The 8 Worst and Finest Housing Markets in The US (2023 Version)

What’s one of the best housing marketplace for actual property investing? If this had been 2022, we’d say cities like Boise, Austin, or Phoenix, however issues have modified, and lots of final yr’s prime actual property markets appear like this yr’s losers. So which cities are those price investing in over the following yr? Which is able to see inhabitants, job, and residential value development? And which markets are you able to count on to sink even decrease as rates of interest rise and the specter of a recession looms?

We’ve bought a couple of housing market specialists round that will help you navigate the plethora of property markets in the US. James Dainard, grasp home flipper on the west coast, has a shocking prediction on an usually underrated east coast metropolis. Jamil Damji, one of many nation’s largest wholesalers, is bearish on what was as soon as a sizzling market and bullish on a “unicorn” metropolis between two cultural capitals. Kathy Fettke, the Golden State’s residence builder and investor, picks a battle with a well-known character and has her eyes set on one other sunshine state.

And, after all, we additionally get Dave Meyer‘s tackle the place the information says would be the worst and finest actual property market to spend money on throughout 2023. So place your bets, get your MLS search prepared, and put together to see which markets will come out on prime over the following yr. In case you’re considering of shopping for or promoting, these picks could fully change your plans!

Dave:
Hey, everybody. Welcome to On The Market. My identify’s Dave Meyer. I’ll be your host in the present day, joined in the present day by Kathy Fettke, James Dainard and Jamil Damji. How are all of you?

Kathy:
We’re all sick, woo-hoo. It was an important get together.

Dave:
Each single considered one of us is sick. I believe we’re going to have a whole lot of muting of microphones.

Jamil:
I may need to take accountability for it.

Dave:
It was Jamil’s fault apparently, however I wasn’t even on the get together and I’m sick too, so I don’t know.

Jamil:
Effectively, that’s as a result of we mailed it to you.

Kathy:
Oh, yeah.

Dave:
Effectively, thanks. I admire that. I actually admire you in together with me. It’s very considerate. Effectively, I truly wasn’t on the get together, however I did get to do one thing very enjoyable, which was I used to be in Madrid, Spain and I bought to fulfill in individual your entire crew that edits this podcast, all of them stay in Madrid. I don’t even know should you guys know that.
However I went to go hang around with them and so they’re extraordinarily cool, enjoyable folks. They took me on a 10-hour tour of the within of many bars in Madrid and I simply wished to provide a shout out to Joel, Eliezer, Alexander and Anna, who’re an extremely gifted crew. It was a pleasure to fulfill them and I had a whole lot of enjoyable with them. Very gifted, passionate individuals who make this present attainable. That was actually cool for me and I simply wished to let you know guys about it.

Jamil:
Wonderful. I had no concept that they had been in Spain, however now we’ve to make a visit on the market and go hang around.

Kathy:
Seems like we’ve to.

James:
Are they sick of our voices but?

Dave:
No. They had been making enjoyable of me the entire time. They’re like, “I really feel like I’ve to place a body round your face. That’s what I’m used to seeing you want. It’s bizarre seeing you.” No, they’d love that. We must always try this subsequent time. Kathy, subsequent time you’re in Portugal, simply pop over to Madrid. It’s not far.

Kathy:
April.

Dave:
All proper.

Jamil:
Did anybody say to you that you just’re taller than they anticipated?

Dave:
No, most likely mentioned shorter figuring out me.

Jamil:
I all the time get, “Oh, you’re thinner than I anticipated you to be.” I don’t know methods to take that. I’m like …

Dave:
Effectively, they had been most likely already considering you’re very skinny and muscular, so even thinner.

Jamil:
I get, “You’re thinner than I assumed,” and, “Your beard doesn’t look as horrible in individual because it does on video.”

Dave:
What?

Kathy:
No person says that to you.

Dave:
Who thinks your beard seems to be horrible?

Jamil:
I don’t know, man. The Web is enjoyable.

James:
Effectively, let me see. I can’t even develop a beard.

Jamil:
That’s what occurs while you’re one of many America’s finest traders and also you’re solely 12, James.

Dave:
That’s like one of many BiggerPockets podcast headlines like, 150,000 items by 12 years previous, that includes James Dainard.

James:
Revenue and puberty.

Dave:
That might be your BP e-book pitch, James.

James:
I believe I’m going to jot down that down.

Dave:
All proper, nicely let’s get to in the present day’s episode. As we wind down the yr, we wished to recap and form of return to really one of many first exhibits we did, which we had been choosing finest markets, worst markets. And so in the present day, we’re going to speak about our predictions for one of the best and worst markets for 2023.
However earlier than we do, Rocket Mortgage, one of many largest mortgage firms within the nation, simply got here out with their rankings of the highest 5 markets for 2022. I wish to throw these on the market and see what you guys take into consideration these earlier than we get into our predictions for subsequent yr.
They mentioned the quantity 5 was Charlotte, North Carolina. Did any of you decide them final yr? I really feel like somebody may need.

Kathy:
I did.

Jamil:
Oh, you probably did?

Kathy:
Didn’t I?

Jamil:
Why do I really feel like-

Dave:
No, Jamil. You had Austin in Denver. I do not forget that particularly.

Jamil:
Austin and Denver, that’s proper.

Dave:
As a result of the ultimate was simply you in opposition to your self.

Jamil:
Yeah. Charlotte?

Dave:
It’s Charlotte. Do you make investments there, Kathy?

Kathy:
Yeah.

Dave:
How did it do that yr?

Kathy:
Effectively, it bought very costly this yr, so it grew to become troublesome to purchase this yr. However should you purchased earlier than this yr, you probably did nice.

Dave:
Good. Then quantity 4, we’ve at Nashville, which is form of, I really feel like perennially on everybody’s checklist of prime markets. Then we had Raleigh, quantity three. Tampa, which I mentioned, however bought voted out early for quantity two, and Austin for primary, which I used to be form of confused by. I believe that’s truly what gained in our competitors final yr. However would you guys suppose Austin was one of the best performing market this yr?

