Zillow Research has put together its list of 2023’s hottest housing markets based on the forecasted growth in home values, the economic fundamentals, and inventories that are moving relatively quickly. Also factored into the locations making the list were places where likely buyers will probably be plentiful.
The Midwest makes up many of the hottest housing markets, rivaling the Sun Belt.
The housing market will probably continue cooling throughout this year, as the mortgage costs have risen quite a bit and put a damper on sales volume.
While the national slowdown is going to have an impact on a macro level, there are going to be markets affected in different ways.
Zillow based its rankings of the hottest housing markets for 2023 on an analysis of forecasted home value growth, recent velocity in housing markets, home construction activity, the number of homeowners households, and the projected changes in the labor market.
With these factors in mind, Charlotte, North Carolina, is at the top of the list. In second place is Cleveland. Pittsburgh is number three, although it’s the only market in the top five that has forecasted household declines. According to the research, Pittsburgh might be able to make up for its drop in owner-occupied properties by having a high ratio of jobs added per new home permit.
The markets that will probably see the biggest cooldowns are San Jose, Sacramento, Minneapolis, and Denver. Each of these markets poised to see slowdowns has anticipated annual value declines and slower market velocity. Market velocity is measured by the total listing days on the market.
Below, we delve into the factors that went into making the Zillow list in a little more detail.
Inventory and Velocity
In 2022, homes were quickly being sold, but new listings are slowing down this year, and homes hitting the market are taking more than double the time to go under contract. However, in the markets still considered “hot,” homes that go pending are doing so rapidly, even while the inventory age is rising.
The markets where buyers faced the most competition and had the most challenging time finding homes in 2022 will probably see high demand in 2023 compared to other markets.
2022 ushered at the end of record-breaking home values growth triggered by the highest interest rates on mortgages seen since 2008.
While this has been the general situation, some markets have seen minimal declines in home values, and some have even seen prices go up in recent months. Miami is an example of one of these markets, while Austin, where records were being set previously, has seen 4% pricing declines even compared to December.
It’s expected that even the country’s fastest-growing markets will probably experience slowdowns in 2023. For example, in 2022, Nashville had the fifth-highest annual home value growth, but it will probably fall below the top 10 locations this year.
Tampa was the hottest market last year and is expected to keep its top spot as the home value growth continues, with Charlotte not far behind.
Finally, two key generations are shaping housing trends now—Baby Boomers and Millennials. Both are very active in the housing market in different ways. Baby Boomers aren’t leaving the market like older generations once did at the same age, and Millennials are just starting to get into their prime homebuying years in their mid-30s. Both heavily influence factors like available inventory and will continue to do so in the markets highlighted by Zillow.
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Article Written By: Ashley Sutphin Posted in Realty Times 2-21-23