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

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

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

Dave:
Each single certainly one of us is sick. I believe we’re going to have loads 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 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 acquired to fulfill in particular person all the staff that edits this podcast, all of them stay in Madrid. I don’t even know in case you guys know that.
However I went to go hang around with them and so they’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 offer a shout out to Joel, Eliezer, Alexander and Anna, who’re an extremely gifted staff. It was a pleasure to fulfill 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 needed to inform you guys about it.

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

Kathy:
Seems like we now 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’d 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, most likely mentioned shorter figuring out me.

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

Dave:
Properly, they have been most likely already pondering 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 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 while you’re one of many America’s finest buyers and also you’re solely 12, James.

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

James:
Revenue and puberty.

Dave:
That could possibly be your BP e-book pitch, James.

James:
I believe I’m going to put in writing that down.

Dave:
All proper, effectively let’s get to at this time’s episode. As we wind down the 12 months, we needed to recap and form of return to really one of many first exhibits we did, which we have been choosing finest markets, worst markets. And so at this time, we’re going to speak about our predictions for the most effective and worst markets for 2023.
However earlier than we do, Rocket Mortgage, one of many largest 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 choose 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 acquired very costly this 12 months, so it turned troublesome to purchase this 12 months. However in case you purchased earlier than this 12 months, you probably did nice.

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

James:
I imply in case 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 a superb query, James. You’ve been fairly trustworthy about pullbacks in Seattle in your market, are they nonetheless up significantly over pre-pandemic ranges costs in Seattle?

James:
Oh yeah. We’re considerably up from pre. I imply we’re nonetheless 5% up on this 12 months in Seattle, however we 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 examine the information. I used to be like, wait, what occurred? The median residence worth jumped 25% in a single?

Dave:
That’s like a crypto coin.

James:
Yeah. I imply we’re nonetheless not less than 30% up from 2020 or 25% to 30% in sure neighborhoods for certain. And so there’s nonetheless speedy 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 this can be a leveling out of a loopy manic pandemic-induced shopping for spree of final 12 months. And so with so many issues, once we see layoffs, once we see residence costs coming down, it’s actually simply evaluating to an irregular 12 months. And so in case you may hold that in thoughts and possibly simply examine numbers to 2019, individuals who purchased in markets that actually went up and are actually coming again right down to earth, in the event that they purchased this 12 months, they is likely to be feeling a bit of ache. However in case you purchased earlier than that, you’re wonderful.
In the event you maintain it, you’re wonderful. It’s simply anytime it’s a must to promote, in case you’re pressured to promote when it’s not good timing to promote, then that may be painful. However in case you can maintain, normally these scorching markets come again and so they turn into scorching once more.

Jamil:
I really feel like in case you purchased a home within the peak time of 2022, it’s type of like a kind 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 overlook it. And in order that’s mainly what occurred.

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

Jamil:
Possibly.

Kathy:
I left in time.

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

Dave:
I don’t know the best way to comply with that up.

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

Kathy:
That was a superb social gathering.

Jamil:
Let’s be actual.

James:
You realize what? Everybody ought to go to Jamil’s meetups and events. They’re 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 positively examine 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 speak about our predictions for 2023.
All proper, let’s leap 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 alternative angles and everyone’s acquired an opinion and that’s 100 X yearly as increasingly more folks get into the trade. 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 appeared 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 immediately. 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 terrific marketplace for 2023. Once more, it simply is dependent upon your purchase field. I’m certain there’s Detroit buyers listening who’re like, “In the event you 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 few of the highest millennial development there. There’s loads of revitalization occurring downtown. Among 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 many years. Yeah, many years. Detroit has seen a 61% lower in his inhabitants because the ’50s. It was actually fairly like a New York type of metropolis, very fashionable metropolis, however individuals are leaving and so they’re going to put on my favourite market. One in all 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 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 largest cause that I wouldn’t put money into Detroit is that they’ve this legislation, and it’s a powerful legislation, and I do know it effectively.
In Could of 2017, town of Detroit introduced its intention to implement a citywide effort to implement harder rental ordinance guidelines on landlords. Landlord guidelines actually matter. Principally, 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 handle their properties and sort things. However in case 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 very powerful 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 now have to repair. These fixes are costing rather a lot, $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. In the event you’re shopping for an older property in Detroit, you simply need to know that 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 in case you go in and you may get a terrific deal and also you utterly renovate it and also you’ve acquired the funds for it and the reserves, you would get nice money move. 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 positively 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 and so they money flowed the entire time throughout the fund. They have been great for money move. It’s simply while you’re attempting to get out or if 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 plenty and plenty and plenty of reserves for older properties.