James:
I imply should you have a look at these first two quarters in all these tech markets, they jumped so excessive. It’s like they’d room to tug again and it was nonetheless going to be good. I imply, Scottsdale was form of like that too. It was like Scottsdale, Austin, Seattle, LA, San Fran. They only shot up.

Dave:
Effectively, that’s an excellent query, James. You’ve been fairly sincere about pullbacks in Seattle in your market, are they nonetheless up significantly over pre-pandemic ranges costs in Seattle?

James:
Oh yeah. We’re considerably up from pre. I imply we’re nonetheless 5% up on this yr in Seattle, however we had been up 25% to 30% and there’s first two quarters. I do know there was one month alone I used to be seeing some cities admire at 25% in a single month. It was loopy. I needed to triple examine the information. I used to be like, wait, what occurred? The median residence value jumped 25% in a single?

Dave:
That’s like a crypto coin.

James:
Yeah. I imply we’re nonetheless not less than 30% up from 2020 or 25% to 30% in sure neighborhoods for certain. And so there’s nonetheless speedy development. It’s simply sliding again with the affordability proper now.

Kathy:
Yeah, I imply that was form of my remark final yr is that it is a leveling out of a loopy manic pandemic-induced shopping for spree of final yr. And so with so many issues, once we see layoffs, once we see residence costs coming down, it’s actually simply evaluating to an irregular yr. And so should you may maintain that in thoughts and possibly simply examine numbers to 2019, individuals who purchased in markets that basically went up and at the moment are coming again all the way down to earth, in the event that they purchased this yr, they could be feeling a bit of ache. However should you purchased earlier than that, you’re superb.
In case you maintain it, you’re superb. It’s simply anytime it’s a must to promote, should you’re compelled to promote when it’s not good timing to promote, then that may be painful. However should you can maintain, normally these sizzling markets come again and so they turn into sizzling once more.

Jamil:
I really feel like should you purchased a home within the peak time of 2022, it’s form of like a kind of nights you bought actually drunk at a celebration and issues didn’t prove the way in which that they need to have and also you wish to neglect it. And in order that’s mainly what occurred.

Dave:
Is that this what occurred at your get together final weekend, Jamil?

Jamil:
Perhaps.

Kathy:
I left in time.

Jamil:
Hear, all of us have the identical illness, and the way that occurred …

Dave:
I don’t know methods to comply with that up.

Jamil:
I placed on an excellent get together although, guys.

Kathy:
That was an excellent get together.

Jamil:
Let’s be actual.

James:
You recognize what? Everybody ought to go to Jamil’s meetups and events. They’re essentially the most enjoyable issues for actual property I’ve been to. It’s like, it’s a vibe that’s nothing I’ve seen at an actual property convention earlier than or meetup.

Kathy:
I’m signing up.

Jamil:
All proper, nicely undoubtedly examine these out.

Dave:
Okay, nicely let’s take a break now as a result of, Jamil, you threw me off. Let’s take a fast break after which we’ll come again and speak about our predictions for 2023.
All proper, let’s leap into our predictions, however earlier than I ask you which of them markets you truly picked, can we speak shortly about what standards you all used? We’re going to do our worst markets first and when Kailyn and I assigned you these, we didn’t actually give definition what worst means. I’m curious, Kathy, what did you interpret that as? What did you suppose? How did you select the market you selected?

Kathy:
I needed to actually give it some thought as a result of with actual property, you may get tremendous confused. There’s a lot knowledge coming from so many various angles and all people’s bought an opinion and that’s 100 X yearly as increasingly more folks get into the trade. It may be very complicated. I simply needed to cease and say, for what? The worst marketplace for what?
For me, my shopping for field, mainly what I’ve all the time regarded for are areas that money stream with the hope of appreciation as a result of there’s one thing happening in that space, there’s development. And so I don’t want it to go up in value dramatically straight away. I simply need it to over time in order that I do know that I’m getting money stream and appreciation as a result of the double whammy is what can actually make you rich.
For me, the worst market I selected was Detroit. Now Detroit got here up on some lists as an important marketplace for 2023. Once more, it simply relies on your purchase field. I’m certain there’s Detroit traders listening who’re like, “In case you make investments the way in which I make investments, you’ll do nice in Detroit,” as a result of there’s a lot happening and apparently has had a few of the highest millennial development there. There’s a whole lot of revitalization taking place downtown. A few of the issues I search for are there.
The explanation I select it because the worst for me is that they’ve had a inhabitants decline over many years. Yeah, many years. Detroit has seen a 61% lower in his inhabitants because the ’50s. It was once actually fairly like a New York form of metropolis, highly regarded metropolis, however individuals are leaving and so they’re going to put on my favourite market. One in all my finest markets is hotter climates, the Florida space. No, I didn’t let you know the place in Florida, however heat climates with landlord pleasant legal guidelines. This suits the purchase field for me.
If I’m in search of purchase and maintain, money stream, appreciation and development, I wish to be in an space the place there’s job development, inhabitants development, infrastructure development, hire development, all these issues. We’re not seeing it. However the largest cause that I wouldn’t spend money on Detroit is that they’ve this legislation, and it’s a robust legislation, and I do know it nicely.
In Could of 2017, the town of Detroit introduced its intention to implement a citywide effort to implement more durable rental ordinance guidelines on landlords. Landlord guidelines actually matter. Mainly, you may get massively fined relying on which means you have a look at it. For renters, that is nice, it implies that landlords need to maintain their properties and make things better. However should you’re not conscious of that, you may get actually caught.
We’re attempting to promote three Detroit properties in our former fund. My final single household rental fund, we’re down to 3 Detroit properties that we’re having a extremely robust time promoting. We will’t get the tenants out as a result of landlord legal guidelines are actually not in our favor there. Town is available in and inspects and tells us all this stuff we’ve to repair. These fixes are costing so much, $40,000 to $50,000. These are properties we solely owned 5 years and we mounted them 5 years in the past. They’re older. In case you’re shopping for an older property in Detroit, you simply need to know that the town inspectors could cost you.
For me, this isn’t a finest marketplace for me, it’s a worst marketplace for me. I do suppose should you go in and you may get an important deal and also you fully renovate it and also you’ve bought the price range for it and the reserves, you possibly can get nice money stream. I simply don’t suppose that you just’re ever actually going to see that market admire the way in which I prefer it to do in different markets.

