The 8 Worst and Best Housing Markets in The US (2023 Edition)

Dave:
Hey, everybody. Welcome to On The Market. My title’s Dave Meyer. I’ll be your host right this moment, joined right this moment by Kathy Fettke, James Dainard and Jamil Damji. How are all of you?

Kathy:
We’re all sick, woo-hoo. It was a fantastic social gathering.

Dave:
Each single one in all us is sick. I believe we’re going to have a variety of muting of microphones.

Jamil:
I may need to take duty for it.

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

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

Kathy:
Oh, yeah.

Dave:
Properly, thanks. I respect that. I actually respect you in together with me. It’s very considerate. Properly, I really wasn’t on the social gathering, however I did get to do one thing very enjoyable, which was I used to be in Madrid, Spain and I acquired to satisfy in particular person the complete group that edits this podcast, all of them stay in Madrid. I don’t even know for those who guys know that.
However I went to go hang around with them they usually’re extraordinarily cool, enjoyable individuals. 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 proficient group. It was a pleasure to satisfy them and I had a variety of enjoyable with them. Very proficient, passionate individuals who make this present doable. That was actually cool for me and I simply wished to inform you guys about it.

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

Kathy:
Appears like now we have 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 do 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 stated shorter understanding me.

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

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

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

Dave:
What?

Kathy:
No one says that to you.

Dave:
Who thinks your beard appears to be like horrible?

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

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

Jamil:
That’s what occurs whenever you’re one of many America’s greatest buyers and also you’re solely 12, James.

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

James:
Revenue and puberty.

Dave:
That could possibly be your BP ebook pitch, James.

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

Dave:
All proper, nicely let’s get to right this moment’s episode. As we wind down the 12 months, we wished to recap and form of return to truly one of many first exhibits we did, which we had been selecting greatest markets, worst markets. And so right this moment, we’re going to speak about our predictions for the most effective and worst markets for 2023.
However earlier than we do, Rocket Mortgage, one of many greatest mortgage firms within the nation, simply got here out with their rankings of the highest 5 markets for 2022. I need to throw these on the market and see what you guys take into consideration these earlier than we get into our predictions for subsequent 12 months.
They stated the quantity 5 was Charlotte, North Carolina. Did any of you decide them final 12 months? 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 12 months?

Kathy:
Properly, it acquired very costly this 12 months, so it grew to become tough to purchase this 12 months. However for those who purchased earlier than this 12 months, you probably did nice.

Dave:
Good. Then quantity 4, now we have at Nashville, which is form of, I really feel like perennially on everybody’s record of high markets. Then we had Raleigh, quantity three. Tampa, which I stated, however acquired voted out early for quantity two, and Austin for primary, which I used to be sort of confused by. I believe that’s really what received in our competitors final 12 months. However would you guys suppose Austin was the most effective performing market this 12 months?

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

Dave:
Properly, that’s a superb query, James. You’ve been fairly trustworthy 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 12 months 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 respect at 25% in a single month. It was loopy. I needed to triple verify the information. I used to be like, wait, what occurred? The median house 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 fast progress. It’s simply sliding again with the affordability proper now.

Kathy:
Yeah, I imply that was sort of my remark final 12 months is that this can be a leveling out of a loopy manic pandemic-induced shopping for spree of final 12 months. And so with so many issues, once we see layoffs, once we see house costs coming down, it’s actually simply evaluating to an irregular 12 months. And so for those who might preserve that in thoughts and perhaps simply evaluate 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 12 months, they could be feeling a bit ache. However for those who purchased earlier than that, you’re fantastic.
For those who maintain it, you’re fantastic. It’s simply anytime it’s a must to promote, for those who’re pressured to promote when it’s not good timing to promote, then that may be painful. However for those who can maintain, normally these sizzling markets come again they usually develop into sizzling once more.

Jamil:
I really feel like for those who purchased a home within the peak time of 2022, it’s sort of like a kind of nights you bought actually drunk at a celebration and issues didn’t end up the best way that they need to have and also you need to overlook it. And in order that’s mainly what occurred.

Dave:
Is that this what occurred at your social gathering final weekend, Jamil?

Jamil:
Perhaps.

Kathy:
I left in time.

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

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

Jamil:
I placed on a superb social gathering although, guys.

Kathy:
That was a superb social gathering.

Jamil:
Let’s be actual.

James:
You realize what? Everybody ought to go to Jamil’s meetups and events. They’re probably 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 verify 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 discuss our predictions for 2023.
All proper, let’s bounce into our predictions, however earlier than I ask you which ones markets you really picked, can we speak rapidly 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 will get tremendous confused. There’s a lot information coming from so many various angles and all people’s acquired an opinion and that’s 100 X yearly as increasingly more individuals get into the business. 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 at all times 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 progress. 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 a fantastic marketplace for 2023. Once more, it simply depends upon your purchase field. I’m certain there’s Detroit buyers listening who’re like, “For those who make investments the best way I make investments, you’ll do nice in Detroit,” as a result of there’s a lot happening and apparently has had a number of the highest millennial progress there. There’s a variety 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 a long time. Yeah, a long time. Detroit has seen a 61% lower in his inhabitants for the reason that ’50s. It was actually fairly like a New York sort of metropolis, very fashionable metropolis, however individuals are leaving they usually’re going to put on my favourite market. Considered one of my greatest markets is hotter climates, the Florida space. No, I didn’t inform you the place in Florida, however heat climates with landlord pleasant legal guidelines. This suits the purchase field for me.
If I’m searching for purchase and maintain, money stream, appreciation and progress, I need to be in an space the place there’s job progress, inhabitants progress, infrastructure progress, hire progress, all these issues. We’re not seeing it. However the greatest motive that I wouldn’t spend money on Detroit is that they’ve this regulation, and it’s a robust regulation, 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 will get massively fined relying on which method you have a look at it. For renters, that is nice, it signifies that landlords should maintain their properties and sort things. However for those who’re not conscious of that, you will get actually caught.
We’re making an attempt 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 very robust time promoting. We will’t get the tenants out as a result of landlord legal guidelines are actually not in our favor there. The town is available in and inspects and tells us all these items now we have to repair. These fixes are costing loads, $40,000 to $50,000. These are properties we solely owned 5 years and we fastened them 5 years in the past. They’re older. For those who’re shopping for an older property in Detroit, you simply should know that the town inspectors might cost you.
For me, this isn’t a greatest marketplace for me, it’s a worst marketplace for me. I do suppose for those who go in and you will get a fantastic deal and also you utterly renovate it and also you’ve acquired the finances for it and the reserves, you could possibly get nice money stream. I simply don’t suppose that you just’re ever actually going to see that market respect the best way 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 speculate there and our fund purchased a bunch of properties there they usually money flowed the entire time through the fund. They had been fantastic for money stream. It’s simply whenever you’re making an attempt 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 should have tons and much and much and many reserves for older properties.

Dave:
Kathy, it’s a fantastic level. Two or three years in the past, I did this information 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 just a few that had been each, however they had been modest for each. The outliers for good money stream like Detroit had been additionally outliers for dangerous appreciation.
And so that you noticed the opposite factor too. An outlier for appreciation like Seattle was additionally an outlier for dangerous money stream a variety of the time, simply on common. For the reason that pandemic began, all that acquired 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 available in the market the place some markets are actually good for money stream however don’t respect 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 essential to have a look at how efficiency was earlier than 2020. I do know a variety of these cities have actually redefined themselves within the final decade, however for those who 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 strong years for actual property. That will probably be a greater metric for the place we’re headed in 2023, I believe.

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

James:
I picked sort of a unique metropolis. I spent a variety of time researching all these markets and I’m like, you realize what? I’m going again to the market that I had the largest 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 means of now as a result of it’s a unique factor, however I keep in mind in 2009, the sky-rise condos went all the way down to below 400 grand. This stuff had been such as you’d be up killer views, model new, and you could possibly purchase them for below half million {dollars} they usually had been buying and selling for over one million earlier than the mortgage business exploded.
However the motive I picked San Diego is I do suppose, A, I believe San Diego is the most effective metropolis on the West Coast. It’s the place you need to stay for certain, however the issue is the earnings is simply not there and what individuals can afford within the job market. It’s a very good place to maneuver to when you have cash, but when not, you’re going to wrestle with a variety 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 house value down over 10%. There’s been a drop from about 950 down 850. We’ve seen one thing very attention-grabbing 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% they usually had been one of many high 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 variety of the explanation that they’ve retracted again is the maths 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 need a distant work in San Diego for those who might? That’s the place I’d need a distant work. And in order the workforce goes again to the place they’re imagined to be working, all these items are beginning to convey it again.
In the course of the pandemic, residing in a high quality place was a giant concern for most individuals and San Diego’s top-of-the-line you may be in. And so I believe individuals are simply beginning to go away a bit 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 common house purchaser wants to save lots of up $160,000 to purchase a home. With the earnings that they’re making, they should save a minimal of $13,000 per 12 months to it. It’ll take them nearly 8 to 12 years to save lots of up for that 20% deposit. That doesn’t even preserve monitor with the pricing going up throughout that point. With a median house value of $905,000, the family earnings needs to be $166,000 to afford that comfortably.
The issue is the median family earnings there may be $70,000 and a variety of the precise jobs which are in San Diego are massive … There’s not as a lot, and I picked San Diego as a result of there’s not as a lot massive enterprise as there may be in Austin, Seattle, San Francisco the place there’s these massive anchor tech firms that sure, they could be going by means of a downturn proper now and shedding some individuals however they’re going to return again and these are firms that aren’t going away whereas they’ve a way more restricted pool. Navy is a giant deal.
Now I do suppose if we’re going into extra battle that the army might develop and that there’s going to be, that might increase in San Diego as a result of it’s the largest army base there may be, however it nonetheless doesn’t get you to the earnings for affordability. With charges being as excessive as they’re, it’s simply going to drag every part again as a result of simply individuals do not make sufficient cash to purchase. We’re seeing that proper now.
If the charges proceed to go up, which I do consider they are going to for not less than the primary two quarters, you’re going to see houses dropping value. 43% of all houses in San Diegos have minimize their value this 12 months. 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 individuals can’t afford them.
The main pool of that they will’t afford that, these massive firms are slowing down, like Qualcomm is a large enterprise there. That’s one in all their anchor employers. Qualcomm has froze their hiring proper now. They haven’t introduced layoffs but so far as I might 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 12 months. They’re predicting that they will do much less enterprise as an organization which goes to start out shedding the individuals which are going to soak up a variety of these costlier properties. And so all these issues that whenever you get in a combination, I simply see these items coming down. It’s method too costly, we’re lacking like $70,000 on the median house value to get individuals to essentially have the ability to afford. Then there’s different issues which are simply indicating that it’s method higher to hire versus to purchase. The price to hire ratio is 30.38. In a wholesome market, it’s such as you need to be beneath 21.
It’s so far out of whack proper now that I believe that San Diego might 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 really on my cities to slate to purchase in. I simply suppose that there’s going to be extra alternatives. I don’t need to have the identical remorse I had in 2009 as a result of I do suppose high quality of residing and folks need to stay there on the whole and that’s at all times going to drive progress.
They’re additionally on a long-term foundation predicting that San Diego’s financial system goes to develop, I believe they stated 31% within the subsequent 10 years or 20 years. And they also’re predicting progress. However within the quick 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 buyers is whenever you’re enjoying in costly markets, the retraction can actually damage. And in order that’s why I put this because the worst market that I’d spend money on.

Dave:
Everybody loves leverage whenever you’re going up, after which when it goes down it hurts loads.

James:
I imply it undoubtedly hurts. Like what we had been speaking about earlier than I acquired 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 understand how 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 12 months. And so it’s a must to be careful for these slides and the slides are okay, you simply have to organize for them appropriately.
However I do suppose San Diego’s going to have some points. It’s simply too costly for what individuals make there. I do suppose individuals are at all times going to need to stay there. Properly, along with moreover that expense, you may have that California expense, the additional 13% earnings tax. There’s too many bills happening which are consuming up liquidity and that’s why I do suppose that it’s inclined for a fairly large drop from right here. I believe one other 10% is coming again.

Dave:
San Diego could be in your greatest markets for 2024 record?

James:
Sure. I really 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 are having these large retractions are nice shopping for alternatives, particularly after this second quarter. However it’s a must to purchase rigorously. You possibly can’t purchase historically. For those who’re shopping for historically, you’re going to get … I believe you’re going to get burnt.
However because the markets preserve free fall … I imply these are the markets which are going to have probably the most alternative. Those which are falling backwards are those that everybody simply jumps out of. That’s the place I actually need to bounce in. I most likely will purchase one thing in San Diego. I need to purchase some quick 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 searching for, 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 house value, there’s runway for progress and fairness beneficial properties in over a five-year interval.
However like what Kathy stated, 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 progress markets as a result of that’s the place you make these massive fairness beneficial properties. These fairness beneficial properties have utterly modified me as an investor and the way I’ve been capable of passively make investments simply based mostly on these beneficial properties.

Dave:
All proper. Properly stated. Truly after I was making an attempt to suppose by means of this for greatest markets, I used to be pondering of doing a contrarian opinion and saying one thing like Austin, as a result of I believe it’s going to go down 20% or 30%, however it has top-of-the-line long-term progress potentials of any metropolis within the nation. And so perhaps it’s a nice time to purchase in Austin if to your level, James, you’re shopping for below market worth and discovering good worth.
All proper. Jamil, what about you? How’d you method this?

Jamil:
Properly, I beloved every part that James and Kathy stated. I agree that it’s a must to have a look at it from the attitude of your funding technique. Everyone knows that I’m a dealer. I have a look at the true property market by way of how can I profit, how can I become involved and the place are my patrons? The place are my purchasers? The place are they seeking to make investments? The place are they operating 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 big amount of cash. Once you have a look at repair and flip, whenever you have a look at wholesale, whenever you have a look at alternatives for us to commerce in property, for those who’ve acquired declining market to that diploma with the entire issues that James was speaking about, you’ve acquired the common Southern California points just like the state tax, the migration in Ventura County shouldn’t be, 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 searching for alternatives in Ventura County proper now? They’re not. For me, the place we aren’t going to be investing advertising, the place we aren’t going to be investing sources for boots on the bottom to attempt to discover some alternatives or to select up alternatives for commerce will probably be a few of these larger 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 autumn 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 for those who can time your purchases proper, you may make the worst market at 2023 your greatest 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 variety of inhabitants leaving California and it’s very costly. I really feel like individuals 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 longer term holds for California within the subsequent few years?

Kathy:
I’m a local of many generations. My grandmother was one of many first individuals 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 this can be a dialog that has been had most likely for a century. It’s simply at all times the case when you may have extremely fascinating world class areas, it is going to by no means be low cost and there’ll by no means be a scarcity 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 greatest locations on this planet to stay or to have a second house. There are extra individuals that will purchase there or personal there than work there. Clearly in case you are making an attempt to do a purchase and maintain, once more, it simply depends upon technique. However it’s nearly like if you are able to do a long run flip, which means perhaps you purchase one thing, you hire it out for a 12 months or two the place it’s sort of masking its value. It most likely received’t, it is going to most likely nonetheless be unfavorable however then do the flip later so that you sort of acquired in low …

Jamil:
For those who can by no means get the tenant out.

Kathy:
Proper, there may be that.

Dave:
Legitimate level.

Kathy:
However it at all times has bounced again, and you’ll make some huge cash for those who 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 circumstances.
For those who stay in California, so what I consider California, I’d love to depart California. However I really like the climate. I really like every part about it besides the politics and the costs. However it will be arduous for me to go anyplace else and I believe lots of people really feel that method who stay there.

Dave:
All proper, nicely yeah. I wouldn’t guess in opposition to the California market long run. It at all times bounces again. Oh, and one factor I do need to say whenever you had been speaking about that, that could possibly be an excellent alternative for a live-in flip for individuals who need to do this. You get to stay in California after which flip it down the street. For those who 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 discuss loads 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. Properly it went loopy during the last couple of years, so hopefully you probably did nicely there.

Kathy:
Offered 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 one in all these cities that simply popped on account 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 whenever 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 very not a excessive sufficient earnings stage to assist the costs. You don’t actually see, in contrast to Seattle or Austin that has distinctive job progress and tech firms shifting there, don’t see that to the identical diploma in Reno.
That is what to me going to be an attention-grabbing experiment as a result of I believe it grew loads just like Boise. I believe it’s form of the same factor the place individuals who wished to stay someplace with a fantastic high quality of life determined to maneuver there, however must see if the financial 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 12 months. 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:
Properly, I might inform you why we invested there, why we purchased land there and constructed a variety of homes there as a result of Tesla moved its battery manufacturing facility there and there was simply … Google was shifting up there as a result of it’s solely about 4 hours from San Francisco, however it’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. However it’s nonetheless a four-hour drive. If there was a velocity bullet practice or one thing, perhaps it will be a unique story, I don’t know. However it’s at all times lagging.

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

James:
Don’t they run out of water? Isn’t there an enormous water problem in Reno too, prefer it’s dry nearly? I simply keep in mind I went to Lake Tahoe, they had been speaking about it. The water’s low they usually’re making an attempt to determine get extra water in.

Kathy:
I believe on the whole, that was California.

Dave:
And Nevada.

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

Jamil:
No, that’s attention-grabbing.

Dave:
All proper, nicely we’ve talked concerning the draw back. Once more, I believe that a few of these markets could possibly 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 12 months. Kathy, on the opposite facet, you didn’t like Detroit. What do you want for subsequent 12 months?

Kathy:
Properly, as you realize, like I stated, we at all times have a look at job progress, inhabitants progress and infrastructure progress mixed with affordability. I need to be in markets that money stream right this moment and so you may maintain these properties. They don’t should money stream loads. This can be a long-term play however cowl their prices so that you just’re actually capable of maintain these as they respect.
Tampa actually suits that for me. Tampa has utterly redefined itself within the final decade. In reality 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 progress and that’s actually essential to us.
Now with that comes inhabitants progress. In Tampa, it was 1.3% up final 12 months. That is the essential 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 12 months, by 2024, there’s not sufficient housing for all these individuals.
We’re nonetheless shopping for homes within the one $150,000-$200,000 vary nearly 45 minutes exterior of Tampa. I don’t wish to be too far-off from a significant 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, sort of extra inland of Tampa, we’re actually discovering wonderful offers. I believe for those who might 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 30 days for a three-bedroom house. There’s a variety of markets the place it could be a two-bedroom house or one thing. However in accordance with Zumper, $2,300 for a three-bedroom house, that’s fairly good. Rents have elevated by 16% final 12 months, and 48% of households in Tampa hire fairly than personal. I believe we will all agree that Florida on the whole is enterprise pleasant and landlord pleasant. It meets all of the issues that I need. I’m not anxious in any respect about shopping for in Tampa right this moment.
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 making an attempt to purchase these houses. There’s nonetheless a variety of exercise.

Jamil:
That’s my fault.

Dave:
It’s Jamil, he’s calling you.

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

Dave:
All proper. Properly, I really like Tampa too. That’s an excellent decide. I imply I believe there’s a variety 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 sturdy fundamentals. We’ll should keep watch over that one.

Kathy:
I’ll simply say yet one more factor after which add to it that the iBuyers are sort of backing off, so you may have a bit bit extra alternative to get in right this moment and we’re lastly beginning to see the foreclosures gross sales sort of hit. There’s extra alternative there than there was, however all the identical dynamics of progress that we like.

Dave:
Good. All proper. James, what about you? What do you want for subsequent 12 months?

