20 of the Hottest Real Estate Markets in the US

The housing market is chugging ahead, with even higher home prices and more buyer activity—and in May, we’re seeing more than the ordinary seasonal uptick.

“On the demand side, we are seeing traffic and searches on realtor.com® continue to set new highs,” said our chief economist, Jonathan Smoke, who did a preliminary analysis of our site’s data in May. Visits and searches are expected to be up more than 50% and 35%, respectively, year over year.
Helping create more opportunities for buyers, the listings inventory is now growing faster, at 4% over April—but it’s still down compared with last year, so buyers will need to keep on their toes. In part because of the limited inventory, the median list price increased nationally to $228,000, up 7% over the previous year and 1% over April. At the same time, homes are moving more quickly: Median days on market, now at 66, continued a sharp decline, down 11% year over year and 10% month over month.

Smoke’s team also ranked the nation’s 20 hottest real estate markets for buyers and sellers. Looking at the nation’s 300 largest markets, the team used the number of views per listing on realtor.com to gauge demand, and the median age of inventory to assess supply.

California dominated the list, with half of the country’s 20 hottest real estate markets, because of its tight supply of homes and economic-powered growth in demand. San Francisco and San Jose maintain the second and third spots from the April rankings, while the state capital, Sacramento, leaped from No. 21 in April to No. 12 in May.

“Sacramento typically follows strong growth in Silicon Valley and the San Francisco Bay Area, as it is a relatively more affordable alternative,” Smoke said. “But this market has had strong employment growth above the national average and is seeing strong household growth as a result.”
Three states pulled off a two-fer on the list: Texas, with No. 4 Dallas–Fort Worth and No. 16 Austin; Colorado, with No. 1 Denver and No. 13 Boulder; and Michigan, with No. 9 Ann Arbor and No. 10 Detroit. These markets’ success also reflects economic-powered gains, but the Texas and Colorado story is more of a continuing saga that shows the resilience and diversified nature of the states’ economies despite the declines in oil. Michigan’s performance is related to economic recovery and very strong affordability.

Denver resoundingly maintained the top ranking as inventory there shaved six days off the median age while listing views grew 7% over April. Like Dallas, Denver is experiencing substantial economic growth, and the tight supply of housing is resulting in the fastest-moving inventory in the country.

The 20 Hottest Real Estate Markets in May 2015

Market	May Rank	April Rank
Denver-Aurora-Lakewood, CO	1	1
San Francisco-Oakland-Hayward, CA	2	2
San Jose-Sunnyvale-Santa Clara, CA	3	3
Dallas-Fort Worth-Arlington, TX	4	4
Vallejo-Fairfield, CA	5	5
Boston-Cambridge-Newton, MA-NH	6	6
Santa Cruz-Watsonville, CA	7	8
Santa Rosa, CA	8	7
Ann Arbor, MI	9	9
Detroit-Warren-Dearborn, MI	10	11
San Diego-Carlsbad, CA	11	10
Sacramento-Roseville-Arden-Arcade, CA	12	21
Boulder, CO	13	17
Fargo, ND-MN	14	12
Los Angeles-Long Beach-Anaheim, CA	15	15
Austin-Round Rock, TX	16	14
Oxnard-Thousand Oaks-Ventura, CA	17	13
Manchester-Nashua, NH	18	31
Columbus, OH	19	22
Stockton-Lodi, CA	20	38

Rental Rates Outpace Home Appreciation

Buying a home is already far more affordable than renting one, and that imbalance could worsen as rents outpace home values for the first time in years.

In April, rents nationally rose an average of 4 percent compared to home values increasing by just 3 percent year-over-year, according to new data from Zillow.

One result: Renters who were considering buying are now taking that first step.
“We finally have more buyers who are serious now,” said Cyndi Mino, an agent with First Team Real Estate Agents in Huntington Beach, CA. “Landlords are raising rents ridiculously high, and people are saying, ‘That’s it — it’s time to buy.'”

In Mino’s area, first-time home buyers are finding 2-bedroom condos for $350,000 and 2-bedroom town homes for about $450,000.

Although millennials are expected to be the largest home-buying group in 2015, many first-time buyers are older, Mino said. “They never thought they would or could buy, but with rents going up, if they can save enough money to buy, they’ll pay less for a mortgage [than for rent].”
The last time this happened, it went on for a while — but the situation was considerably different.
In the wake of the housing bust, home values declined before rebounding. Rents, maintaining steady growth, easily stayed ahead.

That changed in April 2013, when home values finally heated up enough to pass rents. By April 2014, home values were sprinting at 8.8 percent year-over-year, while rent gains remained steady between 2 percent and 3 percent on an annual basis.
Now home values are cooling off, while rents pick up a little — and that’s enough for the tortoise to pass the hare.