Veros Real Estate Solutions (Veros®) has released its 2023 Q4 VeroFORECASTSM, projecting a 2.4% nationwide increase in home prices over the next year, surpassing last quarter's forecast of a 2.2% rise. The report evaluates home prices in over 300 major housing markets, utilizing data science for predictive analysis based on economic, housing, and geographic variables.
Despite the challenges faced by the housing market in 2023, characterized by low supply and unaffordability, the Federal Reserve has maintained current interest rates in its December 2023 meeting. However, hints of three potential rate cuts in 2024 have led to a decrease in mortgage rates to 6.6%, though predictions suggest they won't dip below the mid-six percent range.
Mortgage-free homeowners have yet to significantly impact the market due to limited options and high prices, with a considerable portion owned by baby boomers. Affordability concerns persist, even with mortgage rates lower than 6.6% observed during the first half of 2023.
On the positive side, sustained demand in the housing market is fueled by millennials forming households and first-time buyers seeking opportunities. Affordable destinations in the northeast and Midwest are gaining attention, offering lower living costs, promising economic prospects, and family-oriented communities. Remote work has enabled individuals to reside in more affordable areas while maintaining employment elsewhere.
Rochester, NY, leads the current list of top-performing markets based on VeroFORECASTSM, with three cities in Ohio, two in Pennsylvania, and one each in Connecticut, New Hampshire, and Illinois also making the top 10. Greensboro in North Carolina is the sole market outside the Midwest or northeast to make the cut, with projections of appreciation in the 5.3% to 7% range.
Former worst performers San Francisco, San Jose, and Seattle are displaying signs of recovery, while five of the current worst-performing cities are in Texas. Utah, Idaho, Louisiana, and Nevada also feature among the list of worst performers, with a forecasted modest depreciation ranging from -2% to -5.5%. This shift in rankings reflects the dynamic nature of the real estate market as areas witness changes in fortune or continue to grapple with challenges.