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Where It Makes the Most Sense to Buy This Winter

Written by Aaron Terrazas on October 30, 2018

Trying to time the housing market, like trying to time any market, is a bad idea. Even the experts make mistakes, and a home is the most valuable asset that most people will ever own, so it’s especially important not to gamble with it.

In the end, the best time to buy a home is always when the time is right for an individual buyer – often when they’re financially ready, when they’re having a major life event that requires upsizing or downsizing, or when they’re moving to a new area.

For potential home buyers whose stars are aligning in one or more of these ways, this winter could be an excellent time to buy. Although mortgage interest rates are rising – already putting gains in mortgage payments ahead of home value growth – they are poised to climb further over the next year. Rent appreciation has been slow (or even negative) across the country but is expected pick up as more potential buyers delay because of the interest-rate squeeze. At the same time, for-sale listings with a price cut are becoming more common as sellers who priced aggressively in late summer are finding the market isn’t quite as hot as it was just a few months ago.

For those sideline buyers looking to make a move before rents and mortgage payments rise further, here are 20 metro areas where it makes the most sense to buy this winter, based on an index we developed:

And here are five metros where it makes the least sense, based on those same rankings:

Indianapolis
Pittsburgh
Cleveland
San Antonio
Riverside, Calif.

Of course, there may be other compelling reasons to buy in low-ranked markets such as Indianapolis, Pittsburgh and Phoenix. But expect that price cuts might not be as widespread or rent appreciation not as robust over the next year.

Here are the three factors that went into our index:

The share of price cuts compared to a year ago: Markets that have an increasing share of homes with a price cut move higher on the index, because metros with more price cuts will offer more options for buyers.
Rent appreciation forecast: Rents are falling nationally, but as interest rates send mortgage payments higher, rents should pick back up. Metros where rents are expected to rise more over the next year are ranked higher on the index, because they offer the greatest opportunity for buyers to save money by picking up a mortgage rather than continuing to pay rising rents.
Mortgage affordability: Metros that already have bad mortgage affordability will become harder for buyers as mortgage rates rise, so they are prioritized on this index. However, some markets have worse mortgage affordability than they did historically, which might mean that they are near a peak and not a good area for buyers, so they were penalized in this index.

Here are the metro areas ranked according to that index:

[i] Mortgage affordability is the portion of the monthly median household income that goes toward a monthly mortgage payment for a median-priced home, assuming a 20 percent down payment and a 30-year fixed mortgage.
n[i] Mortgage affordability is the portion of the monthly median household income that goes toward a monthly mortgage payment for a median-priced home, assuming a 20 percent down payment and a 30-year fixed mortgage.

Rank	Metropolitan Area	Change in Listings with a Price Cut	Projected YOY Rent Change	Affordability[i]	Median Home Value
1	Orlando, FL	n 6.8% n	1.4%	20.2%	$231,000
2	Boston, MA	n 3.9% n	3.1%	25.8%	n $458,000 n
3	Seattle, WA	n 11.6% n	3.3%	28.6%	n $486,600 n
4	n Las Vegas, NV n	9.8%	-0.1%	22.5%	n $273,800 n
5	n Charlotte, NC n	4.2%	2.9%	15.1%	n $199,400 n
6	Columbus, OH	n 4.0% n	1.9%	14.1%	n $184,200 n
7	Portland, OR	n 4.6% n	3.7%	26.1%	n $391,400 n
8	Sacramento, CA	n 5.3% n	-0.1%	28.8%	n $400,600 n
9	n Minneapolis, MN n	1.9%	n 1.5% n	n 16.7% n	$263,300
10	Dallas, TX	n 2.5% n	1.4%	16.7%	n $233,200 n
11	Kansas City, MO	n 2.5% n	3.2%	13.8%	n $185,500 n
12	Chicago, IL	n 3.2% n	1.2%	15.6%	n $222,200 n
13	San Diego, CA	n 10.0% n	0.9%	37.9%	n $589,200 n
14	Cincinnati, OH	n 2.4% n	4.1%	n 12.5% n	n $164,500 n
15	Tampa, FL	n 5.9% n	-0.3%	18.7%	n $208,400 n
16	Austin, TX	n -0.6% n	1.5%	19.3%	n $300,600 n
17	Atlanta, GA	n 3.2% n	0.7%	15.2%	n $209,700 n
18	Philadelphia, PA	n -1.3% n	1.6%	16.1%	n $229,300 n
19	Washington, D.C.	n 0.5% n	0.7%	19.4%	n $401,000 n
20	Miami, FL	n 5.5% n	0.7%	24.9%	n $278,400 n
21	Houston, TX	n 6.8% n	-0.3%	15.1%	n $200,900 n
22	San Jose, CA	n 8.8% n	0.3%	53.5%	n $1,288,700 n
23	Baltimore, MD	n 0.6% n	1.1%	16.0%	n $265,600 n
24	Los Angeles, CA	n 6.5% n	0.3%	45.0%	n $647,100 n
25	Denver, CO	n -1.1% n	3.4%	25.3%	n $398,400 n
26	Phoenix, AZ	n 0.3% n	0.2%	20.2%	n $258,300 n
27	St. Louis, MO	n 0.6% n	0.9%	12.6%	n $163,100 n
28	Detroit, MI	n 2.1% n	0.3%	12.9%	n $157,200 n
29	San Francisco, CA	n 5.4% n	0.0%	44.9%	n $961,200 n
30	Riverside, CA	n 5.9% n	-0.5%	28.3%	n $362,000 n
31	San Antonio, TX	n -3.2% n	0.5%	15.4%	n $187,800 n
32	Cleveland, OH	n 1.5% n	0.3%	12.7%	n $142,700 n
33	Pittsburgh, PA	n 0.7% n	0.5%	11.7%	n $142,300 n
34	Indianapolis, IN	1.6%	0.1%	12.5%	n $157,200 n