Dave:
Kathy, it’s a terrific 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. Principally, 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 loads of the time, simply on common. For the reason that pandemic began, all that acquired thrown out of the window and everybody has simply seen each. However I do suppose as we go into 2023, we’re going to start out going again to that ordinary form of bifurcation out there the place some markets are actually good for money move 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 move, however appreciation most likely not going anyplace.

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

Dave:
All proper, effectively there we acquired one. James, how did you strategy this and what metropolis did you choose?

James:
I picked type of a distinct 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 most important 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 way 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 beneath 400 grand. This stuff have been such as you’d be up killer views, model new, and you would purchase them for beneath half million {dollars} and so they have been buying and selling for over 1,000,000 earlier than the mortgage trade exploded.
However the cause I picked San Diego is I do suppose, A, I believe San Diego is the most effective metropolis on the West Coast. It’s the place you need to stay for certain, however the issue is the earnings is simply not there and what folks can afford within the job market. It’s a very 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 worth down over 10%. There’s been a drop from about 950 down 850. We’ve seen one thing very fascinating to look at for and these are the markets I’m most cautious in proper now are those that’s hockey stick up in that first two quarters at a loopy price. San Diego positively hits that. In March, they have been up 30% and so they 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 believe loads of the rationale 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 suppose the rents are falling as a result of extra the distant work. Why wouldn’t you need a distant work in San Diego in case you may? That’s the place I’d need a distant work. And in order the workforce goes again to the place they’re purported to be working, all these items are beginning to carry it again.
Through the pandemic, dwelling in a high quality place was a giant concern for most individuals and San Diego’s the most effective you might be in. And so I believe individuals are simply beginning to go away a bit of 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 typical 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 will take them nearly 8 to 12 years to avoid wasting up for that 20% deposit. That doesn’t even hold observe with the pricing going up throughout that point. With a median residence worth of $905,000, the family earnings must be $166,000 to afford that comfortably.
The issue is the median family earnings there may be $70,000 and loads of the precise jobs which can be in San Diego are massive … There’s not as a lot, and I picked San Diego as a result of there’s not as a lot massive enterprise as there may be in Austin, Seattle, San Francisco the place there’s these massive anchor tech corporations that sure, they is likely to be going by way 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. Army is a giant deal.
Now I do suppose if we’re going into extra battle that the navy may develop and that there’s going to be, that might broaden in San Diego as a result of it’s the most important navy base there may be, however it nonetheless doesn’t get you to the earnings for affordability. With charges being as excessive as they’re, it’s simply going to drag every little thing 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’ll for not less than the primary two quarters, you’re going to see houses dropping worth. 43% of all houses in San Diegos have lower their worth this 12 months. That could be a substantial quantity. Which means individuals are both overpricing or even when they’re pricing proper, they’re simply not promoting for folks can’t afford them.
The key pool of that they will’t afford that, these massive corporations are slowing down, like Qualcomm is a big enterprise there. That’s certainly 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 share for subsequent 12 months. They’re predicting that they will do much less enterprise as an organization which goes to start out shedding the folks which can be going to soak up loads of these dearer properties. And so all these issues that while you get in a combination, I simply see these items coming down. It’s means too costly, we’re lacking like $70,000 on the median residence worth to get folks to actually have the ability to afford. Then there’s different issues which can be simply indicating that it’s means higher to hire versus to purchase. The 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 believe that San Diego may fall a further 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 dwelling 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 financial system goes to develop, I believe they mentioned 31% within the subsequent 10 years or 20 years. And they also’re predicting development. However within the brief time period for 2023, I believe it’s going to retract again and I believe all these costly West Coast markets are going to proceed to retract again. The factor it’s a must to watch out about with the buyers is while 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’d put money into.

