February 8, 2023

TheInsiderBusiness

Move Step By Step

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

43 min read

What’s the very best housing marketplace for actual property investing? If this have been 2022, we’d say cities like Boise, Austin, or Phoenix, however issues have modified, and a lot of final yr’s high actual property markets appear to be 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 worth development? And which markets are you able to anticipate to sink even decrease as rates of interest rise and the specter of a recession looms?

We’ve bought just a few housing market consultants round that will help you navigate the plethora of property markets in america. James Dainard, grasp home flipper on the west coast, has a stunning 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 dwelling builder and investor, picks a struggle with a well-recognized character and has her eyes set on one other sunshine state.

And, in fact, we additionally get Dave Meyer‘s tackle the place the info says would be the worst and finest actual property market to put money into throughout 2023. So place your bets, get your MLS search prepared, and put together to see which markets will come out on high over the following yr. For those who’re considering of shopping for or promoting, these picks might fully change your plans!

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

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

Dave:
Each single considered one of us is sick. I feel we’re going to have plenty 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 occasion and I’m sick too, so I don’t know.

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

Kathy:
Oh, yeah.

Dave:
Nicely, thanks. I recognize that. I actually recognize you in together with me. It’s very considerate. Nicely, I really wasn’t on the occasion, however I did get to do one thing very enjoyable, which was I used to be in Madrid, Spain and I bought to satisfy in particular person the whole staff 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 folks. They took me on a 10-hour tour of the within of many bars in Madrid and I simply needed to provide a shout out to Joel, Eliezer, Alexander and Anna, who’re an extremely proficient staff. It was a pleasure to satisfy them and I had plenty of enjoyable with them. Very proficient, passionate individuals who make this present attainable. That was actually cool for me and I simply needed to let you know guys about it.

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

Kathy:
Feels like now we have to.

James:
Are they sick of our voices but?

Dave:
No. They have 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 might 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, in all probability mentioned shorter understanding me.

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

Dave:
Nicely, they have been in all probability 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 particular person 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 do not know, man. The Web is enjoyable.

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

Jamil:
That’s what occurs once 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 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 feel I’m going to jot down that down.

Dave:
All proper, effectively let’s get to as we speak’s episode. As we wind down the yr, we needed to recap and type of return to truly one of many first exhibits we did, which we have been selecting finest markets, worst markets. And so as we speak, we’re going to speak about our predictions for the very best and worst markets for 2023.
However earlier than we do, Rocket Mortgage, one of many greatest mortgage corporations 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 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:
Nicely, it bought very costly this yr, so it grew to become troublesome to purchase this yr. However for those who purchased earlier than this yr, you probably did nice.

Dave:
Good. Then quantity 4, now we have at Nashville, which is type of, I really feel like perennially on everybody’s listing of high 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 feel that’s really what received in our competitors final yr. However would you guys assume Austin was the very best performing market this yr?

James:
I imply for those who take a look at these first two quarters in all these tech markets, they jumped so excessive. It’s like that they had room to drag 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:
Nicely, that’s 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 yr in Seattle, however we have 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 recognize at 25% in a single month. It was loopy. I needed to triple test the info. I used to be like, wait, what occurred? The median dwelling worth jumped 25% in a single?

Dave:
That’s like a crypto coin.

James:
Yeah. I imply we’re nonetheless a minimum of 30% up from 2020 or 25% to 30% in sure neighborhoods for certain. And so there’s nonetheless fast 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 this can be a leveling out of a loopy manic pandemic-induced shopping for spree of final yr. And so with so many issues, after we see layoffs, after we see dwelling costs coming down, it’s actually simply evaluating to an irregular yr. And so for those who may hold that in thoughts and possibly simply evaluate numbers to 2019, individuals who purchased in markets that basically went up and at the moment are coming again right down to earth, in the event that they purchased this yr, they is likely to be feeling slightly ache. However for those who purchased earlier than that, you’re superb.
For those who maintain it, you’re superb. 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 change into sizzling once more.

Jamil:
I really feel like for those who purchased a home within the peak time of 2022, it’s form of like a type 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 need to neglect it. And in order that’s mainly what occurred.

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

Jamil:
Possibly.

Kathy:
I left in time.

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

Dave:
I don’t know tips on how to observe that up.

Jamil:
I placed on occasion although, guys.

Kathy:
That was occasion.

Jamil:
Let’s be actual.

James:
You realize 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, effectively undoubtedly test these out.

Dave:
Okay, effectively 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 soar 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 assume? 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 everyone’s bought an opinion and that’s 100 X yearly as increasingly more folks 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 all the time seemed for are areas that money move 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 worth dramatically instantly. I simply need it to over time in order that I do know that I’m getting money move 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 traders listening who’re like, “For those who 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 number of the highest millennial development there. There’s plenty of revitalization taking place downtown. Among the issues I search for are there.
The rationale 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 once actually fairly like a New York form of metropolis, very fashionable metropolis, however persons are leaving they usually’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 matches the purchase field for me.
If I’m searching for purchase and maintain, money move, appreciation and development, I need 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 greatest cause that I wouldn’t put money into Detroit is that they’ve this regulation, and it’s a robust regulation, and I do know it effectively.
In Might of 2017, the town of Detroit introduced its intention to implement a citywide effort to implement harder rental ordinance guidelines on landlords. Landlord guidelines actually matter. Mainly, you may get massively fined relying on which means you take 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 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 a few 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. The town is available in and inspects and tells us all these items now we have to repair. These fixes are costing quite a bit, $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. 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 finest marketplace for me, it’s a worst marketplace for me. I do assume for those who go in and you may get a fantastic deal and also you fully renovate it and also you’ve bought the price range for it and the reserves, you would get nice money move. I simply don’t assume that you just’re ever actually going to see that market recognize 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 find it irresistible. I used to take a position there and our fund purchased a bunch of properties there they usually money flowed the entire time throughout the fund. They have been great for money move. It’s simply once 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 should have heaps and much and much and plenty of reserves for older properties.

Dave:
Kathy, it’s a fantastic level. Two or three years in the past, I did this knowledge evaluation to have a look at appreciation versus money move for markets and I plotted them out. Mainly, what we noticed was that earlier than the pandemic, most markets have been both actually good appreciation or actually good money move and there have been just a few that have been each, however they have been modest for each. The outliers for good money move like Detroit have 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 move plenty of the time, simply on common. Because the pandemic began, all that bought thrown out of the window and everybody has simply seen each. However I do assume as we go into 2023, we’re going to begin going again to that standard type of bifurcation out there the place some markets are actually good for money move however don’t recognize actually and vice versa. Some will proceed to understand however aren’t going to be locations the place you possibly can simply discover rental properties that meet the 1% rule, for instance.
And so, it sounds such as you agree. Detroit is likely to be good for money move, however appreciation in all probability not going wherever.

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

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

James:
I picked form of a distinct metropolis. I spent plenty of time researching all these markets and I’m like, 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 rationale 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 distinct factor, however I keep in mind in 2009, the sky-rise condos went right down to below 400 grand. These items have been such as you’d be up killer views, model new, and you would purchase them for below half million {dollars} they usually have been buying and selling for over 1,000,000 earlier than the mortgage business exploded.
However the cause I picked San Diego is I do assume, A, I feel San Diego is the very best 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 folks can afford within the job market. It’s a extremely good place to maneuver to in case you have cash, but when not, you’re going to battle with plenty 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 dwelling worth 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 fee. San Diego undoubtedly hits that. In March, they have been up 30% they usually have 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 feel plenty of the explanation that they’ve retracted again is the mathematics simply doesn’t fairly make sense. Additionally, rents have dropped 5% since March as effectively. I do assume 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 may? That’s the place I might need a distant work. And in order the workforce goes again to the place they’re alleged to be working, all these items are beginning to carry it again.
Through the pandemic, residing in a high quality place was a giant concern for most individuals and San Diego’s among the best you could be in. And so I feel persons are simply beginning to go away slightly 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 dwelling 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’ll take them nearly 8 to 12 years to avoid wasting up for that 20% deposit. That doesn’t even hold monitor with the pricing going up throughout that point. With a median dwelling worth of $905,000, the family earnings ought to be $166,000 to afford that comfortably.
The issue is the median family earnings there’s $70,000 and plenty of the precise jobs which might be in San Diego are huge … There’s not as a lot, and I picked San Diego as a result of there’s not as a lot huge enterprise as there’s in Austin, Seattle, San Francisco the place there’s these huge anchor tech corporations that sure, they is likely to be going by means of a downturn proper now and shedding some folks however they’re going to return again and these are corporations that aren’t going away whereas they’ve a way more restricted pool. Navy is a giant deal.
Now I do assume if we’re going into extra battle that the navy may develop and that there’s going to be, that might develop in San Diego as a result of it’s the most important navy base there’s, 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 the whole lot 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 consider they are going to for a minimum of the primary two quarters, you’re going to see properties dropping worth. 43% of all properties in San Diegos have minimize their worth this yr. That could be a substantial quantity. Meaning persons are both overpricing or even when they’re pricing proper, they’re simply not promoting for folks can’t afford them.
The foremost pool of that they will’t afford that, these huge corporations 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 proportion for subsequent yr. They’re predicting that they will do much less enterprise as an organization which goes to begin shedding the folks which might be going to soak up plenty of these dearer properties. And so all these issues that once you get in a mixture, I simply see these things coming down. It’s means too costly, we’re lacking like $70,000 on the median dwelling worth to get folks to essentially be capable of afford. Then there’s different issues which might be simply indicating that it’s means 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 under 21.
It’s so far out of whack proper now that I feel 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 really on my cities to slate to purchase in. I simply assume 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 assume high quality of residing and folks need to stay there typically 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 feel they mentioned 31% within the subsequent 10 years or 20 years. And they also’re predicting development. However within the quick time period for 2023, I feel it’s going to retract again and I feel 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 once 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 put money into.

Dave:
Everybody loves leverage once you’re going up, after which when it goes down it hurts quite a bit.

James:
I imply it undoubtedly hurts. Like what we have been speaking about earlier than I bought on the present, I lastly offered a home that it took 150 days to promote and by chance 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 after we purchased that deal to start with of the yr. 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 assume San Diego’s going to have some points. It’s simply too costly for what folks make there. I do assume persons are all the time going to need to stay there. Nicely, along with moreover that expense, you may 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 assume that it’s inclined for a fairly large drop from right here. I feel one other 10% is coming again.

Dave:
San Diego is likely to be in your finest markets for 2024 listing?

James:
Sure. I really assume 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 assume all these cities which might be 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 feel you’re going to get burnt.
However because the markets hold 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 need to soar in. I in all probability will purchase one thing in San Diego. I need to purchase some quick time period rental stuff proper down by the seashore and PB. I do know the rental market will get hammered and people are issues that I’m searching for, is that if I should purchase it considerably under what it was price, if I’m shopping for them 30%, 40% under that earlier median dwelling worth, there’s runway for development and fairness beneficial properties 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 move. 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 will jeopardize my money move place. I like excessive development markets as a result of that’s the place you make these huge fairness beneficial properties. These fairness beneficial properties have fully modified me as an investor and the way I’ve been in a position to passively make investments simply based mostly on these beneficial properties.

Dave:
All proper. Nicely mentioned. Truly after I was attempting to assume by means of 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 feel it will go down 20% or 30%, however it has among the best 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 below market worth and discovering good worth.
All proper. Jamil, what about you? How’d you method this?

Jamil:
Nicely, I cherished the whole lot that James and Kathy mentioned. I agree that it’s a must to take a look at it from the angle of your funding technique. Everyone knows that I’m a dealer. I take a look at the actual property market by way of how can I profit, how can I get entangled and the place are my consumers? 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’ll drop in gross sales worth by about 30%, 29.3%, 29.1% particularly is what their prediction is. That’s a big amount of cash. While you take a look at repair and flip, once you take a look at wholesale, once you take a look at alternatives for us to commerce in property, for those who’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 is just not, it’s flat, if something.
And so how I take a look at a market like that, as I say, are my purchasers or are my consumers for repair and flip or are my wholesale consumers 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 assets for boots on the bottom to attempt to discover some alternatives or to choose up alternatives for commerce can be a few of these increased worth markets in southern California. However I do additionally agree that trying ahead to 2024, as you had talked about and as James had talked about, there’s going to be an amazing 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 under 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 can also 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 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 plenty 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 assume 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 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 this can be a dialog that has been had in all probability for a century. It’s simply all the time the case when you may have extremely fascinating world class areas, it’s 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 among the finest locations on the earth to stay or to have a second dwelling. There are extra folks that may purchase there or personal there than work there. Clearly if you’re attempting 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 possibly you purchase one thing, you hire it out for a yr or two the place it’s form of protecting its value. It in all probability received’t, it’s going to in all probability nonetheless be unfavorable however then do the flip later so that you form of bought in low …

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

Kathy:
Proper, there’s that.

Dave:
Legitimate level.

Kathy:
However it all the time 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 instances.
For those who stay in California, so what I consider California, I might love to depart California. However I really like the climate. I really like the whole lot about it besides the politics and the costs. However it might be onerous for me to go wherever else and I feel lots of people really feel that means who stay there.

Dave:
All proper, effectively yeah. I wouldn’t wager in opposition to the California market long run. It all the time bounces again. Oh, and one factor I do need to say once you have 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 highway. For those who stay in it for 2 out of 5 years, you pay no tax. Good alternative.
For mine, I needed to choose a metropolis that we don’t discuss quite a bit 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. Nicely it went loopy during the last couple of years, so hopefully you probably did effectively 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 considered one of these cities that simply popped as a consequence of distant work. It’s a good looking place. There’s no earnings tax. It’s proper close to Lake Tahoe, it’s very nice. However once you take a look at the financial fundamentals, it doesn’t actually assist all the expansion that we’ve seen. Much like what James was saying about San Diego, you simply see a extremely 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 development and tech corporations transferring 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 feel it grew quite a bit much like Boise. I feel it’s type of an analogous factor the place individuals who needed to stay someplace with a fantastic high quality of life determined to maneuver there, however should see if the economic system can assist it as soon as persons are both referred to as again to the workplace or salaries don’t rise on the identical charges that they’ve been or there’s layoffs we’re beginning to see.
Sadly for Reno, I don’t assume it’s going to be doing fairly effectively 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 worth drops are over 45%. That’s my decide.

Kathy:
Nicely, I may let you know why we invested there, why we purchased land there and constructed plenty 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, 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’ll assume for these causes corporations 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, possibly it might be a distinct story, I don’t know. However it’s all the time lagging.

Dave:
The earnings simply hasn’t grown there in the way in which that it might want to only 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 have been speaking about it. The water’s low they usually’re attempting to determine tips on how to get extra water in.

Kathy:
I feel typically, that was California.

Dave:
And Nevada.

James:
Nicely, it’s additionally loopy too once 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 might be 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, effectively we’ve talked in regards to the draw back. Once more, I feel that a few of these markets could possibly be nice sooner or later. We’re simply speaking about 2023, not eternally. Let’s transfer on to markets that we do assume are going to outperform or do effectively within the subsequent yr. Kathy, on the opposite facet, you didn’t like Detroit. What do you want for subsequent yr?

Kathy:
Nicely, as , like I mentioned, we all the time take a look at job development, inhabitants development and infrastructure development mixed with affordability. I need to be in markets that money move as we speak and so you possibly can maintain these properties. They don’t should money move quite a bit. It is a long-term play however cowl their prices so that you just’re actually in a position to maintain these as they recognize.
Tampa actually matches that for me. Tampa has fully redefined itself within the final decade. In actual fact simply in 2021, there have been 9 corporations that relocated their headquarters. There’s an article that claims tech firm relocations to Tampa Bay soar in 2021. 94 new corporations have been added to St. Pete’s pipeline. A number of job development and that’s actually necessary to us.
Now with that comes inhabitants development. In Tampa, it was 1.3% up final yr. That is the necessary factor trying 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 exterior of Tampa. I don’t wish to be too distant 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, form of extra inland of Tampa, we’re actually discovering superb offers. I feel for those who 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 monthly for a three-bedroom dwelling. There’s plenty of markets the place it is likely to be a two-bedroom condo or one thing. However in accordance with Zumper, $2,300 for a three-bedroom dwelling, that’s fairly good. Rents have elevated by 16% final yr, and 48% of households in Tampa hire quite than personal. I feel we will all agree that Florida typically 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 as we speak.
Oh my gosh, for the properties that I personal within the Tampa space, I get calls propped and texts in all probability each different day of individuals attempting to purchase these properties. There’s nonetheless plenty of exercise.

Jamil:
That’s my fault.

Dave:
It’s Jamil, he’s calling you.

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

Dave:
All proper. Nicely, I really like Tampa too. That’s an excellent decide. I imply I feel there’s plenty of … Florida, it simply appears to be this cut up metropolis, cut 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 regulate that one.

Kathy:
I’ll simply say another factor after which add to it that the iBuyers are form of backing off, so you may have slightly bit extra alternative to get in as we speak 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 plenty of the anticipated markets which might be going to carry out very 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 worth level. The median earnings is up. There’s low stock, so that they’re predicting development. That absolutely is sensible.
However for me as an investor, I additionally like to purchase stuff the place folks need 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 the very best locations to stay in america. It was ranked quantity six not too long ago 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 need to stay in high quality locations however nonetheless hold their capital.
A number of our pals, 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 rationale they did is as a result of they have been sick of giving freely that 13%. They have been sick of paying an excessive amount of cash for housing they usually’re going to areas like this.
For those who take 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 can have a fantastic life to stay in. The median dwelling worth is $410,000, which did develop by 16% final yr and that’s my concern. It did have plenty of fast development. However the family earnings is $98,000. So folks can afford to … They will transfer there, have a fantastic life and nonetheless stay comfortably.
Everyone that I’ve identified, and I additionally go off of what are folks saying. Individuals have been reloading to Raleigh, North Carolina, Charlotte, they usually find it irresistible. They love the whole lot about it. That could be a buzz, and as we go right into a recession and issues are costing extra, persons are going to search for space. They only need to take pleasure in life and stay someplace that they will increase their youngsters, and that is a type of sizzling locations.
The opposite factor I preferred is there’s going to be a list downside, I consider. Since 2010 till now, they constructed 50% much less homes than they did from 2000 to 2010. You probably have development happening there as a result of the inhabitants is rising, similar to Kathy mentioned prefer it’s rising at a fast fee, it has traditionally grown round 1.5%. It’s been rising close to 3% the final three years. And so it has the excitement. That is the place persons are transferring, 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 form of blew my thoughts. 23% of individuals don’t have mortgages there. That’s how inexpensive it’s. That absolutely caught me off guard. And so once you’re a high quality place to stay, they’ve good earnings. The median dwelling worth remains to be very, very inexpensive. The colleges are nice. Charlotte, the massive metropolis subsequent to it’s rising quickly. These are all good issues for long-term beneficial properties on a property, along with folks need 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 would hire or purchase, however that’s nonetheless under that 21-point threshold that they discuss.
There’s nonetheless slightly bit extra room, it nonetheless makes extra sense to personal than it does to hire. And so these are issues that I feel are actually wholesome for development for 2023. Individuals need to stay there, they will afford it and it’s nonetheless cheaper or a greater scenario to purchase. I feel that it has plenty 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 a substitute of that 10% to twenty% that we’ve seen in a few of these tech markets. It didn’t fairly develop on the identical fee 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 the whole lot I hear about folks, and I actually do love markets the place folks need to stay. Raleigh is considered one of them.

Dave:
Superior. Yeah, I imply it’s anchored by very, very sturdy economic system. Three of the most important analysis universities within the nation, Duke, UNC, NC State are all in that space. When you may have that form of training stage, you see plenty of corporations transferring there to reap the benefits of that workforce. So very, very sturdy 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 referred to as? You must pay some charge to take the home off the market. It’s placing earnest cash down, however it goes onerous instantly. Have you ever ever heard of this?

Jamil:
Possibility charge?

Dave:
Yeah, it’s like an possibility charge. Final yr, they have 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 mentioned, yeah, it’s like two earnest. There’s an earnest cash after which there’s like a due diligence charge.

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 all for shopping for in Durham. They have 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 have been … I imply, that’s loopy. That’s why I simply didn’t do it. However hopefully on this subsequent yr, it received’t be as aggressive when you are able to do one thing like that.

James:
The shopping for situations have been so bizarre although. We used to jot down gives on properties. We write a five-day shut, it’d be listed for 400 grand. We might 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 might 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 have been attempting the whole lot simply to lock a deal down. It was like, however I feel that that can go away from what I hear from folks which might be shopping for there. It’s again right 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 yr?

