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

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

Kathy:We’re all sick, woo-hoo. It was an ideal celebration.

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

Jamil:I may need to take duty for it.

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

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

Kathy:Oh, yeah.

Dave:Effectively, thanks. I recognize that. I actually recognize you in together with me. It’s very considerate. Effectively, I really wasn’t on the celebration, 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 the whole workforce that edits this podcast, all of them stay in Madrid. I don’t even know in the event you guys know that.However I went to go hang around with them and so they’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 fulfill them and I had a variety 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 had been in Spain, however now now we have to make a visit on the market and go hang around.

Kathy:Seems like now we have to.

James:Are they sick of our voices but?

Dave:No. They had been making enjoyable of me the entire time. They’re like, “I really feel like I’ve to place a body round your face. That’s what I’m used to seeing you want. It’s bizarre seeing you.” No, they’d love that. We must always try this subsequent time. Kathy, subsequent time you’re in Portugal, simply pop over to Madrid. It’s not far.

Kathy:April.

Dave:All proper.

Jamil:Did anybody say to you that you just’re taller than they anticipated?

Dave:No, most likely stated shorter understanding me.

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

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

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

Dave:What?

Kathy:No person says that to you.

Dave:Who thinks your beard seems horrible?

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

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

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

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

James:Revenue and puberty.

Dave:That may very well be your BP e-book pitch, James.

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

Dave:All proper, effectively let’s get to at present’s episode. As we wind down the yr, we wished to recap and type of return to truly one of many first reveals we did, which we had been selecting greatest markets, worst markets. And so at present, 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 largest mortgage firms within the nation, simply got here out with their rankings of the highest 5 markets for 2022. I wish to throw these on the market and see what you guys take into consideration these earlier than we get into our predictions for subsequent yr.They stated the quantity 5 was Charlotte, North Carolina. Did any of you decide them final yr? I really feel like somebody may need.

Kathy:I did.

Jamil:Oh, you probably did?

Kathy:Didn’t I?

Jamil:Why do I really feel like-

Dave:No, Jamil. You had Austin in Denver. I do not forget that particularly.

Jamil:Austin and Denver, that’s proper.

Dave:As a result of the ultimate was simply you in opposition to your self.

Jamil:Yeah. Charlotte?

Dave:It’s Charlotte. Do you make investments there, Kathy?

Kathy:Yeah.

Dave:How did it do that yr?

Kathy:Effectively, it acquired very costly this yr, so it grew to become tough to purchase this yr. However in the event you purchased earlier than this yr, you probably did nice.

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

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

Dave:Effectively, that’s a very good query, James. You’ve been fairly trustworthy about pullbacks in Seattle in your market, are they nonetheless up significantly over pre-pandemic ranges costs in Seattle?

James:Oh yeah. We’re considerably up from pre. I imply we’re nonetheless 5% up on this yr in Seattle, however we had been up 25% to 30% and there’s first two quarters. I do know there was one month alone I used to be seeing some cities recognize at 25% in a single month. It was loopy. I needed to triple test the info. I used to be like, wait, what occurred? The median dwelling value jumped 25% in a single?

Dave:That’s like a crypto coin.

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

Kathy:Yeah, I imply that was type of my remark final yr is that this can be a leveling out of a loopy manic pandemic-induced shopping for spree of final yr. And so with so many issues, after we see layoffs, after we see dwelling costs coming down, it’s actually simply evaluating to an irregular yr. And so in the event you might preserve that in thoughts and perhaps simply evaluate numbers to 2019, individuals who purchased in markets that actually went up and at the moment are coming again right down to earth, in the event that they purchased this yr, they is perhaps feeling slightly ache. However in the event you purchased earlier than that, you’re tremendous.In the event you maintain it, you’re tremendous. It’s simply anytime you need to promote, in the event you’re compelled to promote when it’s not good timing to promote, then that may be painful. However in the event you can maintain, often these sizzling markets come again and so they turn into sizzling once more.

Jamil:I really feel like in the event 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 best way that they need to have and also you wish to overlook it. And in order that’s principally what occurred.

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

Jamil:Perhaps.

Kathy:I left in time.

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

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

Jamil:I placed on a very good celebration although, guys.

Kathy:That was a very good celebration.

Jamil:Let’s be actual.

James:You realize what? Everybody ought to go to Jamil’s meetups and events. They’re probably the most enjoyable issues for actual property I’ve been to. It’s like, it’s a vibe that’s nothing I’ve seen at an actual property convention earlier than or meetup.

Kathy:I’m signing up.

Jamil:All proper, effectively undoubtedly test these out.