Dave:
All proper. Detroit is our first worst metropolis. I do know the previous CEO and founding father of BiggerPockets, Josh Dorkin, would undoubtedly agree with you. He made a fame of hating on Detroit for a lot of generations.

Kathy:
I used to adore it. I used to take a position there and our fund purchased a bunch of properties there and so they money flowed the entire time through the fund. They had been fantastic for money stream. It’s simply while you’re attempting to get out or if the town is available in and tells you to do a bunch of labor you weren’t anticipating to do. You simply need to have tons and plenty and plenty and plenty of reserves for older properties.

Dave:
Kathy, it’s an important level. Two or three years in the past, I did this knowledge evaluation to have a look at appreciation versus money stream for markets and I plotted them out. Mainly, what we noticed was that earlier than the pandemic, most markets had been both actually good appreciation or actually good money stream and there have been a couple of that had been each, however they had been modest for each. The outliers for good money stream like Detroit had been additionally outliers for unhealthy appreciation.
And so that you noticed the opposite factor too. An outlier for appreciation like Seattle was additionally an outlier for unhealthy money stream a whole lot of the time, simply on common. For the reason that pandemic began, all that bought thrown out of the window and everybody has simply seen each. However I do suppose as we go into 2023, we’re going to start out going again to that standard form of bifurcation out there the place some markets are actually good for money stream however don’t admire actually and vice versa. Some will proceed to understand however aren’t going to be locations the place you may simply discover rental properties that meet the 1% rule, for instance.
And so, it sounds such as you agree. Detroit could be good for money stream, however appreciation most likely not going anyplace.

Kathy:
Yeah, I believe it’s actually vital to have a look at how efficiency was earlier than 2020. I do know a whole lot of these cities have actually redefined themselves within the final decade, however should you take say 2015 to 2019 and actually have a look at the cap charges and what was taking place in these markets appreciation-wise, these had been good stable years for actual property. That shall be a greater metric for the place we’re headed in 2023, I believe.

Dave:
All proper, nicely there we bought one. James, how did you strategy this and what metropolis did you decide?

James:
I picked form of a special metropolis. I spent a whole lot of time researching all these markets and I’m like, you already know what? I’m going again to the market that I had the most important remorse of not shopping for in 2009. And so I picked San Diego, California. The explanation I picked San Diego is, A, and this has nothing to do with what we’re going by now as a result of it’s a special factor, however I bear in mind in 2009, the sky-rise condos went all the way down to beneath 400 grand. These items had been such as you’d be up killer views, model new, and you possibly can purchase them for beneath half million {dollars} and so they had been buying and selling for over 1,000,000 earlier than the mortgage trade exploded.
However the cause I picked San Diego is I do suppose, A, I believe San Diego is one of the best metropolis on the West Coast. It’s the place you wish to stay for certain, however the issue is the earnings is simply not there and what folks can afford within the job market. It’s a extremely good place to maneuver to when you have cash, but when not, you’re going to battle with a whole lot of the pricing round there.
And so what we’ve seen with the rates of interest rising is the charges, we’ve already seen it go from a medium residence value down over 10%. There’s been a drop from about 950 down 850. We’ve seen one thing very fascinating to look at for and these are the markets I’m most cautious in proper now are those that’s hockey stick up in that first two quarters at a loopy price. San Diego undoubtedly hits that. In March, they had been up 30% and so they had been one of many prime three appreciating markets for that month. It has retracted again 20% from March and it’s persevering with to slip proper now.
I believe a whole lot of the rationale that they’ve retracted again is the mathematics simply doesn’t fairly make sense. Additionally, rents have dropped 5% since March as nicely. I do suppose the rents are falling as a result of extra the distant work. Why wouldn’t you desire a distant work in San Diego should you may? That’s the place I might desire a distant work. And in order the workforce goes again to the place they’re presupposed to be working, all this stuff are beginning to convey it again.
Through the pandemic, dwelling in a high quality place was an enormous concern for most individuals and San Diego’s among the finest you might be in. And so I believe individuals are simply beginning to depart a bit of bit and it’s beginning to let issues down. However to place it in perspective, it’s a must to save … In San Diego, the typical residence purchaser wants to avoid wasting up $160,000 to purchase a home. With the earnings that they’re making, they should save a minimal of $13,000 per yr to it. It’s going to take them nearly 8 to 12 years to avoid wasting up for that 20% deposit. That doesn’t even maintain monitor with the pricing going up throughout that point. With a median residence value of $905,000, the family earnings ought to be $166,000 to afford that comfortably.
The issue is the median family earnings there may be $70,000 and a whole lot of the precise jobs which might be in San Diego are large … There’s not as a lot, and I picked San Diego as a result of there’s not as a lot large enterprise as there may be in Austin, Seattle, San Francisco the place there’s these large anchor tech firms that sure, they could be going by a downturn proper now and shedding some folks however they’re going to come back again and these are firms that aren’t going away whereas they’ve a way more restricted pool. Army is an enormous deal.
Now I do suppose if we’re going into extra battle that the navy may develop and that there’s going to be, that might increase in San Diego as a result of it’s the most important navy base there may be, but it surely nonetheless doesn’t get you to the earnings for affordability. With charges being as excessive as they’re, it’s simply going to tug every little thing again as a result of simply folks don’t make sufficient cash to purchase. We’re seeing that proper now.
If the charges proceed to go up, which I do imagine they may for not less than the primary two quarters, you’re going to see properties dropping value. 43% of all properties in San Diegos have reduce their value this yr. That may be a substantial quantity. Which means individuals are both overpricing or even when they’re pricing proper, they’re simply not promoting for folks can’t afford them.
The main pool of that they will’t afford that, these large firms are slowing down, like Qualcomm is a large enterprise there. That’s considered one of their anchor employers. Qualcomm has froze their hiring proper now. They haven’t introduced layoffs but so far as I may inform, however that’s normally step one. You freeze your hiring after which there’s layoffs coming.
They haven’t predicted the layoffs however they’re anticipating the corporate internally is anticipating that their shipments are going to say no within the double digit share for subsequent yr. They’re predicting that they will do much less enterprise as an organization which goes to start out shedding the folks which might be going to soak up a whole lot of these dearer properties. And so all these issues that while you get in a mixture, I simply see these items coming down. It’s means too costly, we’re lacking like $70,000 on the median residence value to get folks to essentially be capable to afford. Then there’s different issues which might be simply indicating that it’s means higher to hire versus to purchase. The fee to hire ratio is 30.38. In a wholesome market, it’s such as you wish to be beneath 21.
It’s so far out of whack proper now that I believe that San Diego may fall an extra 10% from the place it’s at proper now. That doesn’t imply that I wouldn’t purchase in San Diego, it’s truly on my cities to slate to purchase in. I simply suppose that there’s going to be extra alternatives. I don’t wish to have the identical remorse I had in 2009 as a result of I do suppose high quality of dwelling and other people wish to stay there normally and that’s all the time going to drive development.
They’re additionally on a long-term foundation predicting that San Diego’s economic system goes to develop, I believe they mentioned 31% within the subsequent 10 years or 20 years. And they also’re predicting development. However within the brief time period for 2023, I believe it’s going to retract again and I believe all these costly West Coast markets are going to proceed to retract again. The factor it’s a must to watch out about with the traders is while you’re taking part in in costly markets, the retraction can actually damage. And in order that’s why I put this because the worst market that I might spend money on.

