"Top10 Real Estate Markets of2023: Goodbye COVID-induced City Boom, Hello Promising Mid-Distance Markets."

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"Top10 Real Estate Markets of2023: Goodbye COVID-induced City Boom, Hello Promising Mid-Distance Markets."

After a dramatic slowdown in many real estate markets this year, will markets that are "slow and steady" shine in 2023? Middle markets, which have seen lower price growth and fewer affordability issues than others, are poised to see the strongest growth in home sales and home prices next year, according to a Realtor.com report.
With mortgage interest rates nearly doubling since the beginning of the year and home prices continuing to rise due to low supply, affordability remains a big issue for buyers. "Because these middle markets didn't experience dramatic growth during the pandemic, they're still relatively affordable," Realtor.com chief economist Danielle Hale told USA TODAY. "Almost all of them are priced below the average cost of housing in the U.S."
The list includes Hartford West-Hartford, Connecticut, followed by El Paso, Texas; Louisville, Kentucky; Worcester, Massachusetts; Buffalo-Chickasawaga, New York; Augusta, Georgia; Grand Rapids City of Wyoming, Michigan; Columbia, South Carolina; Chattanooga, Tennessee; and Toledo, Ohio.
"These are markets that have been relatively slow and stable, and that slowness and stability will help support relatively active real estate markets in 2023 in these areas," Hale said.
Home sales in these ten markets are expected to increase 5.2% year-over-year in 2023, while nationally home sales are projected to decline 14.1%. The average home price in these ten markets is expected to increase by 7.3%, while nationally the number is expected to increase by 5.4%.
In those ten markets, about 23 percent of the housing stock is affordable to middle-income buyers, while only 17 percent of the housing stock is nationally affordable. Many of these neighborhoods were overlooked during the pandemic chaos and are now well-positioned for development thanks to the prospect of operating without high urban prices, Hale said.
"With many households closely monitoring their spending, we expect these leading real estate markets to be in relatively high demand," Hale said. "We see lower price appreciation, more affordable terms and greater use of government-backed mortgage products for veteran, first-time and minority buyers in these leading markets, which provides opportunities for all homebuyers."
The only metro area on the list where the median home price exceeds the U.S. median home price of $415,750 is Worcester, with a price of $447,000.
The report also contains the following data:
- The top 10 real estate markets did not experience a pandemic boom like other regions. Sales prices for the 12 months ending August 2022 were up 10.5% year-over-year, while the top 100 metro areas saw a 12.6% increase. Top markets also experienced a smaller decline in sales in recent months, with sales declines of 9.1% compared to an average sales decline across all 100 metro areas of 12.3%.
- Middle markets are supported by domestic industry. The projected top markets of 2023 are again centered on domestic industry and trade. On average, these mid-sized metro areas have a high share of workers in manufacturing, government, education, and health care compared to the 100 largest U.S. metro areas, while these areas have fewer workers in technology, professional services, information technology, and leisure and hospitality. Because they have largely avoided the pandemic real estate boom, buyers in top markets can find solid job prospects and affordable housing options.
- Out-of-town buyers are considering top real estate markets as an option. Nearly half of buyers considering top 10 markets come from out-of-state. In Hartford, the median home price is $375,000 in October, and buyers from New York, Boston and Washington, D.C. lead out-of-state interested parties in the third quarter of 2022, finding significant value compared not only to the high cost of homes in New York ($670,000), but also to the national median cost ($425,000). With remote work opportunities and affordability, these markets will continue to attract buyers from other states.
- Buyers in these markets most often obtain FHA and VA mortgage loans.

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Home sales in the top 10 metro areas are most frequently conducted using government-backed mortgage products, such as VA and FHA loans. From January to August of this year, the share of sales with VA loans was 9.4% in the top 10 markets compared to 7.5% across all 100 markets considered. These types of loans help buyers safely enter the market with a lower down payment and often slightly lower mortgage interest rates.

Here are some other findings from the report:

The top 10 real estate markets did not experience a pandemic boom. Home sale prices increased by 10.5% over the 12 months ending in August 2022 compared to the previous year, while the growth in the 100 largest metro areas was 12.6%. The top markets also experienced a smaller decline in sales in recent months, with a sales drop of 9.1% compared to the average sales decline of 12.3% across all 100 metro areas.

Mortgage interest rates have exceeded 7%. Which rate - fixed or variable - is the best option right now?

The mid-tier real estate markets are supported by the domestic industry. The projected top markets for 2023 are once again focused on domestic industry and trade. On average, these mid-tier metro areas have a high share of workers in manufacturing, public service, education, and healthcare compared to the 100 largest metro areas in the U.S., while these areas have fewer workers in technology, professional services, information technology, and leisure and hospitality. Because they largely avoided the pandemic-driven real estate boom, buyers in the top markets can find reliable job prospects and affordable housing options.

Out-of-town buyers are considering top real estate markets as an option. Nearly half of buyers considering top 10 markets come from out-of-state. In Hartford, the median home price is $375,000 in October, and buyers from New York, Boston and Washington, D.C. lead out-of-state interested parties in the third quarter of 2022, finding significant value compared not only to the high cost of homes in New York ($670,000), but also to the national median cost ($425,000). With remote work opportunities and affordability, these markets will continue to attract buyers from other states.

Buyers in these markets most often obtain FHA and VA mortgage loans. Home sales in the top 10 metro areas are most frequently conducted using government-backed mortgage products, such as VA and FHA loans. From January to August of this year, the share of sales with VA loans was 9.4% in the top 10 markets compared to 7.5% across all 100 markets considered. These types of loans help buyers safely enter the market with a lower down payment and often slightly lower mortgage interest rates.

Top 10 real estate markets in 2023:

Hartford-West Hartford, Connecticut
El Paso, Texas
Louisville, Kentucky
Worcester, Massachusetts
Buffalo-Chictowaga, New York
Augusta, Georgia
Grand Rapids City of Wyoming, Michigan
Columbia, South Carolina
Chattanooga, Tennessee
Toledo, Ohio

Almost half of the buyers considering the top 10 markets come from other states. In Hartford, the average home price is $375,000 in October, and buyers...