Dave:
Everybody loves leverage while you’re going up, after which when it goes down it hurts rather a lot.

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

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

James:
Sure. I truly suppose all these markets like Seattle. It’s Seattle, proper? It’s a really comparable … I like Seattle higher than San Diego as a result of there’s extra jobs there. I like Austin higher than San Diego as a result of there’s extra jobs and infrastructure there. However I do suppose all these cities which can 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. In the event you’re shopping for historically, you’re going to get … I believe you’re going to get burnt.
However because the markets hold free fall … I imply these are the markets which can be going to have essentially the most alternative. Those which can be falling backwards are those that everybody simply jumps out of. That’s the place I actually need to leap in. I most likely will purchase one thing in San Diego. I need to purchase some brief time period rental stuff proper down by the seashore and PB. I do know the condominium market will get hammered and people are issues that I’m searching for, is that if I can purchase it considerably beneath what it was value, if I’m shopping for them 30%, 40% beneath that earlier median residence worth, there’s runway for development and fairness positive factors 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 massive fairness positive factors. These fairness positive factors have utterly modified me as an investor and the way I’ve been capable of passively make investments simply primarily based on these positive factors.

Dave:
All proper. Properly mentioned. Truly after I was attempting to suppose by way 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 believe it will go down 20% or 30%, however it has the most effective 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 beneath market worth and discovering good worth.
All proper. Jamil, what about you? How’d you strategy this?

Jamil:
Properly, I liked every little thing that James and Kathy mentioned. I agree that it’s a must to have a look at it from the attitude of your funding technique. Everyone knows that I’m a dealer. I have a look at the true property market when it comes to how can I profit, how can I get entangled and the place are my patrons? The place are my purchasers? The place are they trying 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. Once you have a look at repair and flip, while you have a look at wholesale, while you have a look at alternatives for us to commerce in property, in case you’ve acquired declining market to that diploma with all the issues that James was speaking about, you’ve acquired the common Southern California points just like the state tax, the migration in Ventura County will not be, it’s flat, if something.
And so how I have a look at a market like that, as I say, are my purchasers or are my patrons for repair and flip or are my wholesale patrons searching for alternatives in Ventura County proper now? They’re not. For me, the place we aren’t going to be investing advertising and marketing, the place we aren’t going to be investing sources for boots on the bottom to attempt to discover some alternatives or to select up alternatives for commerce might be a few of these greater worth markets in southern California. However I do additionally agree that wanting ahead to 2024, as you had talked about and as James had talked about, there’s going to be an incredible worth, however it’s a must to wait.
It’s a foul marketplace for 2023, however coming off the tail finish of that, if you can begin shopping for in This fall 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 in case 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 the direction of the tail finish of ’23.
However for now the worst market, Ventura County.

Dave:
It is sensible. Kathy, what’s your learn on this California hate over right here with getting James and Jamil? However actually we’re seeing loads 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 suppose the longer term holds for California within the subsequent few years?

Kathy:
I’m a local of many generations. My grandmother was one of many first 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 most likely for a century. It’s simply all the time the case when you will have extremely fascinating world class areas, it is going to by no means be low-cost and there’ll by no means be a scarcity of people that can afford it. It’s simply that they’re unstable. These are unstable markets.
However San Diego, I imply it actually is likely one of the finest locations on the earth to stay or to have a second residence. There are extra folks that may purchase there or personal there than work there. Clearly in case you are attempting to do a purchase and maintain, once more, it simply is dependent upon technique. Nevertheless 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 12 months or two the place it’s type of masking its price. It most likely gained’t, it is going to most likely nonetheless be damaging however then do the flip later so that you type of acquired in low …

Jamil:
In the event you can by no means get the tenant out.

Kathy:
Proper, there may be that.

Dave:
Legitimate level.

Kathy:
Nevertheless it all the time has bounced again, and you’ll make some huge cash in case 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.
In the event you stay in California, so what I consider California, I’d love to depart California. However I really like the climate. I really like every little thing about it besides the politics and the costs. However it could be arduous for me to go anyplace else and I believe lots of people really feel that means who stay there.

Dave:
All proper, effectively yeah. I wouldn’t wager towards the California market long run. It all the time bounces again. Oh, and one factor I do need to say while 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. In the event you stay in it for 2 out of 5 years, you pay no tax. Good alternative.
For mine, I needed to select a metropolis that we don’t speak about rather a lot additionally on the West Coast, however was one of many hottest markets over the past 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 over the past 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 certainly one of 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 while you have 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 very not a excessive sufficient earnings degree to assist the costs. You don’t actually see, not like 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 fascinating experiment as a result of I believe it grew rather a lot much like Boise. I believe it’s form of an analogous factor the place individuals who needed to stay someplace with a terrific high quality of life determined to maneuver there, however should see if the financial system can assist it as soon as individuals 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 suppose it’s going to be doing fairly effectively 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 worth drops are over 45%. That’s my choose.

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, however it’s in Nevada, no state earnings tax. It simply appeared like that is going to continue to grow.
However like San Diego, it simply lags. It simply lags. It’s so unusual why you’d suppose for these causes corporations would transfer to Nevada simply to keep away from taxes. Nevertheless it’s nonetheless a four-hour drive. If there was a velocity bullet practice or one thing, possibly it could be a distinct story, I don’t know. Nevertheless it’s all the time lagging.

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

James:
Don’t they run out of water? Isn’t there an enormous water concern 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 and so they’re attempting to determine the best way to get extra water in.

Kathy:
I believe typically, that was California.

Dave:
And Nevada.

James:
Properly, it’s additionally loopy too while you go to Lake Tahoe, that property values as a result of a part of it’s in Nevada and so they 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 will have properties which can be value tens of millions and tens of millions 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 fascinating.

