It also has considerable risk involved as well. 

I agree....but the OP should still bear in mind that these Blue cities will still have very tenant-friendly laws in place, so that should be weighed into the decision as well....IMHO. 

I think this program is an incredible way for new young investors who might make under the income limit, to house hack in high cost areas, which will appreciate well, and then afterward they can buy more rental property potentially in cash flow areas.   

Would love any advice on promising markets, as well as markets to stay away from the rest of 2024. 

Aim for 6+beds and theme 3 bedrooms strongly and you should do well.

@AJ Wong my prior STR experience was with a home that rented well, but was getting to the point where major upgrades/renovations were going to be needed in the near future to keep it in the “mid luxury” market.

2 years since I've been a loan officer.. was selling cashout refi for mostly VA but FHA and Conv as well...

There are calculators online but make sure you are familiar because I get a lot of people call me because their loan officer failed to run the numbers and they are getting ready to lose a deal or earnest money.If you want to go FHA you can always put more down but I would take a look at Fannie Mae as well for High Balance areas.  

We even have a buyer.This was a first for us and honestly, because we get to know our borrowers well, we got choked up over his personal mess.

And does the driving time count as well?