Amid Higher Costs in 2023, Housing Markets in Affordable, Mid-Sized Manufacturing Hubs will Stay Busy
As the cost of housing continues to rise, households are faced with making decisions about how and where they want to live. Whether renting or buying, affordability is a major factor. In this update, we take a closer look at the top housing markets for 2023, ranking them based on sales and price growth. These markets offer insights into why they are expected to thrive in a challenging housing market.
Top 10 Housing Markets Positioned for Growth in 2023
- Hartford-West Hartford-East Hartford, Conn.
- El Paso, Texas
- Louisville/Jefferson County, Ky.-Ind.
- Worcester, Mass.-Conn.
- Buffalo-Cheektowaga-Niagara Falls, N.Y.
- Augusta-Richmond County, Ga.-S.C.
- Grand Rapids-Wyoming, Mich
- Columbia, S.C.
- Chattanooga, Tenn.-Ga.
- Toledo, Ohio
Realtor.com: Top 10 Markets for 2023 - list and infographic
These markets have been selected based on their combined yearly percentage growth in both home sales and prices. They offer a glimpse into the overall trends that are shaping the national housing market forecast for 2023.
The Move to Affordability Elevates Markets Where Buying is Attainable
The past few years have seen a significant impact on the economy and housing markets. Factors such as the Federal Reserve's monetary policy and the underbuilding trend have contributed to a decline in affordability. However, buyers are now seeking affordable options, particularly in mid-sized cities with stronger economies.
In these top markets for 2023, approximately 23% of housing inventory is affordable at the median income level. This is a noticeable improvement compared to other markets, where only 17% of available homes are affordable. Furthermore, in the weakest housing markets for 2023, less than 4% of inventory is financially attainable for families earning the local median income.
Buyers Are Increasingly Looking for Homes Across the State and Across State Lines
The search for affordability has led many buyers to explore options beyond their current cities and even across state lines. In the third quarter of 2022, over 60% of homebuyers looking at properties on Realtor.com expanded their search to other areas. The high cost of properties has been a driving factor for buyers from the Northeast and West regions to seek affordable homes outside their current metropolitan areas.
These trends are also reflected in the cross-market demand data for the top 10 markets. Nearly half of the shoppers in these markets are looking for homes from other states. For example, homebuyers in Hartford, CT, are primarily from New York, Boston, and Washington, DC. In El Paso, TX, buyers from Phoenix, Dallas-Fort Worth, and Salt Lake City are driving the out-of-metro views.
These Are Not Pandemic-Era Hotspots with Room to Catch up
Unlike the highly competitive housing markets during the pandemic, the top 10 markets for 2023 have experienced relatively lower price increases, resulting in a smaller affordability crunch. In the 12 months ending August 2022, these markets saw a growth rate of 10.5% in sale prices, compared to 12.6% for the top 100 markets and 17.3% for the markets forecasted to slow the most in 2023.
Similarly, the top markets have seen a smaller decline in sales in recent months. In the 12 months ending August 2022, these markets experienced an average decline of 9.1% in sales, compared to a decline of 12.3% for all 100 metro areas and a decline of 15.0% for the bottom 10 markets in 2023.
The Top Areas Are Somewhat Insulated from Rising Mortgage Rates
The top 10 markets for 2023 are also somewhat insulated from the impact of rising mortgage rates. These markets offer greater affordability, with a higher percentage of homeowners who own their homes outright, without a mortgage. Additionally, government-backed loan types that provide lower down payment options and slightly lower mortgage rates are more common in these markets.
In the top 10 markets, 38.4% of homeowners live in housing units without a mortgage, slightly higher than the top-100 average. Furthermore, cash sales and sales with government-backed mortgages, such as VA loans and FHA loans, are more prevalent in these markets.
Mid-sized Metros Benefit from "Made-in-America" Trend
These top markets for 2023 represent a shift towards domestic industries, including manufacturing, education/healthcare, and government jobs. In contrast to the information and professional services sectors that have been buoyed by tech companies, these markets offer solid job prospects without the high cost associated with big cities.
The forecasted top growth markets range from 44th to 98th among US metros when ranked by the number of households. They tend to have a higher proportion of workers in manufacturing, government, and education/healthcare jobs compared to the 100 largest US metros. Tech jobs are less common in these areas, as they focus more on other sectors such as trade/transportation.
In conclusion, the top housing markets for 2023 provide opportunities for affordable homeownership, with strong local economies and a focus on domestic industries. These mid-sized metros offer a higher share of affordable homes, making them attractive to buyers seeking a lower cost of living and a better quality of life.
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