Dave:
All proper, effectively we’ve talked in regards to the draw back. Once more, I believe that a few of these markets could possibly be nice sooner or later. We’re simply speaking about 2023, not eternally. Let’s transfer on to markets that we do suppose are going to outperform or do effectively 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 all the time have a look at job development, inhabitants development and infrastructure development mixed with affordability. I need to be in markets that money move at this time and so you possibly can maintain these properties. They don’t need to money move rather a lot. 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 utterly 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. Plenty of job development and that’s actually essential to us.
Now with that comes inhabitants development. In Tampa, it was 1.3% up final 12 months. That is the essential factor wanting ahead, it’s projected to develop 3.3% yearly. The expansion has simply began. Greater than 128,000 new residents are forecast to maneuver to the metro space. How on earth by subsequent 12 months, by 2024, there’s not sufficient housing for all these folks.
We’re nonetheless shopping for homes within the one $150,000-$200,000 vary nearly 45 minutes outdoors of Tampa. I don’t prefer 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 believe in case 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 monthly for a three-bedroom residence. There’s loads of markets the place it is likely to be a two-bedroom condominium or one thing. However in line 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 somewhat than personal. I believe we will all agree that Florida typically is enterprise pleasant and landlord pleasant. It meets all of the issues that I would like. I’m not frightened in any respect about shopping for in Tampa at this time.
Oh my gosh, for the properties that I personal within the Tampa space, I get calls propped and texts most likely each different day of individuals attempting to purchase these houses. 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 choose. I imply I believe 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 regulate 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 will have a bit of bit extra alternative to get in at this time 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 after I was researching all this. There have been loads of the anticipated markets which can be going to carry out rather well in 2023. It’s all primarily based off math equations. After I was taking a look at 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 completely 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 12 months. The reason is is it’s ranked on quite a few lists as the most effective locations to stay in america. 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 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 and so they 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 and so they’re going to areas like this.
In the event you have a look at how reasonably priced that is for the standard of dwelling, so that is the sixth rank metropolis of locations to stay that you would be able to have a terrific life to stay in. The median residence worth is $410,000, which did develop by 16% final 12 months and that’s my concern. It did have loads of speedy development. However the family earnings is $98,000. So folks can afford to … They will transfer there, have a terrific life and nonetheless stay comfortably.
Everyone that I’ve recognized, and I additionally go off of what are folks saying. Individuals have been reloading to Raleigh, North Carolina, Charlotte, and so they find it irresistible. They love every little thing about it. That could be a buzz, and as we go right into a recession and issues are costing extra, individuals are going to search for space. They only need to take pleasure in life and stay someplace that they will elevate their children, and that is a kind of scorching locations.
The opposite factor I preferred is there may be going to be a listing 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 speedy price, 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 individuals are transferring, there’s a scarcity of stock and folks can afford issues.
One other fascinating 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 while you’re taking a look at a high quality place to stay, they’ve good earnings. The median residence worth 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 positive factors 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 taking a look at now in all my metrics after I’m taking a look at 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 beneath that 21-point threshold that they speak about.
There’s nonetheless a bit of bit extra room, it nonetheless makes extra sense to personal than it does to hire. And so these are issues that I believe are actually wholesome for development for 2023. Individuals need to stay there, they will afford it and it’s nonetheless cheaper or a greater scenario to purchase. I believe that it has 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, however it solely got here down 5% as an alternative of that 10% to twenty% that we’ve seen in a few of these tech markets. It didn’t fairly develop on the identical price 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 happening there.
However I’m going to actually dig into this market. I like all of the stuff I learn on it. I do know I like every little thing I hear about folks, and I actually do love markets the place folks need to stay. Raleigh is certainly one of 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 will have that type of schooling degree, 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 a must 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, however it goes arduous instantly. Have you ever ever heard of this?

Jamil:
Possibility 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 and so they 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 eager 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 acquired, it was like 20 or 25 grand. That was earlier than you even acquired an inspector in there, earlier than you even essentially stroll the property.
So if folks have been … I imply, that’s loopy. That’s why I simply didn’t do it. However hopefully on this subsequent 12 months, it gained’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 put in writing provides on houses. 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 might 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 little thing simply to lock a deal down. It was like, however I believe that that can go away from what I hear from folks which can 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 12 months?

Jamil:
Properly, once more, taking a look at this from the attitude of a dealer, so I’m searching for alternatives which can be fast the place my patrons can get in and do tasks the place they gained’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, taking a look at what we’ve seen, we’re seeing throughout america in nearly each market that costs are declining. Nonetheless, there’s a unicorn market proper now that loads of people aren’t speaking about the place that’s not occurring, and it’s Hartford, Connecticut.
Hartford, Connecticut. Fascinating, realtor.com is predicting that they’ll 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 provides, 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 every little thing that we have been seeing main as much as this complete market shift, all of the craziness in a lot of the markets throughout america, we’re seeing these a number of provide conditions, it’s nonetheless occurring in Hartford, Connecticut, which is loopy to me.
Past that, the median worth over there may be very low at 372, so it’s nonetheless comparatively reasonably priced. You’ve acquired sturdy migration. You’ve acquired New Yorkers transferring there. You bought folks from Florida transferring there. You bought folks from New England transferring there. It’s acquired loads of demand. And so individuals 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 might 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 must be the primary time in BiggerPockets historical past anybody’s ever talked about anyplace in Connecticut as a spot to … I grew up not so removed from right here and simply by no means even speak about 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, principally to Stanford, Bridgeport, locations near town.
Nevertheless it’s an actual factor. Hartford is type of completely located between Boston and New York. And so possibly you’re getting folks from each of these greater worth markets who simply need someplace within the northeast that’s a bit of bit cheaper.

