Just a few months ago, homebuyers were competing in knock-down, drag-out bidding wars for modest homes that were selling for six figures over their asking prices. Now, sellers are rapidly dropping prices and doing whatever they can to attract even a single interested buyer.
Call it the Great Real Estate Reversal.
As mortgage interest rates have soared, making purchasing a home significantly more expensive, buyers largely have disappeared from the market. It’s not that they don’t want to close on a home; it’s that they can’t afford to do so anymore. Home sales are down, prices have fallen, and properties for sale are beginning to pile up.
However, there are some real estate markets bucking the grimness that has overtaken the housing market in recent months. The Realtor.com® economic research team identified these metropolitan areas where sales and prices are anticipated to continue rising next year. These are the top housing markets of 2023.
“They are very affordable markets. These are areas where your housing dollars really stretch further,” says Realtor.com Chief Economist Danielle Hale. “These places did not overheat during the [COVID-19] pandemic housing frenzy over the last two years. That puts them on more solid footing. Prices and sales still have more room to grow.”
To come up with the list, Realtor.com looked at housing and economic data in the 100 largest metropolitan areas. (Metros include the main city and surrounding suburbs and smaller urban areas.)
(Realtor.com)
These midsized metropolitan areas generally offer lower-priced homes that locals can still afford. All but one had median prices well under the national median of $417,000 in November because they didn’t experience the huge price spikes seen elsewhere during the pandemic. And buyers are still active in these areas, so sales are still happening.
They also tend to have solid economies and are located near big employment centers. They aren’t the latest tech hot spots and are far from the flashier, larger cities on the coasts. Several of the top 10 had military installations, ensuring a steady stream of people moving in and out of the area.
“These are the real estate markets that are going to be more active” next year, says Hale. “If you’re a seller, it means you can expect buyers. If you’re a buyer, you can expect competition. And if you’re a homeowner, you can expect prices to rise, which gives you more equity in your home.”
The Realtor.com 2023 forecast anticipates that home prices will rise 5.4% nationally, a departure from the big run-ups experienced during the pandemic. The number of sales, which was high over the past few years, is expected to drop 14.1% next year.
“They are really outliers, especially when it comes to sales,” Hale says of the top markets.
So what are the top real estate markets of 2023?
Median home list price in November 2022: $372,400
Price change in 2023: 8.5%
Sales change in 2023: 6.5%
Hartford has been bucking the slowdown happening in just about every other housing market. About 90 minutes southwest of Boston and 2.5 hours northeast of New York City, the state capital of Connecticut has seen home prices rising and the number of homes for sale dropping.
The “Insurance Capital of the World” was named one of the hottest markets in the nation in October. Companies such as Aetna, The Hartford, and Cigna are all headquartered in the area.
“We’re still getting people coming in from out of state,” says real estate broker associate Lisa Barall-Matt, of Berkshire Hathaway HomeServices New England. She’s based in West Hartford, a more suburban city just outside of Hartford proper.
“Our [prices] are still attractive, but our market went up exponentially,” she adds. “We could handle it because we were so underpriced before the pandemic.”
As more people can now work remotely, buyers from pricey places like New York City, Boston, and Washington, DC, logged the most out-of-the-area views of homes in the metro on Realtor.com in the third quarter of this year.
Homes are still receiving multiple offers and going for more than the asking price. However, instead of 20 to 30 offers per property before selling for 20% over the list price, now homes are receiving about three to five offers, says Barall-Matt. And the days of six figures over the asking price are over. Homes are generally selling for 3% to 5% more than the list price.
“Prices are still rising,” says Barall-Matt. “The supply is short, and pent-up buyer demand is high.”
Median home list price in November 2022: $290,500
Price change in 2023: 5.4%
Sales change in 2023: 8.9%
El Paso, which sits at the western tip of Texas on the border of Mexico, is home to the U.S. Army installment of Fort Bliss. The constant movement of service people, affiliated companies, and contractors has helped to keep the local housing market brisk.
That may help to explain why more than half of those looking at El Paso listings on Realtor.com came from outside of Texas. Two-thirds of shoppers were from outside the metro area. The most out-of-the-area views of listings came from Phoenix, Dallas, and Salt Lake City.
