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Zillow named its 10 hottest markets for 2023 on Thursday — with relatively affordable markets topping the list.
Buyers in 2023 are contending with a combination of generationally high mortgage interest rates and stubbornly high home prices, meaning markets — where a relative bargain can still be found — are set to command the most attention to some degree.
“Markets that offer relative affordability and room to grow are poised to stand out, especially given the prevalence of remote work,” Anushna Prakash, an economic data analyst at Zillow, said in a statement. “The good news for buyers is that monthly housing costs have stopped climbing. Home shoppers who can overcome affordability hurdles will find a more comfortable market this year, with more time to consider options and less chance of a bidding war, even if they’re shopping in one of the hottest markets.”
While these markets are expected to be “hot” by 2023 standards, they likely won’t resemble anything close to the hottest markets of a year ago when mortgage rates were still low.
“This year’s hottest markets will feel much chillier than they did a year ago,” Prakash said. “The desire to move hasn’t changed, but both buyers and sellers are frozen in place by higher mortgage rates, slowing the housing market to a crawl.”
Zillow data has already illustrated the shift in preference toward affordable markets. The company named the tiny town of Prarie Village, Kansas as its most popular market of 2022, and predicts 2023 will see a surge in interest in Midwestern and Northeastern markets after Sun Belt markets reached new highs during 2021 and early 2022, pricing many would-be homebuyers out.
What follows are Zillow’s predictions for the top 10 markets of 2023:
1. Charlotte, North Carolina
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Zillow named Charlotte its hottest market of the year, continuing the trend of cities with relatively warm climates taking the top spot, following Tampa in 2022 and Austin in 2021. Only four of the cities included on the list last year made it onto the list this year, with Tampa just missing the top ten at number 11, indicating how dramatically the housing market has changed over the last year. Charlotte was one of them, placing fifth last year.
For its 2023 list, Zillow did not look for the fastest-growing home values for its top 10 list. Home price growth in Charlotte is expected to be significantly lower than it was last year, when it grew by 11.8 percent, as it is in all of the top 10 markets. Charlotte still ranked second among large markets in projections for home growth value and growth in owner-occupied homes, which helped it secure the top spot, according to Zillow.
2. Cleveland
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The Ohio city on Lake Erie scored high for affordability, adding weight to the theory that Midwest markets will shine in 2023.
Zillow attributed Cleveland’s high rank to its high market velocity and job market growth. Homes in Cleveland sold for a median price of $111,000 in November 2022, according to Redfin, down 7.4 percent annually.
3. Pittsburgh, Pennsylvania
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Pittsburgh took third place on the list, again illustrating the strength mid-sized Rust Belt cities in the Midwest and Northeast are expected to show in 2023.
According to Zillow, Pittsburgh was the only city in the top five with a forecasted drop in households, but it made up for it with the fourth-highest ratio of jobs added per new home permitted. December 2022 saw homes in Pittsburgh sell for an average of $221,000, up 0.5 percent from the previous year.
4. Dallas, Texas
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While Austin was the Texan boom city of the early years of the COVID-19 pandemic, housing costs in the city have become prohibitively expensive for most buyers, and the market has responded by cooling at the fastest rate in the nation, according to a Redfin report.
Dallas has emerged as a less chaotic alternative, placing fourth on Zillow’s list, though it has seen its fair share of increased demand. Home values rose by 20.4 percent over the past 12 months according to Zillow, which forecasts that they will rise another 2 percent by September 2023.
5. Nashville, Tennessee
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Nashville rounded out the top five, maintaining its status as one of the hottest markets of the pandemic years.
Demand in Nashville has remained solid, according to Zillow, driven by continued migration from other parts of the country, though significant cooling has taken place, with closings in October 2022 30.2 percent lower than they were the year prior, according to a report from the Greater Nashville Realtors.
6. Jacksonville, Florida
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While Florida has gotten too expensive for some buyers, it still remains a highly attractive market for those who can afford it.
Jacksonville made the top 10 list last year and has remained hot, with the median price of properties in the city increasing by 4.8 percent during 2022 to $325,000. Home price appreciation rates in Jacksonville are some of the highest in the country, with price appreciation at 24.89 percent during 2022, according to data from NeighborhoodScout.
7. Kansas City, Missouri
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Another Midwestern metro with promising affordability and high quality of life, Kansas City has proven to be a standout market amid high mortgage rates.
While price growth is slowing, the supply of homes remains low at less than two months, according to Norad Real Estate. The average sales price in Kansas City increased 9.8 percent to $339,575, while sales were down 23.9 percent from the previous year, according to the website.
8. Miami
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Twenty twenty-two proved to be a banner year for Miami real estate, and despite the growth of mortgage rates, Zillow predicts it will last into 2023.
While the market has cooled considerably since early 2022 with the number of sales falling by 60.1 percent annually, according to Redfin data, price growth has improved steadily, increasing 9.6 percent year over year to reach a median sale price of $515,000.
9. Atlanta, Georgia
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Atlanta made No. 9 on Zillow’s list, thanks to its high scores for affordability, population growth and job growth.
Home price growth has proven consistent in the Georgia metro, with the median sale price of $400,000 in January up 12.2 percent from the same time last year, according to Zillow.
10. Philadelphia
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The City of Brotherly Love closed out Zillow’s top 10, further illustrating the strength of affordable Northeastern markets.
Home prices are dropping in the city, presenting new opportunities for buyers. The median sale price now sits at $245,000, according to Redfin, down 3.9 percent from the same time last year.
