For a few years, housing markets have been defined by rising prices, competitive bidding wars, and tight inventory, but these trends are beginning to soften. In fact, a few of the nation’s hottest housing markets are now listed as some of the “best places for buyers this winter,” according to analysis from Zillow.
The top five metros for buyers this winter, according to Zillow, are Orlando, Florida; Boston, Massachusetts; Seattle, Washington; Las Vegas, Nevada; and Charlotte, North Carolina.
In determining the metros for its list, Zillow considered three major factors: changes in the percentage of listings with price cuts, expected rent price appreciation for the next year, and current affordability relative to the past in each market.
Price cuts for listed homes generally signify that the home has been sitting on the market for some period of time without competitive bids. In other words, it means “more options for buyers, less competition for homes and more room for buyers to negotiate,” Zillow said.
Some of the nation’s hottest housing markets are now experiencing significant jumps in the percentage of listings that undergo price cuts. Seattle tops this list with 11.6 percent of listings experiencing price cuts, followed by San Diego with 10 percent, and Las Vegas with 9.8 percent of listings with price cuts.
Another market recently notorious for high prices that experienced a jump in listings with a price cut was San Jose, California, with price cuts on 8.8 percent of listings.
At the top of the list of places to buy this winter, Orlando experienced price cuts on 6.8 percent of its listings.
Projected rent change over the next year varied in the top five markets with 1.4 percent growth expected in Orlando. Boston and Seattle are poised for 3.1 percent and 3.3 percent price growth over the next year, respectively. On the other hand, rental prices are expected to drop 0.1 percent in Las Vegas. Charlotte is expected to see rents rise 2.9 percent over the next year.
For its third measure, Zillow assessed mortgage affordability by calculating the amount of monthly median household income spent on mortgage payments for median-priced homes in each market with a 20 percent down payment on a 30-year fixed-rate mortgage.
All of the top five markets had an affordability percentage under 30 percent. In Orlando, 20.2 percent of a monthly median income would be spent on mortgage payments for a median-priced home. In Boston, that percentage is 25.8; in Seattle, 28.6 percent; in Las Vegas, 22.5 percent; and in Charlotte, 15.1 percent.
The least affordable markets, among those tracked by Zillow, are San Jose, California; Los Angeles, California; and San Francisco, California. In each of these markets, the amount of median income spent on a mortgage payment for a median-priced home is approaching or more than 45 percent.
“The housing market always lets up a little in the fall, when the kids are back in school and the home shopping season wraps up for the holidays,” said Aaron Terrazas, Senior Economist at Zillow. “But this fall and winter are shaping up to be more favorable for those buyers who have struggled to get into the housing market for several years amid red-hot competition.”