Nearly 40% of buyers in the metro purchased their homes using all cash. About a quarter, 24.2%, used U.S. Department of Veterans Affairs loans. The VA loans are attractive because borrowers don’t have to put any money down to buy and can often score lower mortgage interest rates as well.
Buyers looking for a deal can check out this four-bedroom, two-bathroom house with a carport near Fort Bliss for $141,588. Or they can look at this three-bedroom, two-bathroom house with a pergola out back for sale for $235,000.
Median home list price in November 2022: $290,000
Price change in 2023: 8.4%
Sales change in 2023: 5.2%
The largest city in the state—home to the Kentucky Derby and Kentucky Fried Chicken—has emerged in recent years as a big manufacturing center. Those jobs, plus the low home prices and cost of living, have made it an appealing place for homebuyers.
Nearly half of those looking at homes in the area were from other states, according to Realtor.com data. The area has some of the cheapest mansions in the nation for those looking for more space. It was also popular with investors during the pandemic, although that has since slowed as prices and mortgage rates have risen.
Buyers can find this brick, three-bedroom, 1.5-bath ranch home with a large deck for $275,000. Those on tight budgets can check out this newly renovated two-bedroom, one-bathroom house for under $200,000.
Median home list price in November 2022: $447,500
Price change in 2023: 10.6%
Sales change in 2023: 2.5%
Worcester has long been a significantly more affordable alternative to ultraexpensive Boston. Those lower home prices have made it a popular destination for cash-strapped families as well as investors. (Homes in the Boston area, about an hour east, were substantially higher at $739,900.)
However, the market has slowed from its peak since mortgage rates shot up. The combination of the higher rates plus high home prices has made it financially untenable for many folks to become homeowners in the area. And the number of folks moving in from other parts of the country has dropped off, says local real estate broker Nick McNeil, of McNeil Realty.
“For the first time in 10 years, I can no longer tell somebody it’s cheaper to buy a home than it is to rent,” says McNeil. “People who absolutely have to buy are buying whatever they can afford.”
The typical Worcester buyer is looking at units in two-family homes or cheaper starter homes with lower price tags between $300,000 and $325,000, says McNeil. They’re often first-time buyers.
“The people who are looking right now, a lot of them really can’t afford to buy,” he says.
Median home list price in November 2022: $239,000
Price change in 2023: 6%
Sales change in 2023: 6.3%
The northern New York city, which sits on the banks of Lake Erie on the Canadian border, has been steadily on its way back up. The one-time manufacturing powerhouse fell on hard times when plants closed, but it has been undergoing a revitalization for years.
It got a boost during the pandemic as more folks who could work remotely returned to the area. Like the rest of the country, the number of homes for sale fell and prices shot up.
The real estate market now appears to be returning to something more normal, says real estate broker Ryan Connolly, of Re/Max Plus. Homes are sitting on the market longer, and sellers are cutting prices.
Generally, prices in the metro area rise about 3% to 5% annually.
“We’re going to go back to what we used to see a few years ago, which is a smaller increase in prices, not a big jump,” he says.
Most of his buyers now are trading up to larger homes because they want more space.
“Things have slowed right now, but I think that’s the time of year. Historically, we’re really, really slow once we hit Thanksgiving,” says Connolly. “But I have a number of people talking to me about purchasing next year, and their budgets are increasing.”
Median home list price in November 2022: $318,900
Price change in 2023: 5.7%
Sales change in 2023: 6.2%
Augusta, about two hours east of Atlanta on the border of South Carolina, is known to linksmen as the home of the Masters Tournament. It’s also where Fort Gordon, and the U.S. Army Cyber Center of Excellence, is based. And Realtor.com recently named it one of the cheapest places in America to buy a home.
While much of the rest of the country experiences a real estate slowdown, Augusta’s lower prices and the turnover generated from the U.S. Army installation are expected to keep the local real estate market busy.
“We are still continuing to see [home] appreciation. But it’s not as drastic as it had been,” says Carmen Blanchard-Stitt, an associate broker at Meybohm Institute of Real Estate. “We’re still experiencing multiple-offer situations, [just] not near as bad as they were.”
