After a year of fluctuations and uncertainty in the housing market, it's time to look ahead to the coming year. While many housing markets experienced a sudden slowdown, there is a new trend emerging. Mid-sized markets are set to shine in 2023, offering a welcome change from the COVID boomtowns. These markets, characterized by lower price increases and greater affordability, are projected to see the strongest growth in both home sales and listing prices.
The appeal of these mid-sized markets lies in their relative affordability. Danielle Hale, the chief economist for Realtor.com, explains that these cities "didn't really surge to new degrees during the pandemic, so they are still relatively affordable." In fact, nearly all of these markets have home prices below the U.S median home price, making them attractive options for homebuyers.
Housing Market Predictions for 2023
The top 10 real estate markets for 2023 have been identified as follows:
- Hartford-West Hartford, Connecticut
- El Paso, Texas
- Louisville, Kentucky
- Worcester, Massachusetts
- Buffalo-Cheektowaga, New York
- Augusta, Georgia-South Carolina
- Grand Rapids-City of Wyoming, Michigan
- Columbia, South Carolina
- Chattanooga, Tennessee-Georgia
- Toledo, Ohio
These markets have been characterized as "slow and steady," which is expected to keep them relatively active in 2023. Compared to the national average, these markets are projected to experience a growth of 5.2% in home sales and a 7.3% increase in average home prices.
Affordability is a key factor in the appeal of these markets. Approximately 23% of housing inventory in these top 10 markets is affordable at the median income level, compared to just 17% nationally. With solid job prospects and more general affordability, these markets are expected to be in high demand.
Midsize Housing Markets Supported by Domestic Industry
A notable shift in focus can be seen in these mid-sized markets. Rather than being influenced by remote work and the tech industry, these markets have a renewed emphasis on domestic industry and trade. Manufacturing, government, education, and healthcare jobs are more prevalent in these mid-sized metros compared to the larger U.S. metro areas. On the other hand, tech, professional services, information technology, and leisure and hospitality jobs are less common.
This shift positions these markets as attractive options for homebuyers, offering not only affordable housing but also solid job prospects.
Out-of-Town Buyers See These Markets as an Option
Interestingly, almost half of the buyers interested in these top 10 markets are from areas outside of these states. This highlights the appeal of these markets to out-of-state buyers who are seeking affordability and value. For example, homebuyers from New York, Boston, and Washington, D.C. have shown a keen interest in the Hartford market. The availability of remote work opportunities, coupled with affordable housing, makes these markets an enticing option for those looking to relocate.
Buyers in These Markets More Likely to Take FHA and VA Loans
Homebuyers in these top 10 markets also tend to utilize government-backed mortgage products such as VA loans and FHA loans. These types of loans allow buyers to enter the market with lower down payments and often slightly lower mortgage rates. Between January and August of this year, the share of mortgaged sales with a VA loan was 9.4% in the top 10 markets, compared to 7.5% among all the 100 markets reviewed.
Conclusion
As we look towards 2023, it's clear that mid-sized markets are positioned to thrive. These markets offer affordability, solid job prospects, and a shift away from the frenzy seen in larger cities during the pandemic. With growth projected in both home sales and prices, it's no wonder that these markets are attracting attention from homebuyers, including those outside of the local area.
It's an exciting time for real estate, and these mid-sized markets are paving the way for a new chapter in the industry.
Original article by Swapna Venugopal Ramaswamy, housing and economy correspondent for USA TODAY.