Dave:
Everybody loves leverage while you’re going up, after which when it goes down it hurts so much.

James:
I imply it undoubtedly hurts. Like what we had been speaking about earlier than I bought on the present, I lastly offered a home that it took 150 days to promote and fortunately I’m breaking even. I don’t even know the way I’m breaking even. However we simply offered the home for 450 grand, lower than a home that we offered proper across the nook once we purchased that deal at first of the yr. And so it’s a must to be careful for these slides and the slides are okay, you simply have to arrange for them accurately.
However I do suppose San Diego’s going to have some points. It’s simply too costly for what folks make there. I do suppose individuals are all the time going to wish to stay there. Effectively, along with apart from that expense, you could have that California expense, the additional 13% earnings tax. There’s too many bills happening which might be consuming up liquidity and that’s why I do suppose that it’s susceptible for a fairly large drop from right here. I believe one other 10% is coming again.

Dave:
San Diego could be in your finest markets for 2024 checklist?

James:
Sure. I truly suppose all these markets like Seattle. It’s Seattle, proper? It’s a really comparable … I like Seattle higher than San Diego as a result of there’s extra jobs there. I like Austin higher than San Diego as a result of there’s extra jobs and infrastructure there. However I do suppose all these cities which might be having these huge retractions are nice shopping for alternatives, particularly after this second quarter. However it’s a must to purchase rigorously. You may’t purchase historically. In case you’re shopping for historically, you’re going to get … I believe you’re going to get burnt.
However because the markets maintain free fall … I imply these are the markets which might be going to have essentially the most alternative. Those which might be falling backwards are those that everybody simply jumps out of. That’s the place I actually wish to leap in. I most likely will purchase one thing in San Diego. I wish to purchase some brief time period rental stuff proper down by the seaside and PB. I do know the rental market will get hammered and people are issues that I’m in search of, is that if I can purchase it considerably beneath what it was price, if I’m shopping for them 30%, 40% beneath that earlier median residence value, there’s runway for development and fairness good points in over a five-year interval.
However like what Kathy mentioned, it comes down to what’s your technique? My technique isn’t excessive money stream. I don’t like coping with these small homes that may get you 10% to fifteen% returns as a result of I don’t like these upkeep bills. They’ll jeopardize my money stream place. I like excessive development markets as a result of that’s the place you make these large fairness good points. These fairness good points have fully modified me as an investor and the way I’ve been capable of passively make investments simply primarily based on these good points.

Dave:
All proper. Effectively mentioned. Truly after I was attempting to suppose by this for finest markets, I used to be considering of doing a contrarian opinion and saying one thing like Austin, as a result of I believe it’ll go down 20% or 30%, but it surely has among the finest long-term development potentials of any metropolis within the nation. And so possibly it’s a nice time to purchase in Austin if to your level, James, you’re shopping for beneath market worth and discovering good worth.
All proper. Jamil, what about you? How’d you strategy this?

Jamil:
Effectively, I liked every little thing that James and Kathy mentioned. I agree that it’s a must to have a look at it from the angle of your funding technique. Everyone knows that I’m a dealer. I have a look at the actual property market when it comes to how can I profit, how can I become involved and the place are my patrons? The place are my purchasers? The place are they trying to make investments? The place are they working away from?
And so for the worst market of 2023, I’ve chosen Ventura County. Realtor.com predicts that it’s going to drop in gross sales value by about 30%, 29.3%, 29.1% particularly is what their prediction is. That’s a major sum of money. Whenever you have a look at repair and flip, while you have a look at wholesale, while you have a look at alternatives for us to commerce in property, should you’ve bought declining market to that diploma with all the issues that James was speaking about, you’ve bought the common Southern California points just like the state tax, the migration in Ventura County isn’t, it’s flat, if something.
And so how I have a look at a market like that, as I say, are my purchasers or are my patrons for repair and flip or are my wholesale patrons in search of alternatives in Ventura County proper now? They’re not. For me, the place we’re not going to be investing advertising, the place we’re not going to be investing sources for boots on the bottom to attempt to discover some alternatives or to select up alternatives for commerce shall be a few of these greater worth markets in southern California. However I do additionally agree that wanting ahead to 2024, as you had talked about and as James had talked about, there’s going to be an incredible worth, however it’s a must to wait.
It’s a foul marketplace for 2023, however coming off the tail finish of that, if you can begin shopping for in This fall of 2023 and get them considerably beneath market, as a result of at that time there’s going to be desperation, exhaustion. Sellers are going to be simply, they’ll have had it. I really feel should you can time your purchases proper, you may make the worst market at 2023 your finest market at 2024. And so I’ll be re-entering Ventura and a few of these markets in Southern California in the direction of the tail finish of ’23.
However for now the worst market, Ventura County.