More than a third, 35.5%, of all purchases in the area were all cash. Nearly a quarter, 23%, were VA loans. VA loans don’t require a down payment.
The sweet spot in the market is homes priced between $150,000 and $300,000, she says. Buyers are looking for everything from townhomes to single-family homes.
“We see a lot of variety in what buyers are interested in,” says Blanchard-Stitt.
Median home list price in November 2022: $358,300
Price change in 2023: 10%
Sales change in 2023: 1.6%
Grand Rapids, a Midwestern city just east of Lake Michigan known for its brewery scene, was turbocharged during the pandemic as more local, college graduates decided to stick around and folks who grew up in the area and could now work remotely returned. But higher mortgage rates caused many buyers to hit the pause button. That’s beginning to change.
“We were dead in the water, but in the last few weeks I have eight new buyer clients,” says local real estate broker Steve Volkers, of the Volkers Group. “All of them are first-time homebuyers who have been renting and don’t want to anymore.”
He’s seeing a lot of parents of grown children move to Grand Rapids to be closer to their grandchildren. Many are either buying in all cash or making substantial down payments so their monthly mortgage payments are low.
Local and first-time buyers have needed more time to accept that their monthly mortgage payments are going to be significantly higher than they were just a year ago due to those elevated mortgage rates. Many are coming to the realization that they’re going to have to purchase a smaller or older home than they had wanted.
“They’re adjusting their needs to match their goal,” says Volkers. “First-time homebuyers can’t skip the starter house anymore.”
Median home list price in November 2022: $300,400
Price change in 2023: 3.6%
Sales change in 2023: 7.7%
The capital of South Carolina, home to the University of South Carolina (go, Gamecocks!), is also located near a military base. About half of all soldiers are trained at nearby Fort Jackson.
The military base, university, and lower home prices have helped to keep the housing market strong. About 14.5% of all purchases in the metro were made with VA loans, according to Realtor.com data, and 15.8% were made with FHA loans.
Buyers can still find large homes for a reasonable price. This six-bedroom, four-bathroom house that is just under 3,000 square feet is on the market for about $300,000. Buyers looking to save some money can check out this brick, three-bedroom, one-bathroom house on nearly two-thirds of an acre for $150,000.
Median home list price in November 2022: $396,500
Price change in 2023: 8.2%
Sales change in 2023: 2.9%
About two hours southeast of Nashville, the Tennessee city’s downtown has undergone a revitalization in recent years that has helped it to attract startups and other tech companies. The metro, the smallest on our list, is known for its outdoorsy lifestyle, popular with bass fishers and mountain climbers.
The lower real estate prices in the area have made it an attractive destination for those looking for more square footage. It has plenty of larger, affordable homes for sale. About 35% of home sales in Chattanooga were all cash.
This move-in ready, three-bedroom, 1.5-bathroom house is on the market for $230,000. This three-bedroom, three-bathroom house with a finished basement on three-quarters of an acre is for sale for $300,000.
Median home list price in November 2022: $161,100
Price change in 2023: 6.7%
Sales change in 2023: 4.2%
Toledo, about an hour south of Detroit on the banks of Lake Erie, is the cheapest housing market on our list. Those low prices have lured out-of-state buyers and investors to the Midwestern auto and glass manufacturing city.
“It’s slowed down since the rush,” says longtime local real estate agent Rick Turner, of Key Realty. However, “there are still buyers out here. The phones are still ringing.”
About 35.2% of purchases in the metro are all cash.
“We had such a large backlog of buyers this summer with these lower interest rates. Everybody was fighting over stuff,” says Turner. “Now the feeding frenzy is over. Sellers have to come to the realization that buyers are more selective, and they have to step their game up to be attractive to potential buyers.”
Investors are still looking for properties priced between $50,000 and $150,000 that they can rent out, says Turner. Out-of-state buyers are in search of lower-priced properties. And locals are realizing it might be cheaper to pay a mortgage than their rent every month, so they’re jumping into the market.
There are now more homes for sale in the Toledo metro area to choose from, but many buyers are struggling with high inflation, rising rents, and soaring mortgage rates.
“People are feeling pinched right now,” says Turner.