BAM Key Details:
- Zillow has revealed their top 10 hottest markets of 2023, led by Charlotte, Cleveland, and Pittsburgh.
- San Jose, Sacramento, and Minneapolis-St. Paul top the list of coolest markets of 2023
Zillow’s selections for the list are based on factors like buyer demand and expected home value growth. Relatively affordable metros dominated the list.
And buyers who can overcome today’s affordability challenges have the advantages they didn’t have in recent, record-setting years.
At the other end of the spectrum, San Jose, Sacramento and Minneapolis are expected to be the coolest markets this year.
Zillow’s 10 hottest markets of 2023
Here are this year’s top 10:
- Kansas City
Unlike in years past, fast home value growth is not a requirement for making this year’s top ten. Higher mortgage rates and other affordability challenges have weakened buyer demand and dragged home values down from last year’s peak in the summer.
In Charlotte, the number one city on the list, home value growth is projected to be much slower in 2023 than its 11.8% pace in 2022. Zillow economists expect a similar trend in all the cities on this year’s list, as well as in the U.S. market as a whole.
Among large markets, Charlotte ranks second in projections for both home price growth and growth in owner-occupied households. That ranking helped elevate it to the top of the hottest markets list. Cleveland and Pittsburgh both ranked high in projections for days on market and for new jobs per home built.
Only four markets on the list are holdovers from last year—showing how much the overall market has changed in 12 short months.
The hottest market on last year’s list, Tampa, came in at #11, just missing the cut this year. Austin, TX—2021’s hottest market—dropped to #29 on the list, mainly because it now ranks among the most expensive large markets in the country.
And the five coolest large markets this year:
- San Jose
- Minneapolis–St. Paul
- San Francisco
Some positive developments in affordability
While affordability challenges still keep many buyers on the sidelines, the cost of a typical mortgage went down in November, thanks to lower mortgage rates.
Overall, Zillow economists expect affordability to stabilize, if not improve, this year, which should make it easier for more households to budget, save money, and plan for a purchase or home sale (or both).
For buyers now actively shopping for homes, less competition for available homes means inventory is staying on the market longer, and sellers are more likely to cut their list prices and offer concessions. Plus, there’s less risk of being caught in (and losing) a bidding war.
This year’s hottest markets will feel much chillier than they did a year ago. 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. Markets that offer relative affordability and room to grow are poised to stand out, especially given the prevalence of remote work. 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.
To determine the ranking of U.S. cities for their list of the hottest markets of 2023, Zillow analyzed the 50 largest metro areas. Seven were excluded due to missing data.
The analysis took the following factors into account:
- Projections for home value appreciation from December 2022 through November 2023
- The expected change in home value appreciation from 2022
- New jobs per new housing unit permitted
- An estimate of the net number of home-owning households based on current demographic trends
- The rate at which homes are sold
Top takeaways for real estate agents
Whatever market you’re serving right now—from the hottest on this year’s list to the coolest—it’s your job to identify the advantages and disadvantages of buying and selling in the current market—in general terms and specific to an individual client.
Keep in mind that the numbers in these reports, however helpful they can be in providing a general overview, can’t replace what you’re seeing for yourself as an agent in your local market.
Pay attention. And collect any information that could impact your clients. Consumers rightly expect real estate professionals to have intimate knowledge of the market and of the most effective strategies for getting the best value from a transaction.
Give them every reason to see you as the best in the business.