Dave:
It is sensible. Kathy, what’s your learn on this California hate over right here with getting James and Jamil? However actually we’re seeing a whole lot of inhabitants leaving California and it’s very costly. I really feel like folks have been saying California’s going to nostril dive for many years and it by no means occurs. As a resident and a local, what do you suppose the long run holds for California within the subsequent few years?

Kathy:
I’m a local of many generations. My grandmother was one of many first folks to swim … She swam throughout the Golden Gate Bridge. She was an Olympic athlete and would swim round Alcatraz. I actually have my roots in California, and it is a dialog that has been had most likely for a century. It’s simply all the time the case when you could have extremely fascinating world class areas, it is going to by no means be low cost and there’ll by no means be an absence of people that can afford it. It’s simply that they’re unstable. These are unstable markets.
However San Diego, I imply it actually is without doubt one of the finest locations on this planet to stay or to have a second residence. There are extra folks that might purchase there or personal there than work there. Clearly in case you are attempting to do a purchase and maintain, once more, it simply relies on technique. Nevertheless it’s nearly like if you are able to do a long run flip, which means possibly you purchase one thing, you hire it out for a yr or two the place it’s form of masking its value. It most likely gained’t, it is going to most likely nonetheless be destructive however then do the flip later so that you form of bought in low …

Jamil:
In case you can by no means get the tenant out.

Kathy:
Proper, there may be that.

Dave:
Legitimate level.

Kathy:
Nevertheless it all the time has bounced again, and you’ll make some huge cash should you maintain. That’s why so many Californians are loaded and are bringing their cash to different locations as a result of they made their cash in housing in lots of instances.
In case you stay in California, so what I consider California, I might love to go away California. However I really like the climate. I really like every little thing about it besides the politics and the costs. However it could be onerous for me to go anyplace else and I believe lots of people really feel that means who stay there.

Dave:
All proper, nicely yeah. I wouldn’t guess in opposition to the California market long run. It all the time bounces again. Oh, and one factor I do wish to say while you had been speaking about that, that might be an excellent alternative for a live-in flip for individuals who wish to try this. You get to stay in California after which flip it down the highway. In case you stay in it for 2 out of 5 years, you pay no tax. Good alternative.
For mine, I wished to select a metropolis that we don’t speak about so much additionally on the West Coast, however was one of many hottest markets during the last couple of years. I picked Reno, Nevada. Do you guys know something about Reno?

Kathy:
Simply offered off our two subdivisions there simply in time, so sure.

Dave:
Oh good. Effectively it went loopy during the last couple of years, so hopefully you probably did nicely there.

Kathy:
Bought proper earlier than charges went up, in order that was good.

Dave:
Ah, good.

Jamil:
Congrats.

Kathy:
Thanks.

Dave:
As a result of to me, Reno is considered one of these cities that simply popped as a result of distant work. It’s an attractive place. There’s no earnings tax. It’s proper close to Lake Tahoe, it’s very nice. However while you have a look at the financial fundamentals, it doesn’t actually assist all the expansion that we’ve seen. Just like what James was saying about San Diego, you simply see a extremely not a excessive sufficient earnings degree to assist the costs. You don’t actually see, not like Seattle or Austin that has distinctive job development and tech firms transferring there, don’t see that to the identical diploma in Reno.
That is what to me going to be an fascinating experiment as a result of I believe it grew so much much like Boise. I believe it’s form of an identical factor the place individuals who wished to stay someplace with an important high quality of life determined to maneuver there, however must see if the economic system can assist it as soon as individuals are both known as again to the workplace or salaries don’t rise on the similar charges that they’ve been or there’s layoffs we’re beginning to see.
Sadly for Reno, I don’t suppose it’s going to be doing fairly nicely over the following couple of years. It’s already seen the times on market go up by about 250% over the course of this yr. We’re at days on market over 60, which is in any market fairly excessive. And value drops are over 45%. That’s my decide.

Kathy:
Effectively, I may let you know why we invested there, why we purchased land there and constructed a whole lot of homes there as a result of Tesla moved its battery manufacturing facility there and there was simply … Google was transferring up there as a result of it’s solely about 4 hours from San Francisco, but it surely’s in Nevada, no state earnings tax. It simply appeared like that is going to continue to grow.
However like San Diego, it simply lags. It simply lags. It’s so unusual why you’d suppose for these causes firms would transfer to Nevada simply to keep away from taxes. Nevertheless it’s nonetheless a four-hour drive. If there was a velocity bullet prepare or one thing, possibly it could be a special story, I don’t know. Nevertheless it’s all the time lagging.

Dave:
The earnings simply hasn’t grown there in the way in which that it could want to only assist a few of these costs.

James:
Don’t they run out of water? Isn’t there an enormous water situation in Reno too, prefer it’s dry nearly? I simply bear in mind I went to Lake Tahoe, they had been speaking about it. The water’s low and so they’re attempting to determine methods to get extra water in.

Kathy:
I believe normally, that was California.

Dave:
And Nevada.

James:
Effectively, it’s additionally loopy too while you go to Lake Tahoe, that property values as a result of a part of it’s in Nevada and so they name that millionaires row on that aspect as a result of that’s the place all of the mega mansions go. I get what Kathy was doing. They wish to get out of that earnings tax and it’s like, so you could have properties which might be price hundreds of thousands and hundreds of thousands of {dollars} on one aspect after which simply kitty nook, they’re price 45% much less as a result of there’s no earnings tax.

Jamil:
No, that’s fascinating.

Dave:
All proper, nicely we’ve talked in regards to the draw back. Once more, I believe that a few of these markets might be nice sooner or later. We’re simply speaking about 2023, not ceaselessly. Let’s transfer on to markets that we do suppose are going to outperform or do nicely within the subsequent yr. Kathy, on the opposite aspect, you didn’t like Detroit. What do you want for subsequent yr?

