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.