Dave:Okay, effectively let’s take a break now as a result of, Jamil, you threw me off. Let’s take a fast break after which we’ll come again and discuss our predictions for 2023.All proper, let’s soar into our predictions, however earlier than I ask you which ones markets you really picked, can we 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 acquired an opinion and that’s 100 X yearly as increasingly more individuals get into the business. It may be very complicated. I simply needed to cease and say, for what? The worst marketplace for what?For me, my shopping for field, principally what I’ve at all times regarded for are areas that money circulate 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 circulate 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 ideal marketplace for 2023. Once more, it simply depends upon your purchase field. I’m certain there’s Detroit buyers listening who’re like, “In the event you make investments the best way I make investments, you’ll do nice in Detroit,” as a result of there’s a lot occurring and apparently has had among the highest millennial development there. There’s a variety of revitalization occurring downtown. Among the issues I search for are there.The rationale I select it because the worst for me is that they’ve had a inhabitants decline over a long time. Yeah, a long time. Detroit has seen a 61% lower in his inhabitants for the reason that ’50s. It was 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 every of my greatest markets is hotter climates, the Florida space. No, I didn’t inform you the place in Florida, however heat climates with landlord pleasant legal guidelines. This suits the purchase field for me.If I’m on the lookout for purchase and maintain, money circulate, appreciation and development, I wish to be in an space the place there’s job development, inhabitants development, infrastructure development, lease development, all these issues. We’re not seeing it. However the largest motive that I wouldn’t put money into Detroit is that they’ve this regulation, and it’s a powerful regulation, 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. Mainly, you may get massively fined relying on which means you take a look at it. For renters, that is nice, it implies that landlords should maintain their properties and make things better. However in the event 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 a few Detroit properties that we’re having a very powerful time promoting. We will’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 this stuff now we have 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. In the event you’re shopping for an older property in Detroit, you simply should know that town inspectors could cost you.For me, this isn’t a greatest marketplace for me, it’s a worst marketplace for me. I do suppose in the event you go in and you may get an ideal deal and also you utterly renovate it and also you’ve acquired the funds for it and the reserves, you might get nice money circulate. I simply don’t suppose that you just’re ever actually going to see that market recognize the best way I prefer it to do in different markets.

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

Kathy:I used to like it. I used to speculate there and our fund purchased a bunch of properties there and so they money flowed the entire time through the fund. They had been fantastic for money circulate. It’s simply if 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 should have tons and plenty and plenty and many reserves for older properties.

Dave:Kathy, it’s an ideal level. Two or three years in the past, I did this knowledge evaluation to take a look at appreciation versus money circulate for markets and I plotted them out. Mainly, what we noticed was that earlier than the pandemic, most markets had been both actually good appreciation or actually good money circulate and there have been just a few that had been each, however they had been modest for each. The outliers for good money circulate like Detroit had been additionally outliers for dangerous appreciation.And so that you noticed the opposite factor too. An outlier for appreciation like Seattle was additionally an outlier for dangerous money circulate a variety of the time, simply on common. Because the 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 type of bifurcation available in the market the place some markets are actually good for money circulate however don’t recognize actually and vice versa. Some will proceed to understand however aren’t going to be locations the place you may simply discover rental properties that meet the 1% rule, for instance.And so, it sounds such as you agree. Detroit is perhaps good for money circulate, however appreciation most likely not going wherever.

Kathy:Yeah, I believe it’s actually essential to take a look at how efficiency was earlier than 2020. I do know a variety of these cities have actually redefined themselves within the final decade, however in the event you take say 2015 to 2019 and actually take a look at the cap charges and what was occurring in these markets appreciation-wise, these had been good stable 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 decide?

James:I picked type of a special metropolis. I spent a variety of time researching all these markets and I’m like, you recognize 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 rationale I picked San Diego is, A, and this has nothing to do with what we’re going via now as a result of it’s a special factor, however I bear in mind in 2009, the sky-rise condos went right down to underneath 400 grand. This stuff had been such as you’d be up killer views, model new, and you might purchase them for underneath half million {dollars} and so they had been buying and selling for over 1,000,000 earlier than the mortgage business exploded.However the motive I picked San Diego is I do suppose, A, I believe San Diego is the very best metropolis on the West Coast. It’s the place you wish to stay for certain, however the issue is the revenue is simply not there and what individuals can afford within the job market. It’s a very good place to maneuver to if in case you have cash, but when not, you’re going to wrestle with a variety of the pricing round there.And so what we’ve seen with the rates of interest rising is the charges, we’ve already seen it go from a medium dwelling value down over 10%. There’s been a drop from about 950 down 850. We’ve seen one thing very fascinating 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 charge. San Diego undoubtedly hits that. In March, they had been up 30% and so they had been one of many prime three appreciating markets for that month. It has retracted again 20% from March and it’s persevering with to slip proper now.I believe a variety of the rationale that they’ve retracted again is the maths 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 the event you might? 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 this stuff are beginning to carry it again.In the course of the pandemic, residing in a top quality place was a giant concern for most individuals and San Diego’s the most effective you may be in. And so I believe individuals are simply beginning to go away slightly bit and it’s beginning to let issues down. However to place it in perspective, you need to save … In San Diego, the common dwelling purchaser wants to save lots of up $160,000 to purchase a home. With the revenue that they’re making, they should save a minimal of $13,000 per yr to it. It will take them virtually 8 to 12 years to save lots of up for that 20% deposit. That doesn’t even preserve monitor with the pricing going up throughout that point. With a median dwelling value of $905,000, the family revenue must be $166,000 to afford that comfortably.The issue is the median family revenue there’s $70,000 and a variety of the precise jobs which might 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’s in Austin, Seattle, San Francisco the place there’s these massive anchor tech firms that sure, they is perhaps going via a downturn proper now and shedding some individuals however they’re going to return again and these are firms that aren’t going away whereas they’ve a way more restricted pool. Navy is a giant deal.Now I do suppose if we’re going into extra battle that the navy might develop and that there’s going to be, that would develop in San Diego as a result of it’s the largest navy base there’s, nevertheless it nonetheless doesn’t get you to the revenue for affordability. With charges being as excessive as they’re, it’s simply going to drag every thing again as a result of simply individuals do not make sufficient cash to purchase. We’re seeing that proper now.If the charges proceed to go up, which I do imagine they may for a minimum of the primary two quarters, you’re going to see houses dropping value. 43% of all houses in San Diegos have reduce their value this yr. That could be a substantial quantity. Meaning individuals are both overpricing or even when they’re pricing proper, they’re simply not promoting for individuals can’t afford them.The foremost pool of that they’ll’t afford that, these massive firms are slowing down, like Qualcomm is a large enterprise there. That’s considered one of their anchor employers. Qualcomm has froze their hiring proper now. They haven’t introduced layoffs but so far as I might inform, however that’s often 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 yr. They’re predicting that they’re going to do much less enterprise as an organization which goes to start out shedding the individuals which might be going to soak up a variety 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 dwelling value to get individuals to actually have the ability to afford. Then there’s different issues which might be simply indicating that it’s means higher to lease versus to purchase. The fee to lease ratio is 30.38. In a wholesome market, it’s such as you wish to be under 21.It’s so far out of whack proper now that I believe that San Diego might 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 really on my cities to slate to purchase in. I simply suppose that there’s going to be extra alternatives. I don’t wish to have the identical remorse I had in 2009 as a result of I do suppose high quality of residing and folks wish to stay there generally 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 believe they stated 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 you need to watch out about with the buyers 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’d put money into.

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 had been speaking about earlier than I acquired on the present, I lastly offered a home that it took 150 days to promote and fortuitously I’m breaking even. I don’t even know the way I’m breaking even. However we simply offered the home for 450 grand, lower than a home that we offered proper across the nook after we purchased that deal to start with of the yr. And so you need to be careful for these slides and the slides are okay, you simply have to organize for them appropriately.However I do suppose San Diego’s going to have some points. It’s simply too costly for what individuals make there. I do suppose individuals are at all times going to wish to stay there. Effectively, along with moreover that expense, you will have that California expense, the additional 13% revenue tax. There’s too many bills occurring which might be consuming up liquidity and that’s why I do suppose that it’s inclined for a reasonably large drop from right here. I believe one other 10% is coming again.

Dave:San Diego is perhaps in your greatest markets for 2024 checklist?

James:Sure. I really 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 large retractions are nice shopping for alternatives, particularly after this second quarter. However you need to purchase rigorously. You may’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 preserve 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 wish to soar in. I most likely will purchase one thing in San Diego. I wish to purchase some brief time period rental stuff proper down by the seaside and PB. I do know the apartment market will get hammered and people are issues that I’m on the lookout for, is that if I can purchase it considerably under what it was value, if I’m shopping for them 30%, 40% under that earlier median dwelling value, there’s runway for development and fairness positive factors in over a five-year interval.However like what Kathy stated, it comes down to what’s your technique? My technique isn’t excessive money circulate. 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 circulate 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. Effectively stated. Really once I was attempting to suppose via this for greatest markets, I used to be considering of doing a contrarian opinion and saying one thing like Austin, as a result of I believe it’s going to go down 20% or 30%, nevertheless it has the most effective 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 underneath market worth and discovering good worth.All proper. Jamil, what about you? How’d you strategy this?