Kathy:
Effectively, as you already know, like I mentioned, we all the time have a look at job development, inhabitants development and infrastructure development mixed with affordability. I wish to be in markets that money stream in the present day and so you may maintain these properties. They don’t need to money stream so much. It is a long-term play however cowl their prices so that you just’re actually capable of maintain these as they admire.
Tampa actually suits that for me. Tampa has fully redefined itself within the final decade. In actual fact simply in 2021, there have been 9 firms that relocated their headquarters. There’s an article that claims tech firm relocations to Tampa Bay soar in 2021. 94 new firms had been added to St. Pete’s pipeline. Plenty of job development and that’s actually vital to us.
Now with that comes inhabitants development. In Tampa, it was 1.3% up final yr. That is the vital factor wanting ahead, it’s projected to develop 3.3% yearly. The expansion has simply began. Greater than 128,000 new residents are forecast to maneuver to the metro space. How on earth by subsequent yr, by 2024, there’s not sufficient housing for all these folks.
We’re nonetheless shopping for homes within the one $150,000-$200,000 vary nearly 45 minutes outdoors of Tampa. I don’t prefer to be too distant from a serious metro, but when it’s nonetheless driving distance and there’s nonetheless workplaces and jobs close by. Simply on the outskirts and out of flood zones and out of the hurricane zones, form of extra inland of Tampa, we’re actually discovering superb offers. I believe should you may nonetheless get a home for $200,000, $300,000 in an space that’s rising like that, to me that’s a steal.
Median hire is $2,300 per thirty days for a three-bedroom residence. There’s a whole lot of markets the place it could be a two-bedroom residence or one thing. However in keeping with Zumper, $2,300 for a three-bedroom residence, that’s fairly good. Rents have elevated by 16% final yr, and 48% of households in Tampa hire reasonably than personal. I believe we will all agree that Florida normally is enterprise pleasant and landlord pleasant. It meets all of the issues that I would like. I’m not nervous in any respect about shopping for in Tampa in the present day.
Oh my gosh, for the properties that I personal within the Tampa space, I get calls propped and texts most likely each different day of individuals attempting to purchase these properties. There’s nonetheless a whole lot of exercise.

Jamil:
That’s my fault.

Dave:
It’s Jamil, he’s calling you.

Kathy:
I do know. I maintain providing twice what it’s price and nobody’s taking it.

Dave:
All proper. Effectively, I really like Tampa too. That’s an excellent decide. I imply I believe there’s a whole lot of … Florida, it simply appears to be this break up metropolis, break up state. Some markets appear to be overheated proper now, however markets like Tampa simply appear to nonetheless have actually robust fundamentals. We’ll need to regulate that one.

Kathy:
I’ll simply say yet another factor after which add to it that the iBuyers are form of backing off, so you could have a bit of bit extra alternative to get in in the present day and we’re lastly beginning to see the foreclosures gross sales form of hit. There’s extra alternative there than there was, however all the identical dynamics of development that we like.

Dave:
Good. All proper. James, what about you? What do you want for subsequent yr?

James:
What I like for subsequent yr is … It’s humorous after I was researching all this. There have been a whole lot of the anticipated markets which might be going to carry out rather well in 2023. It’s all primarily based off math equations. After I was all these lists, I’m like, okay, I get it. It’s a really low value level. The median earnings is up. There’s low stock, in order that they’re predicting development. That absolutely is sensible.
However for me as an investor, I additionally like to purchase stuff the place folks wish to stay. And so I picked Raleigh, North Carolina, which I do know did actually good this final yr. The reason is is it’s ranked on quite a few lists as one of the best locations to stay in the US. It was ranked quantity six just lately and it has a ton of development behind it. It had a 3.4% GDP development in 2022 and the economics behind, it’s Riley and Durham County however there’s development happening there. The inhabitants is growing as a result of folks wish to stay in high quality locations however nonetheless maintain their capital.
A whole lot of our mates, I do know a considerable quantity of individuals within the final 12 months that make good cash, they’ve good careers and so they reload out of California. The explanation they did is as a result of they had been sick of giving freely that 13%. They had been sick of paying an excessive amount of cash for housing and so they’re going to areas like this.
In case you have a look at how reasonably priced that is for the standard of dwelling, so that is the sixth rank metropolis of locations to stay that you may have an important life to stay in. The median residence value is $410,000, which did develop by 16% final yr and that’s my concern. It did have a whole lot of speedy development. However the family earnings is $98,000. So folks can afford to … They’ll transfer there, have an important life and nonetheless stay comfortably.
All people that I’ve identified, and I additionally go off of what are folks saying. Individuals have been reloading to Raleigh, North Carolina, Charlotte, and so they adore it. They love every little thing about it. That may be a buzz, and as we go right into a recession and issues are costing extra, individuals are going to search for space. They only wish to get pleasure from life and stay someplace that they will elevate their children, and that is a kind of sizzling locations.
The opposite factor I favored is there may be going to be a list downside, I imagine. Since 2010 till now, they constructed 50% much less homes than they did from 2000 to 2010. When you have development happening there as a result of the inhabitants is rising, similar to Kathy mentioned prefer it’s rising at a speedy price, it has traditionally grown round 1.5%. It’s been rising close to 3% the final three years. And so it has the thrill. That is the place individuals are transferring, there’s an absence of stock and other people can afford issues.
One other fascinating stat I noticed and I used to be like, wow, that is fairly, it form of blew my thoughts. 23% of individuals don’t have mortgages there. That’s how reasonably priced it’s. That absolutely caught me off guard. And so while you’re a high quality place to stay, they’ve good earnings. The median residence value continues to be very, very reasonably priced. The faculties are nice. Charlotte, the massive metropolis subsequent to it’s rising quickly. These are all good issues for long-term good points on a property, along with folks wish to stay there.
The one factor that I did see that may be a little regarding is the price of hire. That’s one thing that I’m actually now in all my metrics after I’m issues. Is it means cheaper to stay in a rental? It went from being round 16% to 17% to 19.65%. The hole is getting shut on whether or not you possibly can hire or purchase, however that’s nonetheless beneath that 21-point threshold that they speak about.
There’s nonetheless a bit of bit extra room, it nonetheless makes extra sense to personal than it does to hire. And so these are issues that I believe are actually wholesome for development for 2023. Individuals wish to stay there, they will afford it and it’s nonetheless cheaper or a greater state of affairs to purchase. I believe that it has a whole lot of room to develop.
One other factor I noticed truly, the markets I’ve been watching are these hockey stick markets. Raleigh has jumped dramatically, but it surely solely got here down 5% as an alternative of that 10% to twenty% that we’ve seen in a few of these tech markets. It didn’t fairly develop on the similar price as San Diego, Seattle, Austin, it grew about half the speed. And so it’s form of a extra leveled out market, so there’s much less of a hockey stick happening there.
However I’m going to essentially dig into this market. I like all of the stuff I learn on it. I do know I like every little thing I hear about folks, and I actually do love markets the place folks wish to stay. Raleigh is considered one of them.