Jamil:
Nicely, once more, this from the angle of a dealer, so I’m searching for alternatives which might be fast the place my consumers can get in and do initiatives the place they received’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 scenario. Now, what we’ve seen, we’re seeing throughout america in nearly each market that costs are declining. Nevertheless, there’s a unicorn market proper now that plenty of of us 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 are going to have a worth appreciation in 2023 of 8.5%. Purchaser demand is so sturdy there proper now that they’re nonetheless in a number of gives, conditions on properties, and homes are promoting 20% above listing proper now with mortgage charges the place they’re proper now. That’s how sturdy the demand is. It’s loopy. It’s like the whole lot that we have been seeing main as much as this entire market shift, all of the craziness in many of the markets throughout america, 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 worth over there’s very low at 372, so it’s nonetheless comparatively inexpensive. You’ve bought sturdy 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 plenty of demand. And so persons are transferring 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 can be very sturdy over there. We’re going to be doubling down our efforts in addition to attempting to ascertain 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 wherever 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 worth market. Simply anecdotally, most of my pals who grew up in New York with me now moved to Connecticut, largely to Stanford, Bridgeport, locations near the town.
However 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 increased worth markets who simply need someplace within the northeast that’s slightly 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 bought their headquarters there. Cigna’s bought their headquarters there. We all know that there’s sturdy alternative in healthcare. There all the time can be. That’s one of many industries that we perceive will all the time have plenty of demand and plenty of alternative.
I feel it’s considered one of these markets that we are going to take 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 essential.

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

Jamil:
Wow.

Kathy:
Yeah.

Dave:
What, in Hartford?

Kathy:
Mm-hmm.

Dave:
Wow. All proper. Possibly Jamil and Wealthy should go on a tour. All proper. Nicely for mine, I needed to do one thing much like Jamil, slightly contrarian, some locations that individuals 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 feel much like how the Southeast during the last couple years has seen, this huge pop, the climate is nice, but additionally it’s simply extra inexpensive than the West Coast and the Northeast.
I feel 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 inexpensive a part of the nation now as a result of the Southeast has gotten a lot dearer. The 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 fee 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 feel this market remains to be going to continue to grow over the following yr. I don’t assume it’s a fluke. I feel it’s an inexpensive market, top quality of life and inexpensive, which as James mentioned, type of a number of the key indicators for long-term efficiency for purchase and maintain markets.
I attempted to do one thing slightly bit bizarre and slightly bit completely different, however I feel 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 depends upon 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 in all probability have to look into slightly little bit of the methodology.

Jamil:
While 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 high school in upstate New York and it’s completely brutal. I didn’t prefer it. It’s not for me.

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

Dave:
Yeah, precisely. However I simply assume usually, I feel the Midwest has gotten hit onerous and there’s different cities within the Midwest additionally I feel are Chicago I consider will rebound over the following couple of years. I imply, I feel it’s doing superb proper now, however we’ll begin rising once more simply because it’s a lot extra inexpensive than different huge 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 the whole nation. We have 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 steady costs in Chicago since 1990. They’re simply doing us all a favor.

Kathy:
Chicago’s plenty 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 soar up my listing 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 a minimum of?

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 will 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, effectively thanks guys. It’s been plenty of enjoyable. Let’s simply sum this up. Kathy’s picks have been worst performing marketplace for subsequent yr can be Detroit, however finest can be Tampa. James had San Diego because the worst performing market, and his finest was …

James:
Raleigh.

Dave:
Raleigh. There we go. Jamil selecting 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 feel Reno’s going to take successful, however Madison, Wisconsin is my darkish horse for subsequent yr.
All proper, effectively thanks all everybody. We might love to listen to on the boards, we simply placed on the BiggerPockets boards a query to ask you what all you assume the very 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, ensure that 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 recognize you. We recognize 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 due to the whole BiggerPockets staff.
The content material on the present, On The Market, are opinions solely. All listeners ought to independently confirm knowledge factors, opinions, and funding methods.

 

Word By BiggerPockets: These are opinions written by the creator and don’t essentially signify the opinions of BiggerPockets.

Copyright © All rights reserved. | Newsphere by AF themes.