The soaring price of homes in the nation's metropolitan areas is forcing buyers to look elsewhere for cheaper options — particularly in midsize cities in the South and Midwest.
Places like Chattanooga, Tennessee; Grand Rapids, Michigan; and Louisville, Kentucky, may soon become the nation's hottest housing markets as home prices there are expected to climb next year, according to Realtor.com.
The real estate listing firm also expects prices to rise in places such as Columbia, South Carolina; El Paso, Texas; and Toledo, Ohio, as buyers priced out of bigger cities — but who can now work remotely because of the pandemic — look for more affordable places to live.
"If you have a remote work job that you can take with you, then it can make sense to move there because you're going to see your real estate dollar stretch a lot further," Realtor.com Chief Economist Danielle Hale told CBS MoneyWatch.
Here are what Realtor.com expects to be the hottest housing markets around the U.S. next year, along with the cities' median home price as of November and how much that is expected to grow in 2023:
- Augusta, Georgia — $319,000, 5.7%
- Buffalo, New York — $240,000, 6%
- Chattanooga, Tennessee — $397,000, 8.2%
- Columbia, South Carolina — $300,000, 3.6%
- El Paso, Texas — $291,000, 5.4%
- Grand Rapids, Michigan — $358,000, 10%
- Hartford, Connecticut — $372,000, 8.5%
- Louisville, Kentucky — $290,000, 8.4%
- Toledo, Ohio — $161,000, 6.7%
- Worcester, Massachusetts — $447,000, 10.6%
The Midwest in particular is expected to attract more first-time home buyers next year as people look for value, according too Zillow.
"Having available houses to choose from is another key component of a healthy market, and the Midwest stands out," Zillow noted last week. "Inventory isn't in a massive hole compared to pre-pandemic times and declines in new listings are smaller than the national average — encouraged by the more consistent demand from buyers."
Three cities in the Northeast — Buffalo, New York; Hartford, Connecticut; and Worcester, Massachusetts — also made Realtor.com's list of hot markets. Hale said those spots have not historically been prime destinations for Americans looking to buy a new home, but for someone looking to get the biggest bang for their buck these areas "are going to finally show up on home shoppers' radars."
While people high-paying tech jobs have helped drive trends in the housing market in recent years, employees in health care, education, manufacturing and the public sector are also diving in. Places like El Paso, Hartford and Toledo have a growing number manufacturing or government jobs, Hale said.
Hale said Hartford in particular is attractive because of a growing number of education jobs.
"And the fact that it's between New York and Boston gives people options," Hale said. "So, in a year that's going to be somewhat uncertain in terms of economy, [Hartford] opens up two potential job markets for someone."
The median home price in Hartford in November was $372,000 but that figure is expected to jump 8.5% next year, Realtor.com estimated.
El Paso has thousands of government jobs, with many border and customs department roles and military base Fort Bliss, Hale noted. The area's unemployment rate is expected to continue declining next year while adding more than 474,000 new jobs in construction, health care and the financial sector, according to a University of Texas at El Paso forecast.
Expect prices to keep climbing
The U.S. housing market is set to turn the page on 2022, a year that saw skyrocketing home prices and. Cities like Austin, Texas; Boise, Idaho; and Phoenix, Arizonna were among the hottest markets in 2021 and most of this year. Those markets have started to cool off as rising mortgage rates sideline buyers.
It's typical for home prices to fall near the end of year, butagain in 2023, Hale predicted.
Still, the pace of those price hikes is likely to be slower than the blistering increases of the past two years. Prices will be elevated during the first half of 2023, but are likely to fall or stay flat during the second half of next year, Hale said.
Realtor.com also expects mortgage rates to climb even further at the beginning of next year as the Federal Reserve continues to raise its benchmark interest rate. Mortgage rates could reach as high as 7.4% in the first half of 2023 before settling down to around 7.1% toward the second half of the year, the company said.
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