With the nationwide housing market showing steady growth—from 4.54 million sales in 2011 to 6.44 million predicted sales in 2019—buyers may be keen to scope out their next home purchase. But this nationwide trend is not necessarily indicative of the housing market health in each state. Indeed, statewide economies are always in flux, with many suffering from weak growth and some even stagnating.
Before picking the right spot for a dream property, it’s critical that homebuyers know what to expect from housing markets across the country. That’s why Fit Small Business completed this ranking, underscored by the latest data on the average price of houses, mortgage rates, inventory, new construction, and household income in each state.
Here are the five data points we considered for ranking the hottest real estate markets in 2019:
- Housing prices (30%): Housing prices are considered the biggest indicator of overall housing market health because price is the primary criterion for inclusion and exclusion in a property search for buyers. Higher home prices indicate a “hot” market as the homes are in great demand.
- Available inventory (20%): The available inventory in a given market is key. Lower inventory means less choice for the buyer and, generally, fewer purchases. Higher inventory, when coupled with buyer interest and financial health, creates a strong housing market.
- New construction (20%): New construction―for middle-market or starter houses―means community growth. New construction gives buyers with a limited budget more property choices and shows general housing market growth.
- Household income (15%): Household income is key to homebuying, of course. Lower incomes mean home purchases are less likely while higher incomes make homebuying eminently possible. Higher incomes, then, indicate a stronger housing market.
- Mortgage rates (15%): High mortgage rates are key to housing market health. While there are many reasons mortgage rates might be high, for the purposes of this study, we considered high rates as an indicator of buyer demand for home loans, indicating a “hot” market. This, however, can be a disincentive to purchase.
These are the top 10 states with the strongest housing markets in 2019.
California ranks well for four of the five data points—income levels, new construction, inventory of houses on the market, and mortgage rates. Income levels are among the highest in the nation in California at around $67,169 annually. The new construction rates are 62,236 new units per year and housing inventory rates are 762,952—both ranking highly nationwide. Mortgage rates fall right in the middle at 3.3% with the median home cost on the high side at $544,000.
Part of what makes California such a strong state for housing is its size and coastal allure. The size allows for large inventory, as noted above, while properties on the water draw in residents seeking beachfront properties. This, in part, accounts for the high median home cost, which is sustained by the equally high average salary.
Colorado comes in second with a robust household income, strong new construction and existing housing inventory, and lower average housing prices. The mortgage rates in Colorado are among the highest in the nation at 4.28%. The average household income for Colorado is $65,458 annually. New home constructions add 29,061 properties to the inventory of 139,336 existing homes each year. Home costs run—on average—$419,000 for a single-family home.
The lower home costs in Colorado, combined with the high average annual household income, makes for a strong housing market. When you add in the housing inventory—new construction and existing homes—buyers have a robust mixture of choices, ranging from starters to move-up housing. The one data point that is troublesome is the higher interest rates in Colorado, which means buyers might pay a lot in interest over the life of a home loan.
Texas enters our list as the third strongest housing market by state due to their high ranking for new construction at 123,249 and 867,217 in existing inventory. Mortgage rates are among the highest of all states at 4.36%, although the state boasts a low median housing cost of $279,900. The household income remains in the middle for all states at $57,051.
Texas is a growing housing market due to its new construction and existing inventory, creating a wealth of buyer opportunities for all budget levels. With the addition of a low average housing cost and a respectable income per household, the mortgage rates are the only setback for buyers in Texas. Still, this indicates it’s a hot marketing in 2019.
Washington is the fourth-strongest housing market by state due to their inventory of 179,169 existing houses mixed with their growth of 23,356 new properties each year. This thriving housing market includes a midrange home price of $395,000 and a statewide average income of $66,174 per year. The mortgage rate is among the highest in our ranking at 4.2%.
The strong housing market in Washington is due to a large selection of new and existing homes that are less than $400,000. This means that both starter and second-time buyers have choices for the right home to fit their budget and their family needs. With an annual household income in the top 10 of our rankings, Washington buyers only suffer from the increased mortgage rates that similarly plague Colorado and Texas.
The housing marketing for Virginia combines a high household income of $68,766 with a relatively low average home cost of $314,970. Virginia ranks in the top 15 nationwide for new construction with 21,139 new homes built yearly, supplementing the 238,948 homes in existing inventory. The mortgage rate is still high at 4.21%―matching several of the hottest real estate markets listed so far.
The Virginia housing market shows great promise, with a low average home cost and a high number of properties to buy. With a strong annual household income, buyers can select houses that meet their budget and easily qualify for a mortgage. Like other states on this list, the mortgage rate is among the highest nationwide. Buyers will need to shop for the best mortgage rate or consider refinancing later when rates drop to save money.
6. New Jersey
New Jersey is in the second half of our list of hottest real estate markets because their average household income of $76,475 and home price of $334,900 are indicators of both a strong economy and a strong housing market. However, there are 397,779 existing homes on the market and only 10,452 new properties built yearly, which means starter homes might be in short supply. The 4.1% mortgage rate is high for any housing market.
