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Top 10 Real Estate Markets To Watch in 2016

Posted on December 3, 2015 | Read time: 4 minutes

Realtor.com chief economist Jonathan Smoke checks the first and second derivative rates of change in the rich and deep data pool at the National Association of Realtors, and clocks in with a 2016 Top 10 markets to watch for growth in prices and sales volume.

Here’s a look at the basic approach to the methodology: Smoke and his team took past trends and seasonal variations of housing and economic data for the 100 largest markets in the country and stuck them into a time machine—oops, we mean a statistical model that predicts future values for home sales and prices. Then they identified the markets whose forecasted growth was equal to or better than the U.S. average. The resulting top 10 list is of the real estate markets that look the most bullish for the coming year.

Month after month here at realtor.com we use our data to determine the hottest markets in the U.S. —where home buyers and sellers are the most motivated and active. And as 2015 winds down, we started to wonder: Where are the next red-hot places for real estate?

In spite of the picture above, we don’t actually have a crystal ball here (sadly), but we do have our chief economist, Jonathan Smoke. As part of the realtor.com 2016 Housing Forecast released on Wednesday, he homed in on the top 10 up-and-coming metropolitan markets in the country.

Smoke and his team took past trends and seasonal variations of housing and economic data for the 100 largest markets in the country and stuck them into a time machine—oops, we mean a statistical model that predicts future values for home sales and prices. Then they identified the markets whose forecasted growth was equal to or better than the U.S. average. The resulting top 10 list is of the real estate markets that look the most bullish for the coming year. Get ready for a few surprises!

Many of the markets that have consistently made our “hot list” because of high demand from buyers and quick sales didn’t make the cut for 2016, because they are predicted to see slower price appreciation and even declining sales. Notably, they include the greater metro areas of San Francisco, Denver and Dallas.

In addition, each of the markets on the list is in high demand, with 60% more listing page views than the U.S. overall and inventory that sells 16 days faster than the U.S. average. Surging demand in each market can be attributed to growing household formation, a prosperous job market, and low unemployment rates as well as large populations of key demographics. Older millennials (25 to 34 years old), younger Gen Xers (35 to 44 years old), and retirees (65 to 74 years old) will be driving home sales in 2016.

While these top markets have bright prospects in common, their underlying dynamics are different.

“Some markets have been hot and are remaining hot (San Diego, Sacramento, Boston, Atlanta),” Smoke noted. “Some are just now seeing signs of recovery based on substantially better economic conditions forecasted for next year (Providence, New Orleans, Virginia Beach, St. Louis). Some are spillover markets from very hot markets (Providence, Sacramento), and most have one or more key demographic driving demand.”

For the younger set, especially those with families, affordability emerges as key to growth, which favors the markets in the South and Midwest, he added.

Without further ado, here’s our list: