Introducing the Top 10 Hottest Housing Markets of 2016

Housing analysts and economists have predicted that U.S. home prices would increase by around 3.5% during 2016. But some local housing markets will exceed this average forecast and post even bigger gains. The real estate information company Zillow recently ranked what they feel will be the ten hottest housing markets in 2016. Denver, Seattle and Dallas topped the list.

What Makes a ‘Hot’ Housing Market?

To create its top 10 list of the hottest housing markets, Zillow reviewed their proprietary home value forecast for cities and metro areas across the U.S. They also looked at recent income growth, local employment trends, and other factors that contribute to overall market health. These contributors were “scaled and combined equally to form a hotness score,” said the company.

Top Top 10 Hottest Markets of 2016

Based on their forward-looking analysis, Zillow created the following list of the top 10 hottest housing markets of 2016:

  1. Denver, Colorado
  2. Seattle, Washington
  3. Dallas-Forth Worth, Texas
  4. Richmond, Virginia
  5. Boise, Idaho
  6. Ogden, Utah
  7. Salt Lake City, Utah
  8. Omaha, Nebraska
  9. Sacramento, California
  10. Portland, Oregon

Here’s an overview of what’s happening in the top three markets on this list.

Denver Home Prices Rise Into Uncharted Territory

It’s not surprising to find Denver included in a forecast of hottest housing markets for 2016. The Mile-High City has generated a slew of real estate-related headlines in the last few months.

In 2013, home prices in the Denver metro area rose above the previous record set during the housing bubble. And they’ve been rising steadily ever since. This housing market is now moving into uncharted territory, where house values are concerned.

Related: Denver sees double-digit price gains

While home price appreciation seems to be slowing in this metro area, Zillow expects to see a gain of around 5% during 2016. “Neighborhoods in Aurora, CO — Delmar Parkway, Highline Villages and Centretech — are the hottest,” the company said. “Denver’s Ruby Hill is also among the metro’s hottest ‘hoods.”

Seattle Real Estate Market #2 on the Hotness Scale

Seattle was one of the hottest housing markets of last year, in terms of price gains. The economists at Zillow expect this trend to continue through 2016 as well. They’ve predicted that the Zillow Home Value Index (ZHVI) for this metro area will rise by 5.4% over the next 12 months or so.

Seattle’s housing inventory — measured by the number of homes listed for sale — has declined over the last year. This comes at a time when demand is on the rise. Home buyers in this housing market are now competing fiercely for a limited supply of properties, and it’s driving prices north. Thus, Seattle was ranked #3 on the list of hottest housing markets for 2016.

Dallas-Forth Worth Sees Double-Digit Gains

What can we say about the Dallas real estate market we haven’t said before (like yesterday). Home prices in the Dallas-Fort Worth metroplex rose by double digits last year.

The area’s strong economy and bustling job market attracts people from elsewhere in the state, and from across the country. This in turn boosts demand for housing, at a time when supply is tight. (It’s that old supply-and-demand story again.)

Zillow ranks Dallas as the third hottest housing market for 2016, and predicts that the median home value for this metro will rise by around 5.6% year-over-year. Holford, Oak Lawn and M Streets are the hottest neighborhoods, the company said in a statement earlier today.

Buying Later in 2016 Could Be More Expensive

Most, if not all, of the housing markets on Zillow’s top 10 list share something in common. In these metro areas, demand for homes has outgrown the available supply. This forces home buyers to compete for limited inventory, which results in higher offers and sales prices.

As a result of these trends, home buyers who postpone their purchases until later in 2016 could end up paying more for a house. And when you combine that with the very real threat of rising mortgage rates, it creates a strong sense of urgency among home buyers.

Disclaimers: This story contains forward-looking statements about home prices and other real estate trends. Such statements were provided by third parties, and as such they don’t necessarily reflect the views of the publisher. The Home Buying Institute makes no claims or assertions about future home prices, or about which metro areas will be the hottest housing markets in 2016.