Cooling Housing Market Will Divide the Country in 2023
Knock Buyer-Seller Market Index shows that buyers will have more leverage in the West, while sellers will maintain an advantage in the East
- U.S. housing market will continue to move in the direction of buyers following the spring homebuying season
- The top five buyers’ markets for 2023 are Phoenix; Colorado Springs, Colo.; Las Vegas, Dallas and Denver
- Fayetteville, N.C.; Harrisburg Pa.; Syracuse, N.Y.; Hartford, Conn. and York, Pa. top the list of the best markets for sellers
- By year-end 2023, 36 markets are forecast to be buyers’ markets, 41 markets will remain sellers’ markets and 23 will be neutral
As the reality of high home prices and higher mortgage rates sets in, U.S. homebuyers will gain some leverage in 2023. However, shoppers are in for very different experiences depending on where in the U.S. they are looking to move, according to the Knock Buyer-Seller Market Index 2023 forecast, which shows a clear divide between the best markets for buyers versus sellers.
According to the Index, which analyzes key housing market metrics to measure the degree to which the nation’s 100 largest markets favor home buyers or sellers, the top 5 buyers’ markets are west of the Mississippi, while the top 5 sellers’ markets are concentrated in the East Coast.
“With home prices and interest rates cutting into purchasing power, the relocation hotspots where prices grew quickly during the pandemic will increasingly favor buyers in 2023, while more mid-sized markets offering good job opportunities and affordable housing will be the top performing real estate markets in 2023,” said Knock Co-Founder and CEO Sean Black. “This will usher in a more balanced housing market. However, home shoppers will find different scenarios depending where in the U.S. they are looking.”
In like a lion, out like a lamb
As 2022 came to a close it was clear the combination of high home prices and interest rates put an end to the frenetic pandemic housing market. Based on the November 2022 Buyer-Seller Index, the latest month of available data, inventory rose in 80 of the 100 largest housing markets and all but two moved at least marginally toward favoring buyers.
A total of 2,336,520 homes were sold in the 100 largest housing markets in the first 11 months of 2022, down 19% from a year earlier. Median days on market increased to 22, up from 13 in November 2021. The average sale-to-list ratio, which measures how close homes are selling to their asking price, was 98%, down from 99% in October and 100% a year ago. There were 14 buyers’ markets in November 2022, 46 markets favored sellers and 40 were in neutral territory.
Hot pandemic markets become 2023 top buyers’ markets
This year’s top buyers’ markets are all west of the Mississippi and were popular relocation spots during the pandemic, which caused home prices to accelerate at a faster pace than the rest of the nation on average. Prices in the top five buyers’ markets rose by 44.6% on average between January 2020 and last month, compared to 34.9% for the rest of the nation during the same period.
In rank order, the top 5 buyers’ metros for 2023 are Phoenix-Mesa-Chandler, Ariz.; Colorado Springs, Colo.; Las Vegas-Henderson-Paradise, Nev.; Dallas-Fort Worth-Arlington, Texas and Denver-Aurora-Lakewood, Colo.
Although these markets will see median home price growth moderate and even decline from their pandemic peaks in 2023, prices are forecast to end the year 38% above pre-pandemic levels, 3% higher than the national average change.
A sign of a slowing market, inventory is expected to grow significantly (54.4% on average) in the top buyers’ markets. Denver will see inventory grow by nearly 100%, ranking second behind Charlotte, N.C., which is projected to lead the nation in inventory growth at 148.3%.
Sellers will have the advantage in smaller, more affordable markets
Concentrated in the East Coast, the top sellers’ markets are forecast to see the strongest growth in home sales and listing prices in 2023. They tend to be smaller to mid-size markets with populations under 1 million, where home prices remain affordable. Despite increasing by as much as 50% since January 2020, prices in the top sellers’ markets remain well below the national median home price of $374,000.
Fayetteville, N.C.; Harrisburg-Carlisle, Pa.; Syracuse, N.Y.; Hartford-East Hartford-Middletown, Conn. and York-Hanover, Pa., top the list of Knock’s best markets for sellers in 2023.
Home sales across the top sellers’ markets are forecast to rise by between 5% and 18% over the next 12 months. The exception is Hartford, Conn., where home sales are projected to dip by 1.7%. In contrast, sales are forecast to decline by 16.3% for the rest of the nation by the end of 2023. On average, the median home price in these markets is expected to increase 8.3%, compared to the less than 1% increase forecast for the U.S. as a whole. Days on market will average 15 days, half the forecasted national median of 30 days, while average months’ supply will be just one month, compared to 3.1 months for the 100 largest markets.
Housing market will gain momentum in the spring before turning to buyers
According to the Index, the nation’s 100 largest housing markets will continue to teeter in neutral territory over the next few months, gain some momentum toward sellers in the spring and then move firmly into buyers’ market territory by summer – a trend that will continue through the end of the year.
