The Hottest Real Estate Markets of 2023 (2024)

FAQs

The Hottest Real Estate Markets of 2023? ›

Despite what some may think, 2023 is still a good year to invest in real estate, thanks to advantages like long-term appreciation, steady rental income, and the opportunity to hedge against inflation. Mortgage rates are expected to decline, but the housing market is likely to remain competitive due to low supply.

Despite what some may think, 2023 is still a good year to invest in real estate, thanks to advantages like long-term appreciation, steady rental income, and the opportunity to hedge against inflation. Mortgage rates are expected to decline, but the housing market is likely to remain competitive due to low supply.

According to recent data from CoreLogic, the answer may be no, at least for the time being. While there are signs of a slowdown in the housing market's year-over-year growth rate, the overall data and forecasts suggest that a crash is unlikely in 2023.

Experts say hopeful buyers should not expect today's high prices to plummet anytime soon. “Home prices won't drop in 2023,” Evangelou says.

Experts at Fannie Mae's Economic and Strategic Research (ESR) Group believe that the housing market downturn could lead to a “modest recession” overall in the second half of 2023. If wage-related inflation continues, the Fed is likely to maintain its tight grip on economic policies.

After dropping more than 18% in 2022, the S&P 500 is now up around 6% year to date (as of May 4), leading some investors to wonder if it's safe to invest now. The short answer is "yes." The longer answer is, "yes, you should be investing regardless of market movements, if you have the means."

Generally, a good ROI for rental property is considered to be around 8 to 12% or higher. However, many investors aim for even higher returns.

Despite the fact that there are some troubling trends in the housing market, we're likely not going to see a crash in 2023 or 2024. While house prices are likely to drop, demand for housing caused by America's ongoing housing shortage is likely to keep prices relatively stable.

Mortgage rates are likely to decrease slightly in 2023, although they're highly unlikely to return to the rock-bottom levels of 2020 and 2021. However, rate volatility may continue for some time.

How much should I offer on a house in 2023? ›

If you really need the home, then you will want to make a house offer that is at least near the asking price — perhaps within 5% to 10% of that asking figure. For most sellers, coming in close to what they want to get and what the market bears for that particular home is considered a good offer.

In general, buying a home during a recession will get you a better deal. The number of foreclosures or owners who have to sell to stay afloat increases, typically leading to more homes available on the market and lower home prices.

“We expect that 30-year mortgage rates will end 2023 at 5.2%,” the organization noted in its forecast commentary. It since has walked back its forecast slightly but still sees rates dipping below 6%, to 5.6%, by the end of the year.

According to Treasury Secretary Janet Yellen, a recession in 2023 is unlikely. As she said in a recent appearance on ABC's Good Morning America, "You don't have a recession when you have 500,000 jobs and the lowest unemployment rate in 50 years."

According to the CoreLogic HPI Forecast, home prices are projected to continue their upward trajectory. The forecast indicates an expected month-over-month increase of 0.8% from March 2023 to April 2023 and a year-over-year increase of 4.6% from March 2023 to March 2024.

Flipping houses has been extremely profitable for the past decade, but 2023 should see the market tightening up quite a bit. With demand sagging, rehab costs going up, and days on market doubling or even tripling, house-flippers have a little tougher path to profitability than before.

Consider Alternative Investments

Speaking of broader diversification, 2023 holds promise for alternative investments finally earning a place in everyday investor portfolios. The portfolio for 2023—no matter your net worth, risk tolerance, or time horizon—should include an increased allocation to alternatives.

Investors probably need no explanation why and convincing that Florida tops the list of the best states for the long term rental investment strategy. Our nationwide rental market analysis shows that, on average, you can expect the highest rate of return in the Sunshine State.

Where is the highest ROI in real estate? ›

The state with the highest one-year ROI on residential single-family homes is Arizona with 27.42 percent, according to iPropertyManagement data. The next two highest states are Utah with 27.05 percent and Idaho with 27.02 percent.

(NewsNation) — A new survey from WalletHub shows that New Hampshire and Florida are two of the best states for taxpayers to live if they want to see more bang for their tax bucks.

With mortgage rates declining faster than expected, home prices are likely to remain mostly flat throughout 2024. This will be good news for buyers who have been waiting on the sidelines for a good time to enter the market.

The housing market in four major US cities could experience a drop of up to 25% in 2023, according to a recent prediction by Goldman Sachs – similar to what we saw in 2008. Goldman Sachs expects the housing market to drop up to 25% in these four major US cities: San Jose, California. Austin, Texas.

If you need to be occupying your home by a certain date to save on rent, it's a much better deal to close at the end of the previous month (for example, January 30) instead of the beginning of the current month (February 1).

Will there be a future without real estate agents? The short answer is no. Real estate agents are highly unlikely to go the way of the Caspian tiger or Guam flying fox anytime soon. Still, it seems likely that the demand for real estate agents will decline over the next decade.

Mortgage Rate Predictions 2023

Mortgage experts see rates decreasing over the coming months as the economy slows. Lawrence Yun, the chief economist of the National Association of Realtors, said he expects rates to fall to 5.5 percent by mid-2023.

As inflation starts to come down, mortgage rates will recede somewhat as well. If we experience a recession, rates may drop a little faster. But average 30-year fixed rates will likely remain somewhere in the 6% to 7% range throughout 2023.

The average 30-year fixed mortgage rate rose to 6.57% on May 25, 2023 — almost a quarter percent spike from the 6.39% average on April 20, 2023, according to the Freddie Mac Primary Mortgage Market Survey (PMMS).

