With affordability on homebuyers’ minds – as interest rates continue to climb and outsized price tags have become the pandemic-born norm – Realtor.com offers hope for consumers with its 2023 Top Housing Markets forecast.
Markets on the list are not only poised to see the strongest combined growth in home sales and listing prices in the coming year but up to this point have seen a smaller affordability crunch than other markets across the U.S., the report states.
Realtor.com ranks the greater Chattanooga area at No. 9.
Generally concentrated in mid-size markets east of the Mississippi, with local industries tied to manufacturing, education, health care and government, this year’s top 10, in descending order, include: Hartford, Connecticut; El Paso, Texas; Louisville, Kentucky; Worcester, Massachusetts; Buffalo, New York; Augusta, Georgia; Grand Rapids, Michigan; Columbia, South Carolina; Chattanooga; and Toledo, Ohio.
In the report, Realtor.com forecasts home sales across the top 10 markets to grow by 5.2% year-over-year in 2023 despite a national drop in home sales of 14.1%.
Additionally, average home prices in the top 10 are expected to increase 7.3%, compared to 5.4% for the U.S. as a whole.
Based on a November 2022 median home price of $397,000, Realtor.com is forecasting an increase in home prices in the Chattanooga area in 2023 of 8.2%. The report also anticipates an increase in home sales of 2.9%.
Greater Chattanooga Realtors President Derek English credits the city’s moderate cost of living, groundbreaking internet speeds and abundance of outdoor activities with luring many newcomers to move to the area.
“The secret is out about greater Chattanooga,” English says. “Realtors in our area will be ready to provide housing advice to all who move to the Scenic City.”
At a time when housing costs are a concern for many, areas like the greater Chattanooga area offer relative affordability, having experienced less of a price surge than other hot pandemic-era markets, says Greater Chattanooga Realtors in a news release.
In the top 10 markets, about 23% of housing inventory is affordable at the median income level, compared to just 17% of affordable homes nationally. Better affordability offers some insulation from the impact of rising mortgage rates, the release notes.
“As many households keep a close eye on their spending, we expect these top housing markets to be in high demand,” says Realtor.com Chief Economist Danielle Hale. “We’ve seen lower price increases, more general affordability and more use of government-backed mortgage products for veterans, first-time and minority buyers in these top markets, providing opportunities for all homebuyers to stretch their homebuying dollars.”
According to Realtor.com’s analysis, this year’s top 10 housing markets avoided the “wild buying frenzy” and price increases seen in other areas in 2022. Sale prices in the 12 months ending August 2022 increased by 10.5% on a year-over-year basis, compared to a growth rate of 12.6% for all 100 largest metros.
The top markets have also seen less of a dip in sales in recent months, with sales declining by 9.1% year-over-year, compared to an average decline of 12.3% for all 100 metro areas.
Representing a shift from remote-work and tech-industry induced home buying, this year’s top markets have a renewed focus on domestic industry and trade, states Realtor.com in its report.
Having largely avoided the pandemic housing boom seen in other markets, homebuyers in the top markets can find solid job prospects and affordable housing options, continues the report.
On average, these mid-sized metros employ a higher proportion of workers in manufacturing, government, education and health care jobs relative to the 100 largest U.S. metros, while jobs in tech, professional services, information technology and hospitality are less common in these areas.
Home sales in the top 10 metros also tend to leverage more government-backed mortgage products such as VA loans and FHA loans, says Realtor.com’s report.
Between January and August 2022, the share of mortgaged-sales with a VA loan was 9.4% in the top 10 markets versus 7.5% among all the 100 markets reviewed.
These types of loans help buyers safely enter the market with lower down payments and often slightly lower mortgage rates.
Realtor.com’s forecast uses data on the housing market and overall economy to estimate 2023 values for these variables for the 100 largest U.S. metropolitan statistical areas by population size.
It then ranks these markets by combining forecasted growth in home prices and sales. In cases of a tie, forecasted year-over-year sales growth was used as a tiebreaker.
Sources: Realtor.com; Greater Chattanooga Realtors