The U.S. housing market is nothing if not unpredictable.
The housing market is slowing down, but some areas will see more buzz in 2023. Florida real estate was hot during 2022, with Tennessee, the Carolinas and Texas metro areas also featuring prominently on a list of the 100 largest metros where prices have risen most significantly, according to Zillow
But other more affordable regions are expected to pop in 2023.
“The heat will stay on in the Sunshine State, to be sure,” Zillow said in its annual real-estate forecast released this month. “But as affordability has become the key driver of both supply and demand in the market, places that still feature reasonable prices are already seeing momentum shift their way, and should have the healthiest housing markets in 2023.”
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“Enter the Midwest,” the report added. “Unlike nearly every other region in the United States, prices in most Midwest metro areas haven’t run up to extremes. Mortgage costs as a share of income are still within healthy, sub-30% levels across Ohio, Pennsylvania, Kansas, upstate New York, Iowa and smaller metros in Illinois, which will allow first-time buyers to take the plunge.”
“As interest rates and prices rise, Realtor.com named 10 regions where sales and prices are expected to experience a bump in 2023.”
As interest rates and prices rise, Realtor.com named 10 regions where sales and prices are expected to experience a bump in 2023: Hartford-West Hartford, Conn., El Paso, Texas, Louisville, Ky., Worcester, Mass., Buffalo-Cheektowaga N.Y., Augusta-Richmond County, Ga., Grand Rapids-Wyoming, Mich., Columbia, S.C., Chattanooga, Tenn., and Toledo, Ohio.
Realtor.com sees prices in 2022 rising by 7.3% — versus 5.4% nationally — in these top 10 markets, which are largely located in mid-size markets east of the Mississippi River, with local industry tied to manufacturing, education, healthcare and government. Annual sales in these markets will grow by over 5% in 2022, compared to a projected drop of 14% in national housing sales.
“We’ve seen lower price increases, more general affordability and more use of government-backed mortgage products for veterans, first-time and minority buyers in these top markets, providing opportunities for all home buyers to stretch their home-buying dollars,” Realtor.com chief economist Danielle Hale said.
More affordable places, but rising interest costs
Home hunters, especially first-time buyers, will be looking for more affordable places to live in 2023, with the 30-year mortgage interest rate currently hovering around 7%, double the rate this time last year. “Many of these areas flew under the radar in the pandemic frenzy, and are now well-positioned to bubble up with solid job prospects without the big-city price tag,” Hale added.
Still, Realtor.com predicts that affordability will remain an issue in 2023, despite a market retreating from red-hot demand in the early days of the pandemic. The typical monthly mortgage payment will hit $2,430 in 2023, 28% higher than this year, which will likely force many would-be home buyers out of the property market and ultimately force them to keep renting, it said.
The last two years left indelible marks on the housing market, Realtor.com said. “Among those, the Federal Reserve’s monetary policy combined with a long-term underbuilding trend caused a whiplash in affordability.” (Realtor.com is operated by News Corp subsidiary Move Inc., and MarketWatch is a unit of Dow Jones, also a subsidiary of News Corp.
“Affordability will remain an issue in 2023 with high interest rates, but Rent.com outlined the most affordable metro areas.”
Rent.com, the apartment search engine, listed the most affordable metro areas, which it said provide a respite from high rental costs. “Single-digit rent price hikes and decreasing month-over-month rental rates in several markets give renters hope that prices may be stabilizing after a period of historic growth,” it said.
Oklahoma City was ranked No. 1 most affordable. Renters in that metro area paid a median rent of $1,301 in October 2022. While Oklahoma City actually recorded the largest annual rent hike among the top 25 most affordable metro areas (31.7%) rent only increased by 3.3% from September to October, the report said.
Other affordable metro areas on Rent.com’s top 10 list include: Louisville/Jefferson County, Ky.; San Antonio-New Braunfels, Texas; Kansas City, Mo., Indianapolis-Carmel-Anderson, Ind.; Cleveland-Elyria, Ohio; Columbus, Ohio; Birmingham-Hoover, Ala.; Buffalo-Cheektowaga, N.Y.; and Memphis, Tenn.