Housing shifts: south & west fall behind northeast & midwest

Sunny climates in the South and parts of the West, once attractive to homebuyers during the COVID-19 pandemic, are now losing their appeal. According to the Realtor.com® 20 Hottest Housing Markets report, these regions have not featured prominently on the list for over a year. Instead, markets from the Northeast and Midwest dominate.

"The Northeast and the Midwest were the only regions on this month’s list with 13 and seven markets, respectively," said Hannah Jones, Realtor.com® senior economic research analyst. "October’s list is the 13th in a row that only contains Northeast and Midwest markets."

The Realtor.com Market Hotness Index evaluates real estate markets based on demand and market pace. The ranking assists buyers, sellers, and investors in understanding market competitiveness.

Hot markets are characterized by quick sales and intense competition. Sellers benefit from high home equity potential, while investors identify areas with growth opportunities.

Affordability is a significant factor influencing these trends. "The Midwest and Northeast have reigned supreme as homes to most of the country’s hottest markets since mid-2022 when mortgage rates picked up steam," noted Jones.

Rising mortgage rates have increased home prices in certain regions, pushing buyers toward more affordable areas. This shift has affected traditionally desirable Western markets due to their high prices.

In November 2021, when mortgage rates were around 3%, several Southern and Western cities appeared in the top 20. However, by July 2023, no Western cities remained in those rankings.

Jones explained that declining demand sometimes results from an oversupply of housing stock: "The South has seen waning demand and climbing inventory over the last two years." This trend has led to longer market times and fewer property views.

"Like the South, inventory levels in the West have recovered more annually relative to pre-pandemic," added Jones. More available homes mean less per-property viewership and lower hotness rankings.

While Southern and Western metros have not made it into the top 20 recently, they still appear within the top 200. Huntington, WV ranks at No. 44, while Oxnard, CA appears at No. 85.

To improve their standings on this list, Jones suggests that "buyer demand would have to pick up significantly," possibly due to lower home prices or reduced mortgage rates.