Denver’s housing market is on fire—at least according to a U.S. News analysis of December 2023 data from the U.S. News Housing Market Index, which includes multiple indicators of housing supply and demand, along with financial health measures. A healthy job market, low rental vacancy rates, and a low housing supply that keeps rents from falling may make Denver an attractive market to investors as well, U.S. News reports, despite its high home prices relative to the national median. 

Several more of the top 20 housing markets ranked by U.S. News were also located in Colorado, and three were located in North Carolina. Multiple markets in Texas and Florida also made the list, consistent with recent migration trends into these states. 

U.S. News also used changes in the data over time to identify markets to watch as housing market conditions improve, along with a few other rankings based on unique interpretations of the data. Let’s dive in. 

Why Denver Is Considered the Hottest Housing Market

Denver’s financial health subindex played an outsized role in its high ranking. In December, there were few signs of financial distress among homeowners. The mortgage delinquency rate in the metropolitan statistical area (MSA) was only 1.8%, half the national rate, and the foreclosure rate of 0.1% was about a quarter of the national rate. Denver residents also have a high median income relative to median mortgage and rent payments in the area. 

Denver has long been considered a desirable destination due to its abundant urban amenities and proximity to the Rocky Mountains, although rapidly rising home prices have pushed the city to the bottom of U.S. News’ ranking of the Best Places to Live—in 2016, it held the top spot, but it’s now ranked No. 99. 

But U.S. News data still showed high housing demand in the Denver metro area in December. Home prices in Denver are still more affordable than coastal hubs like New York and Los Angeles, and local real estate agents report growing interest from homebuyers early in the year. 

A low housing supply and few building permits relative to new household formation have kept prices high, even amid high mortgage rates. Rising prices have also created more renter households, with vacancy rates falling to 4.6% at the end of 2023, well below the national vacancy rate. Rents have risen 3.1% year over year, in line with national median rent increases. 

Denver’s job market also remains attractive to movers. Though the city has experienced a 1.2% decline in jobs compared to December 2022, the unemployment rate sits at just 3.3%. In addition, the ratio of construction permits to the growth in employment was positive. 

The overall Housing Market Index for the Denver metro area was 74.8, a 7.4-point improvement from the year prior. However, it’s important to note that there are a multitude of housing market data points and different ways of interpreting each one. For example, Zillow’s index, which includes predictive measures such as forecasted appreciation, ranks Denver as the 48th hottest housing market, an eight-spot decline from last year and second-to-last on Zillow’s list. 

Other Top Housing Markets in the U.S.

Here are the top 20 MSAs with the highest Housing Market Indices (the higher the number, the hotter the market), based on data from December, including:

• Consumer and builder sentiment.
• Unemployment figures.
• Ratio of building permits to job growth and to household growth.
• Available housing supply.
• Rental vacancy rates.
• Construction costs.
• Delinquencies and foreclosures.
• Ratio of median rent and mortgage payment to area income.

Many of these markets were popular with movers during the pandemic, when remote work arrangements and the desire for more spacious homes drove people away from urban areas on the coasts and continued to be popular when home prices peaked and movers sought more affordable residences. U.S. News notes another common feature: Big-city amenities without big-city problems.

Housing Markets Worth Keeping an Eye On

To assess markets that were quickly heating up, U.S. News watched changes in the Housing Market Index over the course of six months. Tracking the data from June 2023, when mortgage rates began a steady climb, to December 2023, when rates were beginning to fall, the publication identified markets with improving Housing Market Indices amid challenges. 

Cleveland, which now ranks above Denver in the U.S. News list of Best Places to Live, has a growing job market that is gradually changing the city’s reputation. Just 14 years ago, it was called the most miserable city in the country, but opportunities in healthcare, IT, and other fields have led to the city’s revitalization. 

And with a median home price of just $190,370, investors can find affordable rental properties. As the city draws younger residents in droves, Zillow expects Cleveland’s housing market to heat up this year. 

The Virginia Beach metro area, which was also ranked third on the overall list of top markets, has the highest HMI of the markets to watch. Each of these 10 MSAs saw their Housing Market Indices increase by almost three to nine points in the span of just six months. 

Housing Markets in High Demand

U.S. News also ranked markets based on a housing demand subindex, which was based on the following data:

• Employment and unemployment figures
• Consumer sentiment (via University of Michigan)
• Household growth 
• Median home price (via Redfin)
• Housing rental prices (via Zillow)

Here are the top MSAs for housing demand. 

The Bottom Line

There are endless possibilities for compiling housing data in order to identify opportunities. Beyond U.S. News and Zillow, you’ll find a differing list of the hottest housing markets from Realtor.com.

Ultimately, it may be beneficial to compile your own data and analyze it based on the factors most relevant to your investment strategy and budget. But if you need a place to start, consider the U.S. News Housing Market Index. 

The HMI for markets to watch, based on changes in HMI over six months, may be more useful to investors than the overall ranking of markets that are already red-hot, but it’s nevertheless helpful to consider the factors that earned Denver the top spot. And despite Denver’s relatively high price-to-rent ratio, it’s still a favorable spot for investors seeking a reliable market due to its resiliency, above-average appreciation, and consistently rapid population growth. Cleveland, on the other hand, may offer an opportunity for newbies with limited funds who want to ride the wave of revitalization in the metro.

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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.