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

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

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

Dave:
Each single one among us is sick. I feel we’re going to have loads 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 admire that. I actually admire you in together with me. It’s very considerate. Properly, I truly 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 bought to satisfy in particular person your complete workforce that edits this podcast, all of them reside in Madrid. I don’t even know when you 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 offer a shout out to Joel, Eliezer, Alexander and Anna, who’re an extremely gifted workforce. It was a pleasure to satisfy them and I had loads of enjoyable with them. Very gifted, 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 have been in Spain, however now we have now to make a visit on the market and go hang around.

Kathy:
Seems like we have now 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 should 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 simply’re taller than they anticipated?

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

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

Dave:
Properly, they have been in all probability 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 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:
Properly, let me see. I can’t even develop a beard.

Jamil:
That’s what occurs if 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 may very well be your BP guide pitch, James.

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

Dave:
All proper, nicely let’s get to at the moment’s episode. As we wind down the 12 months, we wished 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 at the moment, 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 12 months.
They mentioned 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 keep in mind that particularly.

Jamil:
Austin and Denver, that’s proper.

Dave:
As a result of the ultimate was simply you towards 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 bought very costly this 12 months, so it turned troublesome to purchase this 12 months. However when you purchased earlier than this 12 months, you probably did nice.

Dave:
Good. Then quantity 4, we have now at Nashville, which is type of, I really feel like perennially on everybody’s checklist 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 type of confused by. I feel that’s truly what received in our competitors final 12 months. However would you guys suppose Austin was the very best performing market this 12 months?

James:
I imply when you have 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 type of like that too. It was like Scottsdale, Austin, Seattle, LA, San Fran. They only shot up.

Dave:
Properly, that’s an excellent 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 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 admire 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 residence value jumped 25% in a single?

Dave:
That’s like a crypto coin.

James:
Yeah. I imply we’re nonetheless at the least 30% up from 2020 or 25% to 30% in sure neighborhoods for positive. And so there’s nonetheless fast development. It’s simply sliding again with the affordability proper now.

Kathy:
Yeah, I imply that was type of my remark final 12 months is that it is 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 residence costs coming down, it’s actually simply evaluating to an irregular 12 months. And so when you may hold 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 is likely to be feeling somewhat ache. However when you purchased earlier than that, you’re nice.
For those who maintain it, you’re nice. It’s simply anytime it’s important to promote, when you’re compelled to promote when it’s not good timing to promote, then that may be painful. However when you can maintain, normally these sizzling markets come again they usually develop into sizzling once more.

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

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

Jamil:
Perhaps.

Kathy:
I left in time.

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

Dave:
I don’t know easy methods to observe that up.

Jamil:
I placed on an excellent social gathering although, guys.

Kathy:
That was an excellent social gathering.

Jamil:
Let’s be actual.

James:
You already know 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 test 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 truly picked, can we discuss 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 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 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, principally what I’ve at all times appeared for are areas that money circulation with the hope of appreciation as a result of there’s one thing occurring in that space, there’s development. And so I don’t want it to go up in value dramatically straight away. I simply need it to over time in order that I do know that I’m getting money circulation and appreciation as a result of the double whammy is what can actually make you rich.
For me, the worst market I selected was Detroit. Now Detroit got here up on some lists as an awesome marketplace for 2023. Once more, it simply relies on your purchase field. I’m positive 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 occurring and apparently has had a few of the highest millennial development there. There’s loads 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 because the ’50s. It was once actually fairly like a New York type of metropolis, very fashionable metropolis, however persons are leaving they usually’re going to put on my favourite market. Considered one of my finest 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 matches the purchase field for me.
If I’m on the lookout for purchase and maintain, money circulation, 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 spend money on Detroit is that they’ve this legislation, and it’s a robust legislation, and I do know it nicely.
In Could of 2017, the town of Detroit introduced its intention to implement a citywide effort to implement harder rental ordinance guidelines on landlords. Landlord guidelines actually matter. Mainly, you may get massively fined relying on which means you have a look at it. For renters, that is nice, it implies that landlords need to care for their properties and sort things. However when you’re not conscious of that, you may get actually caught.
We’re attempting to promote three Detroit properties in our former fund. My final single household rental fund, we’re down to 3 Detroit properties that we’re having a extremely robust time promoting. We are able to’t get the tenants out as a result of landlord legal guidelines are actually not in our favor there. Town is available in and inspects and tells us all these items we have now to repair. These fixes are costing so much, $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 need to know that the town inspectors could cost you.
For me, this isn’t a finest marketplace for me, it’s a worst marketplace for me. I do suppose when you go in and you may get an awesome deal and also you fully renovate it and also you’ve bought the finances for it and the reserves, you may get nice money circulation. I simply don’t suppose that you simply’re ever actually going to see that market admire the way in which I prefer it to do in different markets.

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

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

Dave:
Kathy, it’s an awesome level. Two or three years in the past, I did this knowledge evaluation to have a look at appreciation versus money circulation 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 circulation and there have been a number of that have been each, however they have been modest for each. The outliers for good money circulation like Detroit have been additionally outliers for unhealthy appreciation.
And so that you noticed the opposite factor too. An outlier for appreciation like Seattle was additionally an outlier for unhealthy money circulation loads 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 suppose as we go into 2023, we’re going to start out going again to that ordinary type of bifurcation available in the market the place some markets are actually good for money circulation however don’t admire 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 circulation, however appreciation in all probability not going wherever.

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

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

James:
I picked type of a special metropolis. I spent loads of time researching all these markets and I’m like, 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 special factor, however I bear in mind in 2009, the sky-rise condos went all the way down to beneath 400 grand. These items have been such as you’d be up killer views, model new, and you may purchase them for beneath 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 suppose, A, I feel San Diego is the very best metropolis on the West Coast. It’s the place you need to reside for positive, however the issue is the earnings is simply not there and what individuals can afford within the job market. It’s a extremely good place to maneuver to you probably have cash, but when not, you’re going to wrestle with loads of the pricing round there.
And so what we’ve seen with the rates of interest rising is the charges, we’ve already seen it go from a medium residence value down over 10%. There’s been a drop from about 950 down 850. We’ve seen one thing very attention-grabbing to observe 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 loads of the rationale 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 desire a distant work in San Diego when you may? That’s the place I might desire 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 carry it again.
Throughout the pandemic, residing in a high quality place was a giant concern for most individuals and San Diego’s among the best you might be in. And so I feel persons are simply beginning to depart somewhat bit and it’s beginning to let issues down. However to place it in perspective, it’s important to save … In San Diego, the common residence purchaser wants to avoid wasting up $160,000 to purchase a home. With the earnings that they’re making, they should save a minimal of $13,000 per 12 months to it. It’ll take them virtually 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 residence value of $905,000, the family earnings needs to be $166,000 to afford that comfortably.
The issue is the median family earnings there’s $70,000 and loads 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 individuals however they’re going to come back 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 suppose if we’re going into extra battle that the army may develop and that there’s going to be, that might broaden in San Diego as a result of it’s the largest army base there’s, nevertheless 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 don’t make sufficient cash to purchase. We’re seeing that proper now.
If the charges proceed to go up, which I do imagine they may for at the least the primary two quarters, you’re going to see properties dropping value. 43% of all properties in San Diegos have reduce their value this 12 months. That may be a substantial quantity. Meaning persons are both overpricing or even when they’re pricing proper, they’re simply not promoting for individuals can’t afford them.
The key pool of that they’ll’t afford that, these huge corporations are slowing down, like Qualcomm is a big enterprise there. That’s one among 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 12 months. They’re predicting that they will do much less enterprise as an organization which goes to start out shedding the individuals which might be going to soak up loads of these dearer properties. And so all these issues that if you get in a combination, I simply see these things coming down. It’s means too costly, we’re lacking like $70,000 on the median residence value to get individuals to essentially be capable to afford. Then there’s different issues which might be simply indicating that it’s means higher to hire versus to purchase. The associated fee 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 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 truly 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 reside there usually and that’s at all times going to drive development.
They’re additionally on a long-term foundation predicting that San Diego’s financial 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 important to watch out about with the traders is if you’re taking part in in costly markets, the retraction can actually harm. And in order that’s why I put this because the worst market that I might spend money on.

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

James:
I imply it undoubtedly hurts. Like what we have been speaking about earlier than I bought on the present, I lastly bought 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 bought the home for 450 grand, lower than a home that we bought proper across the nook once we purchased that deal to start with of the 12 months. And so it’s important 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 persons are at all times going to need to reside there. Properly, along with in addition to that expense, you’ve got that California expense, the additional 13% earnings tax. There’s too many bills occurring which might be consuming up liquidity and that’s why I do suppose that it’s susceptible for a reasonably 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 checklist?

James:
Sure. I truly suppose all these markets like Seattle. It’s Seattle, proper? It’s a really related … I like Seattle higher than San Diego as a result of there’s extra jobs there. I like Austin higher than San Diego as a result of there’s extra jobs and infrastructure there. However I do suppose all these cities which might be having these huge retractions are nice shopping for alternatives, particularly after this second quarter. However it’s important to purchase rigorously. You’ll be able to’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 probably 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 bounce 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 seaside and PB. I do know the rental market will get hammered and people are issues that I’m on the lookout for, is that if I can purchase it considerably beneath what it was value, if I’m shopping for them 30%, 40% beneath that earlier median residence value, there’s runway for development and fairness good points in over a five-year interval.
However like what Kathy mentioned, it comes down to what’s your technique? My technique isn’t excessive money circulation. 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 circulation place. I like excessive development markets as a result of that’s the place you make these huge fairness good points. These fairness good points have fully modified me as an investor and the way I’ve been capable of passively make investments simply primarily based on these good points.

Dave:
All proper. Properly mentioned. Really once I was attempting to suppose by means of this for finest markets, I used to be pondering of doing a contrarian opinion and saying one thing like Austin, as a result of I feel it will go down 20% or 30%, nevertheless it has among the best long-term development 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 beneath market worth and discovering good worth.
All proper. Jamil, what about you? How’d you strategy this?

Jamil:
Properly, I cherished every part that James and Kathy mentioned. I agree that it’s important to have a look at it from the angle of your funding technique. Everyone knows that I’m a dealer. I have a look at the true property market when it comes to 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’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. If you have a look at repair and flip, if you have a look at wholesale, if you have a look at alternatives for us to commerce in property, when you’ve bought declining market to that diploma with all the issues that James was speaking about, you’ve bought the common Southern California points just like the state tax, the migration in Ventura County 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 consumers for repair and flip or are my wholesale consumers on the lookout for alternatives in Ventura County proper now? They’re not. For me, the place we’re not going to be investing advertising and marketing, the place we’re not going to be investing assets for boots on the bottom to attempt to discover some alternatives or to select up alternatives for commerce will likely be a few of these larger 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 important 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 when you can time your purchases proper, you may make the worst market at 2023 your finest market at 2024. And so I’ll be re-entering Ventura and a few of these markets in Southern California in 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 loads 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 long run holds for California within the subsequent few years?

Kathy:
I’m a local of many generations. My grandmother was one of many first 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 it is a dialog that has been had in all probability for a century. It’s simply at all times the case when you’ve got extremely fascinating world class areas, it should 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 this planet to reside or to have a second residence. There are extra individuals 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 relies on technique. But it surely’s virtually 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 type of overlaying its value. It in all probability received’t, it should in all probability nonetheless be unfavourable however then do the flip later so that you type 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:
But it surely at all times has bounced again, and you’ll make some huge cash when you maintain. That’s why so many Californians are loaded and are bringing their cash to different locations as a result of they made their cash in housing in lots of circumstances.
For those who reside in California, so what I consider California, I might love to go away 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 wherever else and I feel lots of people really feel that means who reside there.

Dave:
All proper, nicely yeah. I wouldn’t guess towards the California market long run. It at all times bounces again. Oh, and one factor I do need to say if you have been speaking about that, that may very well be an excellent alternative for a live-in flip for individuals who need to do this. You get to reside in California after which flip it down the highway. For those who reside 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 so much additionally on the West Coast, however was one of many hottest markets during the last couple of years. I picked Reno, Nevada. Do you guys know something about Reno?

Kathy:
Simply bought 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 among these cities that simply popped on account of distant work. It’s a gorgeous place. There’s no earnings tax. It’s proper close to Lake Tahoe, it’s very nice. However if you have a look at the financial fundamentals, it doesn’t actually assist all the expansion that we’ve seen. Just like what James was saying about San Diego, you simply see a extremely not a excessive sufficient earnings 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 so much much like Boise. I feel it’s type of an analogous factor the place individuals who wished to reside someplace with an awesome high quality of life determined to maneuver there, however should see if the financial system can assist it as soon as persons are both referred to 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 subsequent 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 may inform you why we invested there, why we purchased land there and constructed loads of homes there as a result of Tesla moved its battery manufacturing unit there and there was simply … Google was transferring up there as a result of it’s solely about 4 hours from San Francisco, nevertheless 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 corporations would transfer to Nevada simply to keep away from taxes. But it surely’s nonetheless a four-hour drive. If there was a velocity bullet practice or one thing, perhaps it will be a special story, I don’t know. But it surely’s at all times lagging.

Dave:
The earnings simply hasn’t grown there in the way in which 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 situation in Reno too, prefer it’s dry virtually? I simply bear in mind I went to Lake Tahoe, they have been speaking about it. The water’s low they usually’re attempting to determine easy methods to get extra water in.

Kathy:
I feel usually, that was California.

Dave:
And Nevada.

James:
Properly, it’s additionally loopy too if 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’ve got properties which might be value thousands and thousands and thousands and thousands of {dollars} on one facet after which simply kitty nook, they’re value 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 in regards to the draw back. Once more, I feel that a few of these markets may very well be nice sooner or later. We’re simply speaking about 2023, not perpetually. 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 , like I mentioned, we at all times have a look at job development, inhabitants development and infrastructure development mixed with affordability. I need to be in markets that money circulation at the moment and so you possibly can maintain these properties. They don’t need to money circulation so much. This can be a long-term play however cowl their prices so that you simply’re actually capable of maintain these as they admire.
Tampa actually matches that for me. Tampa has fully redefined itself within the final decade. In reality 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. Plenty of job development and that’s actually vital to us.
Now with that comes inhabitants development. In Tampa, it was 1.3% up final 12 months. That is the vital 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 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 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, type of extra inland of Tampa, we’re actually discovering superb offers. I feel when you may nonetheless get a home for $200,000, $300,000 in an space that’s rising like that, to me that’s a steal.
Median hire is $2,300 per thirty days for a three-bedroom residence. There’s loads of markets the place it is likely to be a two-bedroom house or one thing. However in accordance with Zumper, $2,300 for a three-bedroom residence, that’s fairly good. Rents have elevated by 16% final 12 months, and 48% of households in Tampa hire relatively than personal. I feel we are able to all agree that Florida usually is enterprise pleasant and landlord pleasant. It meets all of the issues that I would like. I’m not fearful in any respect about shopping for in Tampa at the moment.
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 loads 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 value and nobody’s taking it.

Dave:
All proper. Properly, I really like Tampa too. That’s an excellent decide. I imply I feel there’s loads 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 need to keep watch over that one.

Kathy:
I’ll simply say yet another factor after which add to it that the iBuyers are type of backing off, so you’ve got somewhat bit extra alternative to get in at the moment and we’re lastly beginning to see the foreclosures gross sales type 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 12 months?

