 in August—far below the national median of $435,000.

“This means that buyers financing 80% of a home purchase at today’s mortgage rate of 7.19% would be looking at a monthly housing payment of roughly $1,400 in Rochester versus roughly $2,400 for the median-priced U.S. home,” says Jones.

In other words, Rochester residents are spending $1,000 less per month for a house compared with the average American.

“Though it has only topped the list a handful of times, Rochester has ranked in the top five hottest markets for the last 30 months,” Jones says. “Rochester offers potential buyers affordability and the opportunity to become homeowners in a largely inhospitable market.”

Why affordability rules America’s hottest markets

Jones’ sentiment was echoed by Doug Forken, a Rochester-area real estate agent at Howard Hanna Real Estate Services, who’s seen an influx of out-of-town buyers to his area since the beginning of the COVID-19 pandemic and as investors took advantage of record-low interest rates from 2020 to 2022.

“Home prices [here] are still more affordable than many parts of the country,” Forken says. “With more people working from home, buyers are moving to locations with a lower cost of living.”

As a result, he says, “Supply is not able to keep pace with demand. Supply is so low that every type of buyer imaginable is looking to purchase.”

Given mortgage rates for a 30-year fixed-rate loan have more than doubled from below 3% to over 7% today, homebuyers across the country have shifted their priorities toward more budget-friendly locales. As a result, 14 of August’s hottest markets were priced below the national median of $435,000.

Yet, as demand for these metros has risen, so have their prices.

“Home prices continue to rise in the Rochester area,” Forken warns. “Some buyers have grown more selective recently as prices and mortgage interest rates continue to rise, but updated homes in desirable locations continue to drive prices to new heights.”

Nationwide, list prices have inched up only 0.7% in August compared with last year. Yet by comparison, prices in the 20 hottest markets rose between 2.1% and 19.3%, marking the 13th month in a row of outstripping overall price growth.

Yet even though Rochester prices have shot up 11.1% since last year, that number has remained below the national median since 2016, when Realtor.com started collecting this data. In other words, this city isn’t about to become unaffordable anytime soon.

Why affordability might be relative

Affordability can also be relative, with the second- and third-hottest markets of Portland, ME, and Manchester, NH, sporting median list prices above $550,000.

In fact, seven of August’s 20 hottest markets lie within commuting distance to Boston and offer cheaper alternatives to living in Beantown, where home prices hover at $844,000.

While 10 of August’s hottest markets lie in the Northeast, eight locales are in the Midwest, and two Southern cities entered the rankings this month, including Johnson City (No. 12) and Kingsport-Bristol (No. 17) in Tennessee.

Still, even with some Nashville alternatives jumping into the top 20, the Northeast and Midwest have dominated these rankings since early 2022. And this has kept inventory in these areas tight.

“While the annual decline in homes for sale in these regions has been middle of the pack, the number of homes for sale in the Northeast and Midwest was less than half its pre-pandemic norm in August,” says Jones.

While limited inventory continues to be an issue across the nation—with for-sale inventory tumbling 7.9% year over year in August—three-quarters of the month’s hottest markets saw more severe inventory declines than the rest of the country. As a result, homes in most of the hot list locations don’t linger.

“These markets are seeing homes for sale move up to 31 days more quickly than the typical property in the United States,” says Jones.

So while the market isn’t flying at a pandemic-frenzy pace, homebuyers might still feel some pressure to hurry if they see a property that checks all of their boxes.

As Rochester-based agent Forken puts it, “The annual slowdown is expected at the onset of the holidays, but the market will likely be on the rise again in late February.”

The post America’s ‘Inhospitable’ Housing Market Has Driven Buyers to One City That’ll Surprise You appeared first on Real Estate News & Insights | realtor.com®.