Jamil:
They’re. There’s jobs and trade there too as a result of it’s the insurance coverage capital of, I consider the world, the insurance coverage capital of the world. Aetna’s acquired their headquarters there. Cigna’s acquired their headquarters there. We all know that there’s sturdy alternative in healthcare. There all the time might be. That’s one of many industries that we perceive will all the time have loads of demand and loads of alternative.
I believe it’s certainly one of 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 folks give a credit score for. It’s crucial.

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

Jamil:
Wow.

Kathy:
Yeah.

Dave:
What, in Hartford?

Kathy:
Mm-hmm.

Dave:
Wow. All proper. Possibly Jamil and Wealthy should go on a tour. All proper. Properly for mine, I needed to do one thing much like Jamil, a bit of 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 believe much like how the Southeast over the past couple years has seen, this massive pop, the climate is nice, but additionally it’s simply extra reasonably priced than the West Coast and the Northeast.
I believe 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 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 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 12 months. Its unemployment price 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 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 over the past couple of months. I believe this market continues to be going to continue to grow over the subsequent 12 months. I don’t suppose it’s a fluke. I believe it’s an reasonably priced market, prime quality of life and reasonably priced, which as James mentioned, form of a few of the key indicators for long-term efficiency for purchase and maintain markets.
I attempted to do one thing a bit of bit bizarre and a bit of bit totally different, however I believe Madison’s going to be a winner.

James:
Brutal winters.

Dave:
Sure, positively. Brutal winters.

Kathy:
I do know what he mentioned, high quality of life. I used to be like, it is dependent upon how a lot you like chilly.

Dave:
It will get rated excessive for high quality of life, folks prefer it there. However I assume 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 most likely must look into a bit of little bit of the methodology.

Jamil:
Once you stay in perpetual summer time like me right here in Phoenix, I don’t thoughts seasons.

James:
I’ve had too many seasons. I don’t need them anymore.

Dave:
I went to highschool in upstate New York and it’s completely brutal. I didn’t prefer it. It’s not for me.

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

Dave:
Yeah, precisely. However I simply suppose typically, I believe the Midwest has gotten hit arduous and there’s different cities within the Midwest additionally I believe are Chicago I consider will rebound over the subsequent couple of years. I imply, I believe it’s doing wonderful proper now, however we’ll begin rising once more simply because it’s a lot extra reasonably priced than different massive cities. There’s nonetheless actually good jobs in these markets.

James:
Cool metropolis too. I really like Chicago.

Dave:
Final time I used to be there, Jane’s household lives there, and I used to be there over the summer time. Man, that metropolis is mainly holding down inflation for all the nation. We have been going out and we went and purchased beers and so they’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 loads of enjoyable.

James:
I ate lunch yesterday after I was prepping, doing a little work and consuming, I acquired a sandwich and a soda and it was $33. I used to be like, it’s ridiculous. What’s going on? Yeah. I imply, now Chicago may leap up my listing if it’s actually that low-cost.

Dave:
Truthfully, it’s. It’s so low-cost there, I imply, comparatively talking. Was your sandwich good not less than?

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

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

James:
Yeah. It’s a wagyu beef.

Jamil:
Yeah, when you will 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 loads of enjoyable. Let’s simply sum this up. Kathy’s picks have been worst performing marketplace for subsequent 12 months might be Detroit, however finest might be Tampa. James had San Diego because the worst performing market, and his finest was …

James:
Raleigh.

Dave:
Raleigh. There we go. Jamil choosing 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 believe Reno’s going to take a success, however Madison, Wisconsin is my darkish horse for subsequent 12 months.
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 suppose the most effective 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, make certain 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, modifying by Joel Esparza and Onyx Media. Analysis by Pooja Jindal, and a giant due to all the 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.