James:
What I like for subsequent 12 months is … It’s humorous after I was researching all this. There have been a variety of the expected markets which are going to carry out rather well in 2023. It’s all based mostly off math equations. Once 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 progress. That completely is sensible.
However for me as an investor, I additionally like to purchase stuff the place individuals need to stay. And so I picked Raleigh, North Carolina, which I do know did actually good this final 12 months. The reason is is it’s ranked on quite a few lists as the most effective locations to stay in the US. It was ranked quantity six not too long ago and it has a ton of progress behind it. It had a 3.4% GDP progress in 2022 and the economics behind, it’s Riley and Durham County however there’s progress happening there. The inhabitants is rising as a result of individuals need to stay in high quality locations however nonetheless preserve their capital.
Quite a lot of our buddies, I do know a considerable quantity of individuals within the final 12 months that make good cash, they’ve good careers they usually reload out of California. The explanation they did is as a result of they had been sick of gifting away that 13%. They had been sick of paying an excessive amount of cash for housing they usually’re going to areas like this.
For those who have a look at how inexpensive that is for the standard of residing, so that is the sixth rank metropolis of locations to stay which you could have a fantastic life to stay in. The median house value is $410,000, which did develop by 16% final 12 months and that’s my concern. It did have a variety of fast progress. However the family earnings is $98,000. So individuals can afford to … They’ll transfer there, have a fantastic life and nonetheless stay comfortably.
All people that I’ve recognized, and I additionally go off of what are individuals saying. Individuals have been reloading to Raleigh, North Carolina, Charlotte, they usually adore it. They love every part 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 simply need to take pleasure in life and stay someplace that they will increase their youngsters, and that is a kind of sizzling locations.
The opposite factor I appreciated is there may be going to be a listing drawback, I consider. Since 2010 till now, they constructed 50% much less homes than they did from 2000 to 2010. If in case you have progress happening there as a result of the inhabitants is rising, similar to Kathy stated prefer it’s rising at a fast 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 shifting, there’s a scarcity of stock and folks can afford issues.
One other attention-grabbing stat I noticed and I used to be like, wow, that is fairly, it sort of blew my thoughts. 23% of individuals don’t have mortgages there. That’s how inexpensive it’s. That completely caught me off guard. And so whenever you’re a high quality place to stay, they’ve good earnings. The median house value remains to be very, very inexpensive. The colleges are nice. Charlotte, the large metropolis subsequent to it’s rising quickly. These are all good issues for long-term beneficial properties on a property, along with individuals need to stay there.
The one factor that I did see that could 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 method 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 could possibly hire or purchase, however that’s nonetheless beneath that 21-point threshold that they discuss.
There’s nonetheless a bit 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 progress for 2023. Individuals need to stay there, they will afford it and it’s nonetheless cheaper or a greater scenario to purchase. I believe that it has a variety of room to develop.
One other factor I noticed really, the markets I’ve been watching are these hockey stick markets. Raleigh has jumped dramatically, however it 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 sort 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 part I hear about individuals, and I actually do love markets the place individuals need to stay. Raleigh is one in all them.

Dave:
Superior. Yeah, I imply it’s anchored by very, very sturdy financial system. Three of the biggest analysis universities within the nation, Duke, UNC, NC State are all in that space. When you may have that sort of schooling stage, you see a variety of firms shifting there to benefit from that workforce. So very, very sturdy financial 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 need to pay some payment to take the home off the market. It’s placing earnest cash down, however it goes arduous instantly. Have you ever ever heard of this?

Jamil:
Choice payment?

Dave:
Yeah, it’s like an possibility payment. Final 12 months, 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 they usually stated, 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 12 months, I talked to an agent down there as a result of I used to be taken with shopping for in Durham. They had been saying like in regular 12 months, it’s like 500 bucks. So it’s like, all proper. However final 12 months with how aggressive it acquired, it was like 20 or 25 grand. That was earlier than you even acquired an inspector in there, earlier than you even essentially stroll the property.
So if individuals had been … I imply, that’s loopy. That’s why I simply didn’t do it. However hopefully on this subsequent 12 months, it received’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 write down provides on houses. 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 might write earnest cash at $448,000 and launch it to vendor day after Mutual. We’d write the weirdest phrases we might just do 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 making an attempt every part simply to lock a deal down. It was like, however I believe that that may go away from what I hear from individuals which are 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 sturdy market. All proper. Jamil, what do you bought? What’s your favourite marketplace for subsequent 12 months?

Jamil:
Properly, once more, this from the attitude of a dealer, so I’m searching for alternatives which are fast the place my patrons can get in and do initiatives the place they received’t get slammed and have a home sitting available on the market for months and months and months the place mortgage charges aren’t going to be a substantial scenario. Now, what we’ve seen, we’re seeing throughout the US in nearly each market that costs are declining. Nonetheless, there’s a unicorn market proper now that a variety of of us aren’t speaking about the place that’s not taking place, and it’s Hartford, Connecticut.
Hartford, Connecticut. Fascinating, realtor.com is predicting that they are going to have a value appreciation in 2023 of 8.5%. Purchaser demand is so sturdy there proper now that they’re nonetheless in a number of provides, conditions on properties, and homes are promoting 20% above record proper now with mortgage charges the place they’re proper now. That’s how sturdy the demand is. It’s loopy. It’s like every part that we had been seeing main as much as this entire 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 inexpensive. You’ve acquired sturdy migration. You’ve acquired New Yorkers shifting there. You bought individuals from Florida shifting there. You bought individuals from New England shifting there. It’s acquired a variety of demand. And so individuals are shifting there. There’s sturdy, sturdy, sturdy 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 sturdy over there. Wholesaling will probably be very sturdy over there. We’re going to be doubling down our efforts in addition to making an attempt 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 must 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 discuss Connecticut. However Hartford has been one, it’s a low value market. Simply anecdotally, most of my buddies who grew up in New York with me now moved to Connecticut, principally to Stanford, Bridgeport, locations near the town.
However it’s an actual factor. Hartford is sort of completely located between Boston and New York. And so perhaps you’re getting individuals from each of these larger value markets who simply need someplace within the northeast that’s a bit bit inexpensive.