This is an obvious way, and it's often the ultimate result of bidding wars. Offering $20,000 above the asking price can still mean you're getting a good deal, Conti says. "Buyers get caught up in thinking they're only getting a good deal if they get an offer accepted below listing price," Conti says.

What makes a strong offer on a house? ›

According to the National Association of Realtors (NAR), the home offer with the fewest contingencies is often the most attractive. NAR states that “removing restrictions related to the sale of a current home and being flexible with things like the move-in date can make an offer stand out to a seller.”

In addition, during recessions, people with access to cash are in a better position to take advantage of investment opportunities that can significantly improve their finances long-term.

Recessions and housing market crashes may cause your house's value to decrease. However, your set mortgage rates won't lower, meaning your monthly payments will be higher than your home's worth. While many may dip into their savings to help pay the steep bills, others may need outside assistance.

The median price for a U.S. home sold during the fourth quarter of 2008 fell to $180,100, down from $205,700 during the last quarter of 2007. Prices fell by a record 9.5% in 2008, to $197,100, compared to $217,900 in 2007. In comparison, median home prices dipped a mere 1.6% between 2006 and 2007.

Along those lines, organizations like Fannie Mae and the Mortgage Bankers Association forecast that the average rate on 30-year fixed-rate mortgages will decline throughout 2023, continuing into the first quarter of 2024.

The predictions made by the various analysts and banks provide insight into what the financial markets anticipate for interest rates over the next few years. Based on recent data, Trading Economics predicts a rise to 5% in 2023 before falling back down to 4.25% in 2024 and 3.25% in 2025.

There is broad consensus that the U.S. is likely to see an economic slowdown in Q1 2023 as the impacts of the Federal rate rises from late 2022 start to feed into the economy; however, there is a significant divergence with regards to the quarters that follow.

Geopolitical tensions, energy market imbalances, persistently high inflation and rising interest rates have many investors and economists concerned that a U.S. recession is inevitable in 2023. The risk of a recession rose as the Federal Reserve raised interest rates in its ongoing battle against inflation.

How to financially prepare for 2023 recession? ›

The first reason why June 2023 is an excellent time to buy a house is that mortgage rates are falling back into the 6s and are likely to hold. According to Freddie Mac, 30-year fixed-rate mortgage rates averaged 6.57 percent to open the month, and dropped 0.375 percentage points when Congress reached a budget deal.

In my opinion, real estate is one intelligent option to consider in 2023, as it often has excellent returns, tax advantages and provides diversification even in the face of a challenging economic climate. Real estate also has the potential to compound your investment.

Fannie Mae's forecast model has U.S. home prices, as measured by the Fannie Mae Home Price Index, falling 1.2% between Q4 2022 and Q4 2023, and then another 2.2% decline between Q4 2023 and Q4 2024.

The 70% rule can help flippers when they're scouring real estate listings for potential investment opportunities. Basically, the rule says real estate investors should pay no more than 70% of a property's after-repair value (ARV) minus the cost of the repairs necessary to renovate the home.

Despite what some may think, 2023 is still a good year to invest in real estate, thanks to advantages like long-term appreciation, steady rental income, and the opportunity to hedge against inflation. Mortgage rates are expected to decline, but the housing market is likely to remain competitive due to low supply.

Land investment may not be as common as residential real estate, rental properties, or REITs, but it's looking like a solid choice in 2023, and beyond. Investments in land have steadily increased over the last decade. Investors may purchase land for agricultural purposes or residential and commercial real estate.

In Q1 2023, the average going-in cap rate, which is based on the first year of net operating income at the property purchase price, increased 23 basis points to 4.72%, “marking the first significant quarterly deceleration in cap rate expansion since the Fed began its latest round of rate hikes,” according to CBRE.

Will house prices go down in a recession? While the cost of financing a home typically increases when interest rates are on the rise, home prices themselves may actually decline. “Usually, during a recession or periods of higher interest rates, demand slows and values of homes come down,” says Miller.

What to expect in US housing market 2023? ›

As demand improved back in January, many housing analysts began to revise their home price outlooks upward for 2023. Look no further than Fannie Mae, which came into 2023 expecting national house prices to fall 4.2% in 2023. However, Fannie Mae now expects just a 1.2% national house price decline this year.

One reason commercial properties are considered one of the best types of real estate investments is the potential for higher cash flow. Investors who opt for commercial properties may find they represent higher income potential, longer leases, and lower vacancy rates than other forms of real estate.

#1. Farm Land: With the agricultural market increasing, investing in farmland has emerged as a profitable opportunity. Per statistics, farms have an average of 11.5% yearly return. Plus, having your money locked in farmland investment will settle out your risks and will generate a passive income source.

Generally, a high capitalization rate will indicate a higher level of risk, while a lower capitalization rate indicates lower returns but lower risk. That said, many analysts consider a "good" cap rate to be around 5% to 10%, while a 4% cap rate indicates lower risk but a longer timeline to recoup an investment.

The CBRE survey found that all property types reported cap rates increases in the second half of 2022. Despite strong real estate fundamentals, higher borrowing costs and uncertainty around monetary policy are forcing cap rates upward.

Exit Cap Rate The Exit Cap Rate is the cap rate of a project that is used to estimate the sale value of an asset at the end of a hold period.

Because a decline in disposable income affects prices, the prices of essentials, such as food and utilities, often stay the same. In contrast, things considered to be wants instead of needs, such as travel and entertainment, may be more likely to get cheaper.

Benefits to Buying a House Before a Recession

Increased Likelihood to Get a Mortgage – When the economy is doing well it is likely you are earning the most you can earn in your current employment. Higher earnings will lower your debt-to-income ratio.