Skyrocketing housing prices in San Francisco and New York have created headaches for many of their residents, pushing rents and mortgages to unaffordable levels.
But when it comes to expectations for 2017, those once-hot markets may be cooling off. Real estate services company Zillow projects that three of the five largest U.S. cities will have below-average growth this year. Instead, the real estate markets that may experience the greatest price appreciation are mostly located far from the coasts and represent midsize metropolitan areas.
While American home prices have recovered to their precrisis levels, not all regions and types of housing have rebounded to the same extent. Homes valued below $100,000 have appreciated almost 10 percent in value from 2000, while those in the $500,000 to $1 million range have more than doubled.
The regions that benefited from the sharpest recovery in home prices are the West and South. This year, cities in those regions are also likely to see above-average housing gains, although the spoils will be enjoyed by some mid-tier cities.
Zillow said it based its forecasts on a combination of quickly rising home values, low unemployment rates and strong income growth. "Zillow's 2017 list highlights that jobs and opportunities are increasingly growing in smaller markets away from the coasts," said Zillow Chief Economist Dr. Svenja Gudell in a statement.
Across the U.S., home values are expected to rise 3 percent this year. Only two of the five largest American cities are forecast to experience above-average gains: New York, where prices will rise 3.6 percent, and Houston, at 3.3 percent.
Los Angeles, the second-largest U.S. city, will see home prices rise 1.5 percent, while No. 3 Chicago will experience 2.9 percent appreciation. Home prices in Philadelphia, the fifth-largest city, will rise 2.8 percent. New York and Houston are the largest and fourth-largest U.S. cities by population.
Read on to learn about the 10 hottest U.S. real estate markets for 2017.
10. Sacramento, Calif.: 4.8 percent
Home prices in the capital of California are likely to rise 4.8 percent this year, according to Zillow's projection. The city of roughly 500,000 residents is known for its diversity and sense of history, thanks to its 28-acre National Historic Landmark of "Old Sacramento." It also has a lower cost of living than other California cities, such as San Francisco and Los Angeles.
Incomes for city residents are rising by about 1 percent per year, while the unemployment rate stands at about 5.2 percent.
9. Denver: 3.6 percent
Housing prices in Denver are expected to increase 3.6 percent. While that's the smallest increase for the 10 cities Zillow singled out, Denver has another thing going for it: an extremely low unemployment rate of 2.9 percent
Incomes in the city are increasing by about 1 percent a year. Known for its proximity to Colorado ski areas, the city often appeals to sports and outdoor enthusiasts.
8. Ogden, Utah: 4.7 percent
Homes in Ogden, Utah, are forecast to appreciate by 4.7 percent this year, Zillow said. Located about 40 miles north of Salt Lake City, Ogden is known for its walkable downtown and its access to the outdoors, such as skiing, climbing and biking. It has also been cited as one of the best towns in American by Outside magazine.
Unemployment in Ogden stands at 2.9 percent, while incomes are rising by about 1 percent per year.
7. Knoxville, Tennessee: 4.4 percent
Tennessee's third-largest city will benefit from home appreciation of 4.4 percent this year, Zillow forecasts. Known for its music and cultural scene, Knoxville also appeals to outdoor enthusiasts for its location close to the Smoky Mountains.
Incomes are rising at about 1.1 percent per year, while the unemployment rate stands at 4.7 percent.
6. Portland, Oregon: 5.2 percent
Home values in the hipster haven of Portland, Oregon, are expected to gain 5.2 percent this year. That might seem like a lot, but it would reflect a cooling off from 2016, when home prices jumped 15 percent, Zillow said.
Oregon's largest city is known for its beautiful parks, strong coffee and hip eateries. Incomes there are increasing 1 percent a year, while the unemployment rate stands at 4.8 percent.
5. Salt Lake City: 4.3 percent
Salt Lake City homeowners will see their properties appreciate by 4.3 percent this year, according to Zillow.
Home to the University of Utah, the city is known for its well-educated population, attracting employers such as Marriott (MAR) and Delta Air Lines (DAL), which operate call centers there. It's also home to many tech startups, leading the New Yorker to dub the region "the next Silicon Valley." Incomes are growing by about 1 percent a year, while the unemployment rate is 2.8 percent.
4. Orlando, Florida: 5.7 percent
Home to Walt Disney World (DIS) and Universal Studios Florida (NBCU), Orlando is a mecca for tourists. It's also forecast to treat homeowners well in 2017, with home prices expected to rise 5.7 percent.
Incomes in the city are growing by about 1 percent annually, while the unemployment rate stands at 4.5 percent.
3. Provo, Utah: 4.3 percent
Provo, the third Utah city to make the list, will see home price appreciation of 4.3 percent this year, according to Zillow. Employers include tech company Novell and Nu Skin Enterprises (NUS), a multilevel marketing company that focuses on skin care products.
Incomes are rising by about 1 percent a year, while the unemployment rate is 2.7 percent.
2. Seattle: 5.6 percent
An already expensive city, Seattle is set to become even costlier in 2017, with home prices projected to rise 5.6 percent.
While that might benefit homeowners, it will certainly add to the housing crisis that's already pinching many residents in the Northwestern city. As Seattle's tech companies such as Amazon (AMZN) continue to add employees, prices have been pushed upwards, prompting one local publication to declare, "Our housing stock is no longer for us."
Unemployment in Seattle stands at 4.4 percent while incomes are rising by 1 percent per year.
1. Nashville, Tennessee: 4.3 percent
Nashville scores as the hottest real estate market in 2017, with Zillow projecting real estate appreciation of 4.3 percent.
Nashville isn't just country music. It has a growing health care employment sector, which is fueling growth, employment and income. Young professionals say the top reasons for living there are work opportunities and the quality of life, according to research from the Nashville Area Chamber of Commerce.
Income growth in the city is rising by about 1.1 percent a year, while the unemployment rate is 4 percent.