Jamil:
They’re. There’s jobs and business there too as a result of it’s the insurance coverage capital of, I consider the world, the insurance coverage capital of the world. Aetna’s acquired their headquarters there. Cigna’s acquired their headquarters there. We all know that there’s sturdy alternative in healthcare. There at all times will probably be. That’s one of many industries that we perceive will at all times have a variety of demand and a variety of alternative.
I believe it’s one in all 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 individuals 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. Properly for mine, I wished to do one thing just like Jamil, a bit contrarian, some locations that folks haven’t heard of or aren’t speaking about a lot. For some motive, perhaps not in 2023, however I’m lengthy on the Midwest. I believe just like how the Southeast during the last couple years has seen, this massive pop, the climate is nice, but additionally it’s simply extra inexpensive than the West Coast and the Northeast.
I believe the Midwest additionally has that going for it. Doesn’t have the climate, I’ll offer you that. However the Midwest is by far probably the most inexpensive a part of the nation now as a result of the Southeast has gotten a lot costlier. The town that I like within the Midwest probably the most is Madison, Wisconsin. By no means been there, however simply on paper, it has actually good inhabitants progress. It estimated grew 1.5% simply this 12 months. Its unemployment price is at about 2%, which is far decrease than the nationwide common. It’s a extremely, extremely educated workforce.
To James’s level, I’m simply going based mostly 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 remains to be going to continue to grow over the following 12 months. I don’t suppose it’s a fluke. I believe it’s an inexpensive market, prime quality of life and inexpensive, which as James stated, form of a number of the key indicators for long-term efficiency for purchase and maintain markets.
I attempted to do one thing a bit bit bizarre and a bit 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 stated, high quality of life. I used to be like, it depends upon how a lot you like chilly.

Dave:
It will get rated excessive for high quality of life, individuals prefer it there. However I suppose these are all like James stated, 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 have to look into a bit little bit of the methodology.

Jamil:
Once you stay in perpetual summer time 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 arduous and there’s different cities within the Midwest additionally I believe are Chicago I consider will rebound over the following couple of years. I imply, I believe it’s doing fantastic proper now, however we’ll begin rising once more simply because it’s a lot extra inexpensive than different massive 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 time. Man, that metropolis is mainly holding down inflation for the complete nation. We had been going out and we went and acquired beers they usually’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 secure costs in Chicago since 1990. They’re simply doing us all a favor.

Kathy:
Chicago’s a variety of enjoyable.

James:
I ate lunch yesterday after I was prepping, doing a little work and consuming, I acquired 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 would possibly bounce up my record if it’s actually that low cost.

Dave:
Actually, 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 primary rib sandwich. It is sensible.

James:
Yeah. It’s a wagyu beef.

Jamil:
Yeah, when you may have wagyu between bread, it’s going to 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 variety of enjoyable. Let’s simply sum this up. Kathy’s picks had been worst performing marketplace for subsequent 12 months will probably be Detroit, however greatest will probably be Tampa. James had San Diego because the worst performing market, and his greatest was …

James:
Raleigh.

Dave:
Raleigh. There we go. Jamil selecting Hartford for his greatest 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 a success, however Madison, Wisconsin is my darkish horse for subsequent 12 months.
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 the most effective 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 12 months, 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 respect you. We respect 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, modifying by Joel Esparza and Onyx Media. Analysis by Pooja Jindal, and a giant because of the complete BiggerPockets group.
The content material on the present, On The Market, are opinions solely. All listeners ought to independently confirm information factors, opinions, and funding methods.