Top Housing Markets for 2022 – News

As noted in our 2023 housing forecast and economic overview, we expect the ongoing high cost of housing to be a major factor shaping the decisions of households choosing how and where to live whether they rent or own their home. In this update, our 2023 Top Housing Markets report, we zoom in on the top ten markets ranked by sales and price growth to see why these areas are poised to do well in a challenging time for the housing market. The overarching trends that drove the national forecast, are visible in these top markets. 
Ranking is based on the combined yearly percentage growth in both home sales and prices expected in 2023 among the top 100 largest markets in the country per’s metro level housing forecast. In cases of a tie, Sales Growth y/y was used as a tiebreaker. Top 10 Markets for 2023 - list and infographic
The 2020-22 period left indelible marks on the economy and housing markets. Among those, the Federal Reserve’s monetary policy combined with a long-term underbuilding trend caused a whiplash in affordability. In the early stages of the COVID-19 pandemic and through 2021, the central bank’s push to lower borrowing costs and flood the financial system with capital led to mortgage rates dropping to record lows. The net effect was to significantly boost borrowers’ budget capacity, enabling them to engage in bidding wars as they competed for the small number of homes for sale. However, in 2022, the Fed reversed course, increasing the policy interest rate and pulling back from the mortgage-backed securities market, making borrowing much more expensive, especially for home shoppers. The net effect was a 10-month surge in mortgage rates from 3.1% at the start of the year to almost 7.1% in early November.
Over the last three years, the supply of homes, whether new or existing, also dropped to record lows as seen in both homeowner and rental vacancy rates which tumbled to or near long-term lows. This short-supply was the result of over a decade of underbuilding new construction, coupled with Americans living longer in their homes. This was also evident in the for-sale market where the number of homes available for sale reached a record low early in 2022. With fewer properties to choose from and favorable borrowing conditions, prices skyrocketed to a new high in June 2022.
For most homebuyers, this period capped a decade in which rising home prices and lagging incomes led to shrinking affordability. This trend accelerated in 2022, as surging mortgage rates sidelined a large number of buyers.
For homebuyers, the natural course was to seek affordability wherever they could find it. With the ability to work remotely a reality, many buyers pushed the boundaries of their searches farther away from large urban centers toward mid-sized cities with strong economies.
Hartford CT view of the city. Photo by Balazs Busznyak.
The move toward affordability will continue in 2023, as high prices and mortgage rates drive buyers to find lower-priced homes. The top markets expected to perform well next year offer a solid mix of local economic conditions, proximity to larger employment centers, and critically, more affordable housing. Even in an environment where families are finding that their dollars no longer stretch as far as they did just a few months ago, cities like Hartford, El Paso, Louisville, or Chattanooga offer a larger share of affordable homes for a median income.
In the Top 10 metros for 2023, about 23% of housing inventory is affordable at the median income level, a noticeable improvement from all the other markets. When considering all other markets and excluding the Top 10, only 17% of available homes for sale are affordable to a household earning the median income. And that affordability picture worsens considerably in the 10 metros where sales and price growth is expected to be weakest in 2023. In these areas less than 4% of inventory is financially attainable to a family earning the local median income. 
With the search for affordability becoming a defining trait of the home shopping experience in 2023, buyers are willing to take their search away from their current cities to locations across the state, or even across state lines. In the third quarter of 2022, over 60% of homebuyers looking at properties on searched away from their current cities. This is a noticeable increase from the less than 50% who searched across geographies pre-pandemic.
Due to the high cost of properties, shoppers from the Northeast and West regions dominate the list of those looking for affordable homes away from their current metropolitan area. With 69% of out-of-metro views, the Northeast leads the way in cross-market home shopping, especially from expensive markets like New York and Boston. In the West region—home to similarly, or even more expensive metros, like San Jose-Santa Clara, San Francisco, Los Angeles, or Seattle—66% of home shoppers looked at properties in other markets.
Louisville KY view of the city across the river. Photo by Miles Manwaring.
These trends are reflected in the cross-market demand data for the Top 10 markets, where almost half of shoppers are seeking homes from other states. In Hartford, CT, homebuyers from New York, Boston, and Washington, DC, were leading the wave of out-of-state views in the third quarter of 2022. With a median price of $372,000 in November 2022, Hartford’s homes offered a significant value proposition, compared not only to the high price of houses in New York City ($669,000), but also the national median ($415,750).
Similarly, El Paso’s $291,000 median price in October 2022 was not only well-below the U.S. median, but a relative bargain for buyers from Phoenix, Dallas-Fort Worth, or Salt Lake City, the three top metros which led the list of out-of-metro views. Mirroring traffic patterns that show the attractiveness of the Lone Star state to non-residents, 53.9% of views to El Paso came from outside Texas and alongside the nearly 10% from other parts of the state combined for a total of two-thirds of the El Paso market’s home shopping traffic from somewhere else (66.8%).
The picture was similar in Louisville, KY, where a strong local economy, favorable location along a major trade route, and affordability are leading to 49.8% of home shoppers to seek homes from outside Kentucky. Homebuyers from New York, Atlanta, and Nashville are finding the $300,000 median price highly attractive.
We expect cross-market activity to continue in 2023, as affordability will keep these top markets in the spotlight for homebuyers. Whether it is retirees looking for a lower cost of living, or young families seeking larger homes, better school districts or a higher quality of life, they will continue to find these qualities in smaller markets. 
El Paso TX view of the city. Photo by Chris Carzoli.