James:
What I like for subsequent 12 months is … It’s humorous once I was researching all this. There have been loads of the anticipated markets which might be going to carry out rather well in 2023. It’s all primarily based off math equations. After I was all these lists, I’m like, okay, I get it. It’s a really low value level. The median earnings is up. There’s low stock, so that they’re predicting development. That completely is sensible.
However for me as an investor, I additionally like to purchase stuff the place individuals need to reside. 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 very best locations to reside in the USA. It was ranked quantity six lately and it has a ton of development behind it. It had a 3.4% GDP development in 2022 and the economics behind, it’s Riley and Durham County however there’s development occurring there. The inhabitants is growing as a result of individuals need to reside in high quality locations however nonetheless hold their capital.
Loads of our associates, 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 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 have a look at how reasonably priced that is for the standard of residing, so that is the sixth rank metropolis of locations to reside that you could have an awesome life to reside in. The median residence value is $410,000, which did develop by 16% final 12 months and that’s my concern. It did have loads of fast development. However the family earnings is $98,000. So individuals can afford to … They will transfer there, have an awesome life and nonetheless reside 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 like 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, persons are going to search for space. They only need to take pleasure in life and reside someplace that they’ll increase their children, and that is a type of sizzling locations.
The opposite factor I favored is there’s going to be a list drawback, I imagine. Since 2010 till now, they constructed 50% much less homes than they did from 2000 to 2010. When you’ve got development occurring there as a result of the inhabitants is rising, identical 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 thrill. 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 type of blew my thoughts. 23% of individuals don’t have mortgages there. That’s how reasonably priced it’s. That completely caught me off guard. And so if you’re a high quality place to reside, they’ve good earnings. The median residence value continues to be very, very reasonably priced. The faculties are nice. Charlotte, the massive metropolis subsequent to it’s rising quickly. These are all good issues for long-term good points on a property, along with individuals need to reside 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 once I’m issues. Is it means cheaper to reside in a rental? It went from being round 16% to 17% to 19.65%. The hole is getting shut on whether or not you may hire or purchase, however that’s nonetheless beneath that 21-point threshold that they discuss.
There’s nonetheless somewhat 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 reside there, they’ll afford it and it’s nonetheless cheaper or a greater scenario to purchase. I feel that it has loads of room to develop.
One other factor I noticed truly, the markets I’ve been watching are these hockey stick markets. Raleigh has jumped dramatically, nevertheless 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 similar fee as San Diego, Seattle, Austin, it grew about half the speed. And so it’s type of a extra leveled out market, so there’s much less of a hockey stick occurring 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 reside. Raleigh is one among 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’ve got that type of schooling stage, you see loads of corporations transferring there to reap the benefits of that workforce. So very, very sturdy financial system there.
North Carolina has some bizarre guidelines about shopping for homes although the place it’s important to like, what’s it referred to as? You must pay some price to take the home off the market. It’s placing earnest cash down, nevertheless it goes arduous instantly. Have you ever ever heard of this?

Jamil:
Choice price?

Dave:
Yeah, it’s like an choice price. Final 12 months, 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 price.

Jamil:
Yeah, it’s to curb wholesaling.

Dave:
Yeah. It’s loopy although as a result of in a standard 12 months, I talked to an agent down there as a result of I used to be fascinated about shopping for in Durham. They have 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 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 individuals have 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 have been so bizarre although. We used to write down provides 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 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 offer you all the cash till we shut for two,000 bucks.”
We have been attempting every part simply to lock a deal down. It was like, however I feel that that can go away from what I hear from individuals which might be shopping for there. It’s again all the way down to 500 bucks. Individuals aren’t throwing loopy numbers at it anymore.

Dave:
For positive 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 angle of a dealer, so I’m on the lookout for alternatives which might be fast the place my consumers can get in and do tasks 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 USA in virtually each market that costs are declining. Nevertheless, there’s a unicorn market proper now that loads of people aren’t speaking about the place that’s not taking place, and it’s Hartford, Connecticut.
Hartford, Connecticut. Attention-grabbing, realtor.com is predicting that they may have a value appreciation in 2023 of 8.5%. Purchaser demand is so sturdy there proper now that they’re nonetheless in a number of provides, conditions on properties, and homes are promoting 20% above checklist proper now with mortgage charges the place they’re proper now. That’s how sturdy the demand is. It’s loopy. It’s like every part that we have been seeing main as much as this entire market shift, all of the craziness in a lot of the markets throughout the USA, we’re seeing these a number of provide conditions, it’s nonetheless taking place in Hartford, Connecticut, which is loopy to me.
Past that, the median value over there’s very low at 372, so it’s nonetheless comparatively reasonably priced. You’ve bought sturdy migration. You’ve bought New Yorkers transferring there. You bought individuals from Florida transferring there. You bought individuals from New England transferring there. It’s bought loads 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 provide conditions.
Repair-and-flip goes to be very sturdy over there. Wholesaling will likely be very sturdy over there. We’re going to be doubling down our efforts in addition to attempting to determine extra franchises within the space as a result of I see heavy alternative for wholesaling and fixing and flipping on this little unicorn submarket.

