Total homes sales next year are expected to reach the highest levels since 2006 on the back of new construction and the existing housing market, realtor.com reported Wednesday.
The report contains several surprises. Among them, Providence, Rhode Island, ranked as the hottest market for 2016, and millennials are expected to make up the biggest demographic of homebuyers next year.
Sales of existing and new home sales are expected to reach 6 million for the first time since 2006. The pace of growth of existing home sales and prices is expected to slow to 3 percent but remain strong overall. Meanwhile, new home sales are seen increasing 16 percent.
Realtor.com anticipates new home starts will increase by 12 percent.
Importantly, those new homes are becoming more affordable, realtor.com Chief Economist Jonathan Smoke said Wednesday.
"What you've seen in the last couple of years is that builders have been avoiding that more affordable entry-level price point," he told CNBC's "Squawk Box."
"We're already seeing movement. Last week's report on new home sales showed that the median new home price is finally coming down, and that's a good sign that builders are positioning communities and product for a more affordable price."
That is helping to draw in millennials, who are often viewed as absent from the housing market.
Americans ages 24 to 35 accounted for 30 percent of the existing home sales market in 2015, according to National Association of Realtors data cited by Smoke.
"That's higher than it has been the last couple of years and trending towards normal, which is more around 36, 37 percent," he said.
Smoke noted that realtor.com's top 10 hottest housing markets for 2016 contained other surprises, in addition to top-ranked Providence: St. Louis; New Orleans and Virginia Beach, Virginia.
While all the areas on the list have strong economies or improving prospects, those four areas are about four years behind other markets in the recovery, and their economic outlook for 2016 is particularly strong, Smoke said.
Realtor.com hottest markets for 2016:
1. Providence, R.I., and Warwick, Mass.
2. St. Louis
3. San Diego-Carlsbad
4. Sacramento-Roseville-Arden-Arcade, Calif.
5. Atlanta-Sandy Springs-Roswell
6. New Orleans-Metairie
7. Memphis, Tenn.
8. Charlotte-Concord-Gastonia, N.C.
9. Virginia Beach-Norfolk-Newport News, Va.