Home under construction in Shelburne in 2022. VermontBiz photo.
Vermont Business Magazine The housing market has been on a rollercoaster ride, and it just took another big turn. For the first time in more than a decade, year-over-year home prices in the US fell in February.
Amid such an unpredictable housing market (and a hike in mortgage rates), national mortgage broker SmartAsset presented the results of their annual survey today and maintains that it is increasingly important to buy a home in a place that is both poised for long-term growth and stability. The Burlington area ranked 17th best and was the only metro area in the Eastern Time Zone. Burlington metro home prices have grown 192.8 percent over the last 25 years with no historic loss in value.
SmartAsset set out to uncover the best (and worst) housing markets in America for 2023. To do so, they analyzed growth and stability data (over a 25-year period from 1998-2022) for 400 metro areas across the country.
Gone are the days of a sub-3% mortgage, commonplace during the housing market boom of the COVID-19 pandemic. Mortgage rates have steadily increased since the Federal Reserve started hiking interest rates in March 2022 to combat inflation. As a result, home prices have declined from recent heights.
Key Findings
- Austin takes the title for the best housing market for growth and stability. Austin-Round Rock-Georgetown home prices have risen 354% since 1998 – more than any other metro area in the nation.
- Home prices grew 154% between 1998 and 2022. Across the 400 metro areas we considered for our analysis, home prices increased an average of 154.46% over the 25-year window, compared to an 80% cumulative inflation rate over the same time period.
- The Lone Star State dominates. Austin-Round Rock-Georgetown isn’t the only Texas metro area with a strong housing market. Five other metro areas in the Lone Star State rank among the top 10 markets for growth and stability, and 14 of the top 25. All but one of those metro areas saw above-average growth in home prices between 1998 and 2022.
- Cities in Michigan and Ohio rank poorly. Thirteen out of the 20 worst housing markets for growth and stability are located in Michigan or Ohio. Neither state made an appearance in the top 100.
Worst Housing Markets for Growth and Stability
The four worst housing markets for growth and stability centered around Detroit, Michigan. In these cases, home prices in Flint, Monroe, Detroit and Saginaw didn't even keep up with inflation over the last 25 years. Much of the decline in this area of Michigan can be attributed to the auto industry's exit in the 1990s, though other factors have also contributed to the lack of growth.
Of the top 10 worst housing markets for growth and stability, only three broke the 80% inflation threshold over the 1998 to 2022 time period. For all 10, it's been a rocky decline, with frequent quarterly drops of at least 5% in value.
Data and Methodology
To rank the best and worst housing markets for growth and stability, we looked at data for 400 metro areas and specifically compared them across these two metrics:
- Stability. This is the incidence of homeowners experiencing a significant price decline (5% or more) at any point in the 10 years after they purchased a home. We looked at data for every quarter between 1998 and 2022.
- Overall home price growth. The total growth in home prices during the time period we analyzed. We looked at data for every quarter between 1998 and 2022.
All data comes from the Federal Housing Administration (FHA) and covers the 25-year period from the first quarter of 1998 through the fourth quarter of 2022.
We used these two metrics to create our final rankings. Areas received a score of 100 on the stability metric if there were no quarters in which home prices fell 5% or more within 10 years. The metro area with the highest frequency a significant price declines (46%) received a score of 0. Similarly, the metro area with the highest overall home price growth received a growth index score of 100 and the metro area with the lowest growth received a 0. We then averaged each metro area’s scores over the two metrics, ranking from the highest average score to the lowest.
Limitations
This study is based on historical data. Continued growth and stability is not guaranteed in any metro area, and many factors influence individual housing markets.
Home Buying Tips
- Don’t forget to budget for PMI. When putting less than 20% down on a home purchase, you may be charged private mortgage insurance (PMI). This surcharge, which is rolled into your mortgage payment, typically ranges from 0.22% to 2.25% of your mortgage, according to Chase Bank. How much you end up paying depends on the size of your down payment and your credit score. However, PMI generally goes away once you reach the 20% equity threshold on your home.
- Run the numbers. SmartAsset has a tool designed specifically to help you decide how much house you can afford to buy. The calculator takes into account your annual income, down payment size and any other debt you may have before giving you an estimate.
- Create a financial plan. Having a financial plan and seeing if your home potential purchase will derail other goals, like retirement, is critical. A financial advisor can help you create a holistic financial plan that takes your home purchase into account. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
3.23.2023. SmartAsset. The full report, including key findings, methodology, infographics and a summary of our findings for the top-ranked housing markets, can be found here: https://smartasset.com/data-studies/best-housing-markets-for-growth-and-stability-2023