By November 2023, 36 markets are forecast to be buyers’ markets (up from 14 in November 2022), 41 markets will remain sellers’ markets (down from 46), and 23 will be neutral.
As the market continues to cool, the 100 largest markets are projected to see home sales decline by 16.3% year over year. Fayetteville, Ark., will face the largest falloff at -22.9%.
By the middle of 2023, months’ supply will surpass three months for the first time since the summer of 2019. Charlotte, N.C., is forecast to lead the nation in months’ supply at 12.7 – double that of Port St. Lucie, Fla., which is forecast to have the second-highest months’ supply at 6.2.
Nationally, the median sales price is forecast to peak in June at $386,000, consistent with a typical home selling season. By November, the median price is forecast to be $374,000, basically flat compared to November 2022. Median days on market will continue to rise throughout 2023, reaching 30 days across the U.S. by November 2023, with Colorado Springs, Colo., leading the nation at 121 days.
Average sale prices across large housing markets are forecast to remain lower than the average ask price in each of the next 12 months, keeping the sale-to-list ratio below 100% through 2023.
Top 5 buyers’ markets 2023
1. Phoenix-Mesa-Chandler, Ariz.
November 2022 median home price: $426,990
Forecasted 2023 home price change: -5.4%
Forecasted 2023 home sales change: +6.0%
Forecasted 2023 month’s supply: 3.7 months
Forecasted sale-to-list price ratio: 96%
Phoenix saw home prices grow by 47.4% between January 2020 and November 2022. However, it was one of the first metros to see sales slow and prices begin to recede when interest rates began to rise in 2022. For buyers, Phoenix remains an affordable alternative to high-cost West Coast markets, such as Los Angeles, San Francisco and Seattle. It offers residents more than 200 golf courses, Spring Training, all four major professional sports leagues and numerous cultural events. Much more than a place to retire, Phoenix is headquarters to five Fortune 500 companies: Freeport McMoRan, PetSmart, Avnet, Republic Services and Insight Enterprises.
2. Colorado Springs, Colo.
November 2022 median home price: $425,000
Forecasted 2023 home price change: +1.2%
Forecasted 2023 home sales change: -18.3%
Forecasted 2023 month’s supply: 4.2 months
Forecasted sale-to-list price ratio: 97%
Colorado Springs was viewed as an affordable alternative to high-priced West Coast metros and even neighboring Denver, where the median home price is 38% higher. Located at the foot of Pikes Peak, Colorado Springs is known for its great weather with over 300 days of sunshine a year, walkable neighborhoods, easy access to the outdoors and a vibrant downtown.
3. Las Vegas-Henderson-Paradise, Nev.
November 2022 median home price: $386,000
Forecasted 2023 home price change: -6.6%
Forecasted 2023 home sales change: +17.6%
Forecasted 2023 month’s supply: 4.8 months
Forecasted sale-to-list price ratio: 96%
The pandemic housing boom pushed the median home price in Las Vegas up 57.9% between January 2020 and May 2022, when prices peaked at $450,000. Home prices are forecast to dip below the national median to $361,000 in 2023, and buyers will have more choices as months’ supply rises to 4.8 months by November 2023. Known as the Entertainment Capital of the World, Las Vegas offers residents trendy neighborhoods, family-friendly master-planned communities, world-class dining and professional sports. It also has a strong job market beyond tourism in the healthcare, logistics and technology sectors and no state income tax.
4. Dallas-Fort Worth-Arlington, Texas
November 2022 median home price: $380,000
Forecasted 2023 home price change: +6.7%
Forecasted 2023 home sales change: -9.0%
Forecasted 2023 month’s supply: 4.2 months
Forecasted sale-to-list price ratio: 95%
Unlike the three top buyers’ markets, prices in the Dallas metro have risen significantly since last year, and are forecast to continue to increase throughout 2023. Despite the rising prices, Dallas had the sixth largest inventory of homes on the market in the nation in November at 14,751. With inventory forecast to grow to 27,000 over the next 12 months, Dallas buyers will have more options. Offering a strong job market and the amenities of a big city, Dallas is considered one of the best places to live in Texas.
5. Denver-Aurora-Lakewood, Colo.
November 2022 median home price: $555,000
Forecasted 2023 home price change: +0.7%
Forecasted 2023 home sales change: -18.2%
Forecasted 2023 month’s supply: 3.8 months
Forecasted sale-to-list price ratio: 97%
In the next year, Denver will have seen one of the largest swings in housing demand. Twelve months ago, a home spent just six days on the market. This is forecast to rise to 36 days by November 2023, well above the national median of 30 days and one of the highest days on market of the 100 largest markets. Well before the pandemic, Denver was a relocation hotspot. Home prices have ranked among the most expensive in the nation since November 2016, the beginning of Knock’s Buyer-Seller Market Index. Despite the market’s slowdown, they are projected to continue to rise in 2023, hitting $559,000 by year-end. In addition to beautiful landscapes and four seasons of outdoor activities, Denver offers its residents a reasonable cost of living, museums and cultural events as well as a booming tech market.
