These Are the 3 Real Estate Markets to Watch in 2023 — And What Brought Us Here
Over the past couple of years, mortgage rates have soared, putting welcome pressure on a housing market sizzling out of control.
Recently, this inferno has begun cooling. It’s led some analysts to wonder: Will the housing market continue to chill in 2023 or crash in a fiery blaze of sizzling rates?
According to Neda Navab, President at Compass, housing remains in limited supply because people who bought homes in the past few years and locked in good rates aren’t selling. This tightness of inventory keeps prices from slipping any lower, which continues pricing many would-be homeowners out of the market, especially those who’ve never purchased a home.
Prices are still pretty high when measuring YoY, but they’re nothing like they were in early 2022. Wherever mortgage rates happen to go in the near future, housing prices are likely to follow.
So, what’s it look like on the horizon?
2023 Market Forecast
Those in the housing industry warn against attempting to time or beat the market. The economy is still in a state of flux, and uncertain is how things look at the moment. Whether individuals decide to buy a home now or wait is really a personal decision. What’s their motivation? Their situation? Buying may not be feasible, but waiting could also prove to be a mistake. For those who decide to wait, there’s no guarantee that home prices or mortgage rates will improve further.
As 2022 comes to a close, experts are watching the economy for signs of relief. Inflation, interest rates, geopolitical upheaval, and even the recent midterms continue pulling the economy in every direction. While there’s been a recent market cooldown, rates for home mortgages are still twice as much as they were at the opening of 2022. And home prices are still over 6% more than they were. Affordable housing continues to be an elusive phrase.
In October, existing homes carried a median sales price of just over $379,000 — that’s 6.6% more than October 2021 but still better than June 2022, when the median home price was nearly $414,000. The outrageous costs sunk mortgage applications to lower levels than we’ve seen in 25 years. In fact, home sales fell by almost 6% between September and October (2022) — the ninth month in a row of declining home sales.
But there may be good news coming soon. As of December 12, 2022, mortgage rates were still falling. According to the chief economist for Freddie Mac, Sam Khater, since November 21, the .75-point drop experienced in just these past four weeks is the sharpest, greatest decline since the catastrophe of 2008.
Still, economists and those in the real estate industry are hopeful that this could change soon. What can we expect, then, as far as inventory levels in the real estate housing market in 2023?
Inventory Predictions for the Real Estate Housing Market in 2023
The housing market crash in 2008 took more than just the average person’s home and savings. It also demolished new home construction — and the market has never recovered entirely or been the same since.
The continued lack of new builds is putting pressure on an already limited supply of homes, leaving many people wondering if now is the right time to buy or if holding out hope for a home is a better option.
Should You Buy Right Now or Hold Off Until Later in 2023?
No matter what the housing market looks like, how mortgage rates shake out, or the Fed’s next move, buying a home is an extremely subjective, private decision. A house represents the largest “big ticket item” people will ever purchase. Your financial position — private and subjective — should be rock solid before taking on this type of responsibility. A mortgage calculator can help you determine how much house you can afford by estimating monthly costs.
At the same time, buying a home shouldn’t be something you prepare for by “predicting” what will happen in the market months down the road. Many potential homeowners are currently waiting it out in hopes of lower home prices and mortgage rates. The rate drops over the past few months are promising, but it’s also possible that those who wait could be disappointed if prices skyrocket again. Hopefully, inflation has reached its peak, and all industries will begin to even out and feel relief.
Ones to Watch — The 3 Hottest Real Estate Markets to Watch in 2023
So, should you wait? Or should you buy? If you decide to buy, consider the following list of the cream of the real estate housing market in 2023 crop:
- Memphis, TN
- Rochester, NY
- Montgomery, AL
Let’s see why these real estate housing markets are the top contenders:
- Population: 650,000
- Median age: 34
- Cool fact: Tech-related business is booming.
Why Memphis made the list
In addition to tech businesses primed for success in the region, Memphis has a strong, vibrant entrepreneurial spirit, especially in tech. Black-owned tech businesses in Memphis have earned the city the nickname “Black Silicon Valley,” and companies with access to venture capital have far outpaced other towns. As a nation, less than 1% of venture capital is earmarked for a Black-owned business — in Memphis, that number jumps to 16%. Around 13% of startup funding in Memphis has gone to a firm founded by a person of color.
In addition to this “tech valley,” Federal Express (FedEx), Tennessee’s state government, and the federal government are the largest employers in the area. Per capita income continues to rise, and the cost of living in Memphis is almost 20% lower than the national average.
Finally, if you love music, history, or music history, there’s no better city in the world — besides its neighbor, Nashville, maybe — where music and history are so richly steeped. This was Elvis’s stomping grounds when blues and rock and roll collided here long ago, and Graceland still stands as proof that Memphis upholds its musical roots.
- Population: 210,606
- Median age: 32
- Cool fact: This is a city that protects its history and heritage. The oldest standing structure in the county is in Rochester near Brighton — the Stone-Tolan House. It was built in 1792 and still stands in the same place, overlooking suburban sprawl, as a testament to Rochester’s humble beginnings. The structure served as a home, farm, tavern, and inn. Tours are limited but available.
Why Rochester made the list
According to Realtor.com, the current median price for a home in Rochester is just shy of $150,000, which is just 3.4% higher (year over year) from December 2021 to December 2022. The city piques the curiosity of real estate housing market experts because of its proximity to Manhattan and its affordability for Manhattanites looking to find larger living spaces for less money. For a market so strained in other parts of the country, Rochester has a large quantity of homes for sale (nearly 500) and rent (just over 400) — but it’s also the nation’s fastest-selling market. The average time a home in Rochester spends on the MLS is a short 35 days.
The city’s largest employer is the University of Rochester and the University of Rochester Medical Center. Together, the school employs 32,000 people.
- Population: 198,665
- Median age: 36
- Cool fact: Montgomery’s median annual real estate housing tax is one of the nation’s lowest, coming in at just over $500 per year.
Why Montgomery made the list
It’s not often that the not-so-glamorous locations make a “one to watch” list — but anyone that doesn’t give Montgomery its due is missing out on one of the most promising real estate housing markets in 2023. It also offers two of the nation’s most promising careers — Alabama’s aerospace and automotive industries are booming.
Any aerospace company that immediately comes to mind most likely has a headquarters here: Boeing, Lockheed Martin, Raytheon, and more. Hyundai boosted its open positions, adding over 200 jobs in 2021.
Montgomery is the perfect place for an American family to discover that which has nearly been forgotten: “The American Dream.” Families can build wealth here with career opportunities and extremely low costs of living.
Keeping your finger on the pulse of the real estate housing market in 2023 could help you find your dream home or the perfect fix-and-flip investment. If you’re interested in learning more about the market and what’s to come for 2023, check out the ProspectNow blog.