Dave:
This must 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 value market. Simply anecdotally, most of my associates who grew up in New York with me now moved to Connecticut, principally to Stanford, Bridgeport, locations near the town.
But it surely’s an actual factor. Hartford is type 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 somewhat bit cheaper.

Jamil:
They’re. There’s jobs and business there too as a result of it’s the insurance coverage capital of, I imagine the world, the insurance coverage capital of the world. Aetna’s bought their headquarters there. Cigna’s bought their headquarters there. We all know that there’s sturdy alternative in healthcare. There at all times will likely be. That’s one of many industries that we perceive will at all times have loads of demand and loads of alternative.
I feel it’s one among 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 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. Perhaps Jamil and Wealthy should go on a tour. All proper. Properly for mine, I wished to do one thing much like Jamil, somewhat contrarian, some locations that individuals haven’t heard of or aren’t speaking about a lot. For some cause, perhaps 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 reasonably priced than the West Coast and the Northeast.
I feel 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 reasonably priced a part of the nation now as a result of the Southeast has gotten a lot dearer. Town that I like within the Midwest probably 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 12 months. Its unemployment fee is at about 2%, which is way decrease than the nationwide common. It’s a extremely, extremely educated workforce.
To James’s level, I’m simply going primarily based on affordability. Individuals can afford to reside 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 continues to be going to continue to grow over the subsequent 12 months. I don’t suppose it’s a fluke. I feel it’s an reasonably priced market, prime quality of life and reasonably priced, which as James mentioned, type of a few of the key indicators for long-term efficiency for purchase and maintain markets.
I attempted to do one thing somewhat bit bizarre and somewhat 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 relies on how a lot you’re keen on chilly.

Dave:
It will get rated excessive for high quality of life, individuals 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 must look into somewhat little bit of the methodology.

Jamil:
If you reside 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 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 suppose Wealthy moved from East Coast to West Coast?

Dave:
Yeah, precisely. However I simply suppose usually, I feel the Midwest has gotten hit arduous and there’s different cities within the Midwest additionally I feel are Chicago I imagine will rebound over the subsequent couple of years. I imply, I feel it’s doing nice proper now, however we’ll begin rising once more simply because it’s a lot extra reasonably priced 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 time. Man, that metropolis is principally holding down inflation for your complete nation. We have been going out and we went and purchased 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 loads of enjoyable.

James:
I ate lunch yesterday once I was prepping, doing a little 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 would possibly bounce up my checklist 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 at the least?

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

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

James:
Yeah. It’s a wagyu beef.

Jamil:
Yeah, when you’ve got 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, nicely thanks guys. It’s been loads of enjoyable. Let’s simply sum this up. Kathy’s picks have been worst performing marketplace for subsequent 12 months will likely be Detroit, however finest will likely 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 12 months.
All proper, nicely 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 suppose the very best and worst performing markets of 2023 are going to be. So if you wish to work together with us or discuss to different listeners about market potential for subsequent 12 months, be certain 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 admire you. We admire you all for listening, and we’ll see you subsequent time for On The Market.
On The Market is created by me, Dave Meyer and Kailyn Bennett. Produced by Kailyn Bennett, enhancing by Joel Esparza and Onyx Media. Analysis by Pooja Jindal, and a giant due to your complete BiggerPockets workforce.
The content material on the present, On The Market, are opinions solely. All listeners ought to independently confirm knowledge factors, opinions, and funding methods.