Dave:
Superior. Yeah, I imply it’s anchored by very, very robust economic system. Three of the biggest analysis universities within the nation, Duke, UNC, NC State are all in that space. When you could have that form of training degree, you see a whole lot of firms transferring there to reap the benefits of that workforce. So very, very robust economic system there.
North Carolina has some bizarre guidelines about shopping for homes although the place it’s a must to like, what’s it known as? You must pay some payment to take the home off the market. It’s placing earnest cash down, but it surely goes onerous instantly. Have you ever ever heard of this?

Jamil:
Choice payment?

Dave:
Yeah, it’s like an choice payment. Final yr, they had been like 20 grand earlier than you even have an inspection. It’s loopy.

James:
Yeah, I used to be simply speaking to somebody about that and so they mentioned, yeah, it’s like two earnest. There’s an earnest cash after which there’s like a due diligence payment.

Jamil:
Yeah, it’s to curb wholesaling.

Dave:
Yeah. It’s loopy although as a result of in a traditional yr, I talked to an agent down there as a result of I used to be focused on shopping for in Durham. They had been saying like in regular yr, it’s like 500 bucks. So it’s like, all proper. However final yr with how aggressive it bought, it was like 20 or 25 grand. That was earlier than you even bought an inspector in there, earlier than you even essentially stroll the property.
So if folks had been … I imply, that’s loopy. That’s why I simply didn’t do it. However hopefully on this subsequent yr, it gained’t be as aggressive when you are able to do one thing like that.

James:
The shopping for circumstances had been so bizarre although. We used to jot down provides on properties. We write a five-day shut, it’d be listed for 400 grand. We’d write it up for let’s say $450,000, and we’d write earnest cash at $448,000 and launch it to vendor day after Mutual. We’d write the weirdest phrases we may do exactly to attempt to get that deal. They’re like, “Wait, what do you imply?” We’re like, “No, no, we’re going to provide you all the cash till we shut for two,000 bucks.”
We had been attempting every little thing simply to lock a deal down. It was like, however I believe that that may go away from what I hear from folks which might be shopping for there. It’s again all the way down to 500 bucks. Individuals aren’t throwing loopy numbers at it anymore.

Dave:
For certain it’s wild. However agree that it’s a really robust market. All proper. Jamil, what do you bought? What’s your favourite marketplace for subsequent yr?

Jamil:
Effectively, once more, this from the angle of a dealer, so I’m in search of alternatives which might be fast the place my patrons can get in and do tasks the place they gained’t get slammed and have a home sitting in the marketplace for months and months and months the place mortgage charges aren’t going to be a substantial state of affairs. Now, what we’ve seen, we’re seeing throughout the US in nearly each market that costs are declining. Nevertheless, there’s a unicorn market proper now that a whole lot of people aren’t speaking about the place that’s not taking place, and it’s Hartford, Connecticut.
Hartford, Connecticut. Attention-grabbing, realtor.com is predicting that they may have a value appreciation in 2023 of 8.5%. Purchaser demand is so robust there proper now that they’re nonetheless in a number of provides, conditions on properties, and homes are promoting 20% above checklist proper now with mortgage charges the place they’re proper now. That’s how robust the demand is. It’s loopy. It’s like every little thing that we had been seeing main as much as this complete market shift, all of the craziness in a lot of the markets throughout the US, we’re seeing these a number of supply conditions, it’s nonetheless taking place in Hartford, Connecticut, which is loopy to me.
Past that, the median value over there may be very low at 372, so it’s nonetheless comparatively reasonably priced. You’ve bought robust migration. You’ve bought New Yorkers transferring there. You bought folks from Florida transferring there. You bought folks from New England transferring there. It’s bought a whole lot of demand. And so individuals are transferring there. There’s robust, robust, robust purchaser demand. The mortgage charges didn’t have an effect on it as a result of we nonetheless have a number of supply conditions.
Repair-and-flip goes to be very robust over there. Wholesaling shall be very robust over there. We’re going to be doubling down our efforts in addition to attempting to determine extra franchises within the space as a result of I see heavy alternative for wholesaling and fixing and flipping on this little unicorn submarket.

Dave:
This needs to be the primary time in BiggerPockets historical past anybody’s ever talked about anyplace in Connecticut as a spot to … I grew up not so removed from right here and simply by no means even speak about Connecticut. However Hartford has been one, it’s a low value market. Simply anecdotally, most of my mates who grew up in New York with me now moved to Connecticut, largely to Stanford, Bridgeport, locations near the town.
Nevertheless it’s an actual factor. Hartford is form of completely located between Boston and New York. And so possibly you’re getting folks from each of these greater value markets who simply need someplace within the northeast that’s a bit of bit inexpensive.

Jamil:
They’re. There’s jobs and trade there too as a result of it’s the insurance coverage capital of, I imagine the world, the insurance coverage capital of the world. Aetna’s bought their headquarters there. Cigna’s bought their headquarters there. We all know that there’s robust alternative in healthcare. There all the time shall be. That’s one of many industries that we perceive will all the time have a whole lot of demand and a whole lot of alternative.
I believe it’s considered one of these markets that we are going to have a look at in 5 years and say, who knew? Jamil did.