Top 5 sellers’ markets 2023
1. Fayetteville, N.C.
November 2022 median home price: $221,500
Forecasted 2023 home price change: +9.6%
Forecasted 2023 home sales change: +17.8%
Forecasted 2023 month’s supply: 0.3 months
Forecasted sale-to-list price ratio: 100%
Best known as the home of Fort Bragg, the nation’s largest military base, Fayetteville offers its residents an affordable place to live (the cost of living is 20% lower than that of the national average) with the diversity of a larger city and the proximity to the state’s mountains and beaches. The city has attracted a large number of companies, including General Dynamics, Goodyear Tire and Rubber Company and Wal-Mart, creating jobs for residents. It also offers one of the best retail markets in the country, entertainment, minor league baseball, quality healthcare and good schools. The strong housing market is evidenced by the fact that the median home price in Fayetteville is up 50.2% since January 2020, and is forecast to end 2023 at $243,000, up 9.6%.
2. Harrisburg-Carlisle, Pa.
November 2022 median home price: $237,000
Forecasted 2023 home price change: +7.5%
Forecasted 2023 home sales change: +3.8%
Forecasted 2023 month’s supply: 1.0 month
Forecasted sale-to-list price ratio: 100%
The state capital of Pennsylvania, Harrisburg sits on the Susquehanna River. Etched in American history for the roles it played in the Civil War and Industrial Revolution, Harrisburg continues to grow and evolve, offering residents a strong job market and access to recreational activities, such as hiking, climbing and camping as well as the big city. New York City, Philadelphia, Baltimore and Washington, D.C. are all a few hours away by car. It also provides a more affordable housing market and a lower cost of living than many of the East Coast’s larger metro areas. Since January 2020, home prices in Harrisburg have increased by 28.2%, and are forecast to reach $255,000 by the end of 2023.
3. Syracuse, N.Y.
November 2022 median home price: $195,000
Forecasted 2023 home price change: +6.4%
Forecasted 2023 home sales change: +5.2%
Forecasted 2023 month’s supply: 1.5 months
Forecasted sale-to-list price ratio: 101%
Mention Syracuse and your mind immediately goes to snow – the central New York metro typically gets more than 120 inches per year. But Syracuse has much more to offer, making it a desirable and affordable place to start a career, raise a family and retire. Home to Syracuse University and adjacent to Onondaga Lake, residents have access to college and watersports. Armory Square boasts bars and restaurants, and the city hosts a number of food and music festivals and family-friendly venues. Home prices have increased 35.4% since January 2020, and are forecast to reach $207,000 over the next 12 months.
4. Hartford-East Hartford-Middletown, Conn.
November 2022 median home price: $300,000
Forecasted 2023 home price change: +8.5%
Forecasted 2023 home sales change: -1.7%
Forecasted 2023 month’s supply: 1.5 months
Forecasted sale-to-list price ratio: 102%
One of the oldest cities in the U.S. and Connecticut’s capital city, Hartford has a growing job market, affordable housing market and top-rated universities. This makes Hartford an attractive place to call home for a diverse population. The city’s central business district offers galleries, restaurants and entertainment venues, while the nearby vineyards, state parks and mountains provide year-round outdoor activities. Nicknamed the Insurance Capital of the World, Hartford is home to Aetna, The Hartford, Travelers, United Healthcare, Lincoln Financial Group and Cigna. It also has vibrant healthcare, financial services and education industries. Home prices have increased 36.4% since January 2020, and are forecast to reach $326,000 over the next 12 months.
5. York-Hanover, Pa.
November 2022 median home price: $238,000
Forecasted 2023 home price change: +9.6%
Forecasted 2023 home sales change: +8.3%
Forecasted 2023 month’s supply: 1.0 month
Forecasted sale-to-list price ratio: 100%
Rich in history, having served as the home of the Continental Congress, the birthplace of the Articles of Confederation and the capital of the U.S., York offers its residents a dense suburban feel. An easy commute to the Maryland-Pennsylvania border, the cost of living in York is lower than nearby communities, making it an affordable housing option for young professionals and families with children. Restored Colonial-era buildings are a reminder of the city’s past, while York’s shops, flourishing arts community, craft breweries and minor league baseball team provide residents with a number of options to get out and about. For outdoor enthusiasts, Lake Redman offers kayaking, hiking and fishing, while skiing and snowboarding are just a short drive away. Home prices have increased 33.7% since January 2020, and are forecast to reach $261,000 over the next 12 months.
To view the full report, including rankings of the top buyers’ and sellers’ markets, charts and metro-level data for the 100 largest markets, please visit: https://www.knock.com/blog/cooling-housing-market-will-divide-the-country-in-2023/
SOURCE Knock