The housing market in New Jersey is ideal for those seeking a preexisting property because the number of starter houses are very low. Fortunately, the high average household income is in line with the median home price, making midpriced, existing properties accessible. While the lack of lower cost new construction might lock some first-time buyers out of the market, the favorable inventory of existing homes means that New Jersey is a good spot for higher-income buyers.
7. New York
The housing market in New York boasts existing houses numbering 352,514 and a favorable average annual income of $62,765. New construction is slow, however, with only 10,622 new units added to the market this year. The average home costs $385,000―among the highest in the nation―with a 4.15% average mortgage rate.
New York is similar to New Jersey—with slightly elevated housing prices and lower annual household income. The massive inventory of preexisting homes creates a fairly strong market, however, by giving buyers an advantage over sellers trying to sell properties. This might help first-time buyers break into the market by allowing them to negotiate a price that fits their budget.
Florida is a thriving housing market with an increase in new construction of 94,836 houses last year, adding to the existing inventory of 871,758 houses. While the state has a low annual household income of $50,883, the equally low median housing price of $294,900 makes homebuying a serious option for residents. The mortgage rate is high at 4.22%.
The increase in new construction and availability of existing houses are making Florida one of the hottest real estate markets. What’s more, home prices are eminently affordable, and properties are often located in desirable locations near the water.
Maryland’s residents boast some serious buying power. The high annual household income of $78,916―the highest in the nation―meets the moderate housing prices easily at $325,000. Plus, the robust inventory of houses on the market stands at 147,556, never mind the only 12,797 units added to the mix in new construction last year. The mortgage rate, however, sits at an unfavorable 4.09%.
Considering that Maryland is one of the smallest states in land size, limited new construction is to be expected. Other factors―like annual income and housing prices―show that houses are accessible for ready buyers. With the highest income in the nation and good preexisting inventory, buyers in Maryland are primed for one of the hottest real estate markets of 2019. The mortgage rates for Maryland, however―like other states―will be a costly consideration.
Utah is set to become one of the best real estate markets due to the average household income of $65,325 with moderate housing prices settling in at $350,000. New construction is high at 18,851, adding to the 105,289 existing houses on the market. With an interest rate in line with other thriving markets on our list at 4.1%, Utah rounds out our list of the top 10 states with the strongest housing markets in 2019.
Utah real estate is thriving because of the influx of new construction mixed with a decent inventory of preexisting homes. This gives buyers a good selection of properties and opportunities to pick the best house for their needs/budget. The higher household income means buyers are more likely to be mortgage-eligible and ready to make a purchase—even with the higher interest rate.
Ranking of All 50 States
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Click here to see all data considered in our study.
To rank the top 10 states with the strongest housing market, we considered five primary data points, which were weighted based on their influence or impact on housing markets. Those data points are as follows.
Housing Prices: 30%
Housing price was given the most weight of all of the data points because it is often the primary filter used by buyers seeking a property. If the average home prices are too high, then the buyer will either find smaller properties to meet their budget or delay the purchase for a period of time until housing prices drop.
Available Inventory: 20%
Available inventory is an important data point because it indicates the number of houses likely available to potential buyers. When fewer properties are on the market, sellers often have the advantage over buyers and average property prices increase. For locations where there is an excess of houses on the market, buyers have the advantage of choice and prices will decrease to be competitive.
New Construction: 20%
New constructions, or starter houses, are a vital part of the equation because these tend to be the choice for first-time buyers or low-income buyers. Those who cannot enter the housing market as buyers due to lack of inventory or high home costs will often rent instead.
Household Income: 15%
Household income determines whether or not a buyer can afford a home in a given market. When housing prices outpace household income in an area, people cannot afford to buy and often decide to rent instead. Renters leave homes on the market without available buyers, flooding it with inventory that cannot be purchased. This creates a weak housing market.
Mortgage Rates: 15%
Mortgage rates are a key indicator of a housing market’s health. Low rates mean that lenders are trying to stimulate the market by enticing buyers to finance a home purchase. Higher rates, although costly for the buyer, indicate there are many homebuyers competing for home loans.
Bottom Line: Strongest Housing Market By State 2019
In the states that ranked in the top 10 for strongest housing markets, we found that property prices, available inventory, new construction, household income, and mortgage rates were the top influencers of a market’s health. When income is high and housing prices low, markets surge. High mortgage rates—while sometimes a disincentive to purchase—generally indicates competition for home loans and, therefore, a strong market.
When you are ready to make a move and buy a home, you’ll have to review complicated contracts, offer letters, and real estate documentation like inspection reports. Rocket Lawyer can review your real estate legal documents and answer your questions before you make a costly mistake. Find out more about Rocket Lawyer on its website and click on the “Ask a question” button to find a legal professional.