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The Hottest Home Markets: What You Need to Know If You’re About to Buy

May 20, 2015
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If you like the beach life, you can buy an updated bungalow with three bedrooms, two bathrooms, a remodeled kitchen and a wide front porch to inhale the fresh Tampa Bay air for a little more than $150,000. That’s the surprisingly low median price for a single-family home in the sunny Florida metro area.

Tampa is one of the most affordable — and popular — housing markets in the nation. But there’s a big difference between shopping for a home in a popular market and taking on the house-buying competition in a “hot” market. Tampa, while appealing, isn’t on the list of the very hottest home markets in America. Those markets are typically more favorable to sellers than buyers, because increased demand can lead to accelerating prices.

The top hot markets

The National Association of Realtors (NAR) has ranked the hottest medium to large cities, with homes selling an average of 29 to 49 days more quickly than in the rest of the country — and accelerating.

The hottest markets nationwide are:

  1. Dallas-Fort Worth-Arlington, Texas
  2. Santa Rosa, California
  3. Vallejo-Fairfield, California
  4. Denver-Aurora-Lakewood, Colorado
  5. Boston-Cambridge-Newton, Massachusetts/New Hampshire
  6. San Diego-Carlsbad, California
  7. Nashville-Davidson-Murfreesboro-Franklin, Tennessee
  8. Ann Arbor, Michigan
  9. Detroit-Warren-Dearborn, Michigan
  10. San Francisco-Oakland-Hayward, California
  11. Boulder, Colorado
  12. Santa Cruz-Watsonville, California
  13. San Luis Obispo-Paso Robles-Arroyo Grande, California
  14. Oxnard-Thousand Oaks-Ventura, California
  15. Sacramento-Roseville-Arden-Arcade, California

California is the nation’s homebuying hot spot, accounting for more than half of the hottest markets in the list.

Hot or not?

You may live in a hot market and not even realize it until you go house hunting. Even so, there are still some affordable markets on the list. Dallas has a median single-family home sales price of just $192,000. Compare that to the perennially red-hot San Francisco market — legendary for its lack of affordability — with a median sales price of nearly $750,000.

And prices are still rising, especially in these seller’s markets. Median prices nationally have grown about 9% year-over-year, but in some of these markets it’s much higher. Denver has seen home prices rise at nearly double that rate: 17.2% in one year.

But affordability is just one factor to challenge buyers in a hot market. The other is simply finding a home. The NAR says listings are viewed two to three times more often in these markets than the national average. There’s just not a lot of inventory, and as we mentioned, homes for sale turn fast.

Buying a home in a seller’s market

Buying a home in a hot market takes patience and preparation. That means being preapproved for a loan, with enough upfront money in the bank so you can act fast when an opportunity presents itself. You’ll often have less room to negotiate on price, or just about anything else for that matter. You may find yourself in an unnerving bidding war, too.

Here are some tips to gain every edge you can in the hot market buying process:

  • Get there fast. Don’t wait for weekends to house hunt. Go to the first showings available when a listing debuts.
  • In really hot markets, you’ll have to offer more than the list price to be a successful bidder.
  • It might be wise to pay for an advance home inspection, too. Unfortunately, the costs can add up fast when you miss out on snagging a home after an attempt or two.
  • Expect to put down a sizable earnest money deposit. Your agent can advise you on what to expect so that you can have the funds readily available.
  • Keep contingencies to a minimum. (These are conditions that have to be met to complete a sale.) Or better yet, forget them completely. Making concessions to the seller, such as allowing them extra time to complete a move, are much more likely to help you seal the deal.

While attractive — but not quite hot — markets such as Tampa might be more affordable, the nation’s most competitive housing markets garner much higher home prices while buyers feverishly chase sellers. That’s the price of popularity.

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Hal Bundrick is a staff writer covering personal finance for NerdWallet. Follow him on Twitter @halmbundrick and on Google+.

Photo via iStock.