Dave:
Yeah. Connecticut has underrated pizza. I don’t know if anybody is aware of that, however has higher pizza than folks give a credit score for. It’s crucial.

Kathy:
It’s the place my husband was born.

Jamil:
Wow.

Kathy:
Yeah.

Dave:
What, in Hartford?

Kathy:
Mm-hmm.

Dave:
Wow. All proper. Perhaps Jamil and Wealthy must go on a tour. All proper. Effectively for mine, I wished to do one thing much like Jamil, a bit of contrarian, some locations that folks haven’t heard of or aren’t speaking about a lot. For some cause, possibly not in 2023, however I’m lengthy on the Midwest. I believe much like how the Southeast during the last couple years has seen, this large pop, the climate is nice, but additionally it’s simply extra reasonably priced than the West Coast and the Northeast.
I believe the Midwest additionally has that going for it. Doesn’t have the climate, I’ll provide you with that. However the Midwest is by far essentially the most reasonably priced a part of the nation now as a result of the Southeast has gotten a lot dearer. Town that I like within the Midwest essentially the most is Madison, Wisconsin. By no means been there, however simply on paper, it has actually good inhabitants development. It estimated grew 1.5% simply this yr. Its unemployment price is at about 2%, which is way decrease than the nationwide common. It’s a extremely, extremely educated workforce.
To James’s level, I’m simply going primarily based on affordability. Individuals can afford to stay there and it has a excessive scores for high quality of life, and it’s nonetheless rising. It’s nonetheless constantly rising 8% to 10% year-over-year, and it’s been doing that for the final a number of years and it’s proven no indicators of slowing down during the last couple of months. I believe this market continues to be going to continue to grow over the following yr. I don’t suppose it’s a fluke. I believe it’s an reasonably priced market, top quality of life and reasonably priced, which as James mentioned, form of a few of the key indicators for long-term efficiency for purchase and maintain markets.
I attempted to do one thing a bit of bit bizarre and a bit of bit totally different, however I believe Madison’s going to be a winner.

James:
Brutal winters.

Dave:
Sure, undoubtedly. Brutal winters.

Kathy:
I do know what he mentioned, high quality of life. I used to be like, it relies on how a lot you like chilly.

Dave:
It will get rated excessive for high quality of life, folks prefer it there. However I suppose these are all like James mentioned, it’s a math equation. They’re like, what was your rating on air high quality and what was … It’s these issues. You most likely must look into a bit of little bit of the methodology.

Jamil:
Whenever you stay in perpetual summer season like me right here in Phoenix, I don’t thoughts seasons.

James:
I’ve had too many seasons. I don’t need them anymore.

Dave:
I went to highschool in upstate New York and it’s completely brutal. I didn’t prefer it. It’s not for me.

Kathy:
Why do you suppose Wealthy moved from East Coast to West Coast?

Dave:
Yeah, precisely. However I simply suppose usually, I believe the Midwest has gotten hit onerous and there’s different cities within the Midwest additionally I believe are Chicago I imagine will rebound over the following couple of years. I imply, I believe it’s doing superb proper now, however we’ll begin rising once more simply because it’s a lot extra reasonably priced than different large cities. There’s nonetheless actually good jobs in these markets.

James:
Cool metropolis too. I really like Chicago.

Dave:
Final time I used to be there, Jane’s household lives there, and I used to be there over the summer season. Man, that metropolis is mainly holding down inflation for your entire nation. We had been going out and we went and purchased beers and so they’re like $3 for a beer. We’d go get a sandwich, it’d be like $5.50. And I used to be like, this place is holding it down. There’s steady costs in Chicago since 1990. They’re simply doing us all a favor.

Kathy:
Chicago’s a whole lot of enjoyable.

James:
I ate lunch yesterday after I was prepping, performing some work and consuming, I bought a sandwich and a soda and it was $33. I used to be like, it’s ridiculous. What’s going on? Yeah. I imply, now Chicago may leap up my checklist if it’s actually that low cost.

Dave:
Truthfully, it’s. It’s so low cost there, I imply, comparatively talking. Was your sandwich good not less than?

James:
It was good. It was prime rib dip. It was fairly good.

Jamil:
Oh, he failed to say it was a first-rate rib sandwich. It is sensible.

James:
Yeah. It’s a wagyu beef.

Jamil:
Yeah, when you could have wagyu between bread, it’ll be 33 bucks.

James:
However that was a $20 meal earlier than the pandemic. That was like a $19.94 with a $3 tip on there.

Dave:
All proper, nicely thanks guys. It’s been a whole lot of enjoyable. Let’s simply sum this up. Kathy’s picks had been worst performing marketplace for subsequent yr shall be Detroit, however finest shall be Tampa. James had San Diego because the worst performing market, and his finest was …

James:
Raleigh.

Dave:
Raleigh. There we go. Jamil choosing Hartford for his finest one, bringing a brand new state onto the map. He had Ventura County, California as his worst performing. For me, I believe Reno’s going to take successful, however Madison, Wisconsin is my darkish horse for subsequent yr.
All proper, nicely thanks all everybody. We’d love to listen to on the boards, we simply placed on the BiggerPockets boards a query to ask you what all you suppose one of the best and worst performing markets of 2023 are going to be. So if you wish to work together with us or speak to different listeners about market potential for subsequent yr, be sure to go to the BiggerPockets boards. Simply go to biggerpockets.com/boards and also you’ll discover it there.
Jamil, James, Kathy, thanks a lot for being right here. We admire you. We admire you all for listening, and we’ll see you subsequent time for On The Market.
On The Market is created by me, Dave Meyer and Kailyn Bennett. Produced by Kailyn Bennett, enhancing by Joel Esparza and Onyx Media. Analysis by Pooja Jindal, and an enormous due to your entire BiggerPockets crew.
The content material on the present, On The Market, are opinions solely. All listeners ought to independently confirm knowledge factors, opinions, and funding methods.

 

Notice By BiggerPockets: These are opinions written by the writer and don’t essentially symbolize the opinions of BiggerPockets.