The Top 10 housing markets for 2023 have also seen lower price increases in more recent months, which means they have experienced a relatively smaller affordability crunch than other markets. The Top 10 markets saw sale prices in the 12 months ending August 2022 grow by 10.5% on a year-over-year basis, compared to a growth rate of 12.6% for all 100 metros and a rate of 17.3% for the metros forecasted to slow the most in 2023.
The Top 10 2023 markets, having experienced a relatively lower affordability crunch than extremely hot pandemic-era markets, have also seen less of a decline in sales in recent months. In the 12 months ending August 2022, the Top 10 2023 markets saw sales decline by 9.1% year-over-year, on average, compared to an average decline of 12.3% for all 100 metro areas and a decline of -15.0% for the bottom 10 2023 markets. 
In addition to having seen smaller sales and price jumps amid the frenzy of the pandemic home buying spree, the 2023 Top Housing Markets are somewhat insulated from the shock of rising mortgage rates for three reasons. First, they are more affordable, as detailed above. Second, they have a greater share of homeowners who own their homes outright, without a mortgage. Third, special government-backed loan-types that can help buyers safely enter the market with lower down payments that also tend to have slightly lower mortgage rates are more common in these markets.
According to the most recent American Community Survey, 38.4% of homeowners from the Top 10 markets lived in housing units without a mortgage, slightly higher than the top-100 average (35.9%). Furthermore, in 4 of the Top 10 markets, more than 2 in 5 homeowners own their homes outright: Augusta-Richmond, GA-SC (42.3%), Buffalo-Cheektowaga, NY (43.2%), Chattanooga, TN-GA (40.4%), and El Paso, TX (45.1%).
Chattanooga TN view of the city across the river. Photo by David Sager.
While the outright share of cash-buying is slightly lower in the top markets, it has been growing faster, on average, than in the top 100 markets. Between Jan.-Aug. 2022, the average cash sales share in the Top 10 markets was 31.7%, 3.2 percentage points higher than 2021 and 4.3 percentage points higher than the same period in 2019. In El Paso, TX, nearly 2 in 5 recent sales were transacted with cash. A higher share of cash sales was also found in Augusta-Richmond, GA-SC (35.5%), Toledo, OH (35.2%), and Chattanooga, TN-GA (35.0%). This gap is true among both new construction homes sold and existing homes sold.  
In addition to cash sales, sales in the Top 10 metros also tend to transact more with government-backed mortgage products such as VA loans and FHA loans. These loans are designed to help veterans and first-time or minority home shoppers successfully become homeowners. However, in hotly competitive real estate markets, buyers using these loans can sometimes find themselves at a disadvantage as these loans feature buyer-protections that may include more conditions for sellers than other loan types. Between Jan.-Aug. 2022, the share of sales with a VA loan was 9.4% in the top 10 markets vs. 7.5% in the top 100 markets among mortgaged-purchases. In El Paso, TX (24.2%) and Augusta-Richmond, GA-SC (23.0%), the share of sales with a VA loan was three times more than the top-100 average. A higher share with VA loans is also seen in Columbia, SC (14.5%), nearly twice as high as the top-100 average. Similarly, home sales with a FHA loan was 13.7% in the Top 10 markets vs. 11.8% in the top 100 markets. El Paso, TX (17.3%)  saw the highest share of FHA sales among the top 10 markets, followed by Augusta-Richmond, GA-SC (16.0%), Columbia, SC (15.8%), and Hartford-West Hartford et al., CT (15.4%).
The pandemic exposed an Achilles heel of the far-flung supply chains that have become the norm, namely, that logistics can be disrupted by a wide array of events. The top markets poised for growth represent a renewed focus on domestic industry including manufacturing, education/healthcare and government jobs and a shift away from the information and professional services sectors that have recently been buoyed by tech companies. These markets largely flew under the radar in the pandemic frenzy, and are well-positioned to bubble up with solid job prospects without the big-city price tag. 
The forecasted top growth markets come in 44th to 98th among US metros when ranking by number of households. Louisville is the largest top market with roughly 518,000 households and Chattanooga is the smallest with 233,000 households. On average, these mid-sized metros employ a higher proportion of workers in manufacturing, government and education/healthcare jobs relative to the 100 largest US metros. On the flip side, tech jobs are less common in these areas. These metros had a relatively low proportion of professional services employment, information technology and leisure/hospitality.
Buffalo NY view of the city. Photo by Pavol Svantner.
The midwestern metros of Grand Rapids and Toledo lead the list in proportion of manufacturing jobs with 20.0% and 15.6% of total employment, respectively. Only El Paso bucks this trend with 5.3% of its workforce in manufacturing, lagging the average for the top 100 metros (7.5%). Instead, El Paso leads the list in proportion of government employment with 21.4% of its workforce. El Paso is the home to Fort Bliss, the single largest employer in the area. Similarly, Columbia, SC (home of Fort Jackson) and Augusta, GA (home of Fort Gordon) government employees make up 19.3% and 18.3% of the workforce, respectively. 
Worcester, which contains UMass Memorial Health Care and Medical School, sees almost a quarter of its population in education and healthcare jobs. Similarly, 19.2% and 17.6% of employment in Hartford, CT and Buffalo, NY is in healthcare and education jobs, respectively. While the top market list in general falls in line with the top 100 markets in proportion of trade/transportation jobs (19.0%), Louisville, KY surpasses the average with 22.7% of its workforce employed in this sector.®’s model-based forecast uses data on the housing market and overall economy to estimate 2023 values for these variables for the 100 largest U.S. metropolitan statistical areas by population size. These markets are then ranked by combined forecasted growth in home prices and sales. In cases of a tie, forecasted year-over-year sales growth was used as a tiebreaker.
*Ranked by Combined Growth. In cases of a tie, Sales Growth y/y was used as a tiebreaker.
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