Jamil:Effectively, I beloved every thing that James and Kathy stated. I agree that you need to take a look at it from the angle of your funding technique. Everyone knows that I’m a dealer. I take a look at the true property market by way of how can I profit, how can I get entangled and the place are my patrons? The place are my shoppers? The place are they seeking to make investments? The place are they working 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 value by about 30%, 29.3%, 29.1% particularly is what their prediction is. That’s a major sum of money. While you take a look at repair and flip, if you take a look at wholesale, if you take a look at alternatives for us to commerce in property, in the event 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 take a look at a market like that, as I say, are my shoppers or are my patrons for repair and flip or are my wholesale patrons on the lookout for alternatives in Ventura County proper now? They’re not. For me, the place we aren’t going to be investing advertising, the place we aren’t going to be investing sources for boots on the bottom to attempt to discover some alternatives or to select up alternatives for commerce might 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 you need to wait.It’s a nasty 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 under market, as a result of at that time there’s going to be desperation, exhaustion. Sellers are going to be simply, they’ll have had it. I really feel in the event you can time your purchases proper, you can also make the worst market at 2023 your greatest market at 2024. And so I’ll be re-entering Ventura and a few of these markets in Southern California in direction of the tail finish of ’23.However for now the worst market, Ventura County.

Dave:It is smart. Kathy, what’s your learn on this California hate over right here with getting James and Jamil? However actually we’re seeing a variety of inhabitants leaving California and it’s very costly. I really feel like individuals have been saying California’s going to nostril dive for many years and it by no means occurs. As a resident and a local, what do you suppose the longer term holds for California within the subsequent few years?

Kathy:I’m a local of many generations. My grandmother was one of many first individuals to swim … She swam throughout the Golden Gate Bridge. She was an Olympic athlete and would swim round Alcatraz. I actually have my roots in California, and this can be a dialog that has been had most likely for a century. It’s simply at all times the case when you will have extremely fascinating world class areas, it’ll 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 risky. These are risky markets.However San Diego, I imply it actually is likely one of the greatest locations on the planet to stay or to have a second dwelling. There are extra individuals that might purchase there or personal there than work there. Clearly if you’re attempting to do a purchase and maintain, once more, it simply depends upon technique. But it surely’s virtually like if you are able to do a long run flip, which means perhaps you purchase one thing, you lease it out for a yr or two the place it’s type of overlaying its value. It most likely received’t, it’ll most likely nonetheless be unfavourable 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’s that.

Dave:Legitimate level.

Kathy:But it surely at all times has bounced again, and you’ll make some huge cash in the event 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 go away California. However I like the climate. I like every thing about it besides the politics and the costs. However it will be laborious for me to go wherever else and I believe lots of people really feel that means who stay there.

Dave:All proper, effectively yeah. I wouldn’t wager in opposition to the California market long run. It at all times bounces again. Oh, and one factor I do wish to say if you had been speaking about that, that may very well be an excellent alternative for a live-in flip for individuals who wish to try 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 wished to select a metropolis that we don’t discuss so much 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 offered off our two subdivisions there simply in time, so sure.

Dave:Oh good. Effectively it went loopy over the past couple of years, so hopefully you probably did effectively there.

Kathy:Bought proper earlier than charges went up, in order that was good.

Dave:Ah, good.

Jamil:Congrats.

Kathy:Thanks.

Dave:As a result of to me, Reno is considered one of these cities that simply popped because of distant work. It’s a lovely place. There’s no revenue tax. It’s proper close to Lake Tahoe, it’s very nice. However if you take a look at the financial fundamentals, it doesn’t actually help 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 revenue degree to help the costs. You don’t actually see, not like Seattle or Austin that has distinctive job development and tech firms 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 so much just like Boise. I believe it’s type of the same factor the place individuals who wished to stay someplace with an ideal high quality of life determined to maneuver there, however must see if the financial system can help it as soon as individuals are both known as again to the workplace or salaries don’t rise on the similar charges that they’ve been or there’s layoffs we’re beginning to see.Sadly for Reno, I don’t suppose it’s going to be doing fairly 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 yr. 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:Effectively, I might inform you why we invested there, why we purchased land there and constructed a variety of homes there as a result of Tesla moved its battery manufacturing 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 revenue tax. It simply appeared like that is going to continue to grow.However like San Diego, it simply lags. It simply lags. It’s so unusual why you’ll suppose for these causes firms would transfer to Nevada simply to keep away from taxes. But it surely’s nonetheless a four-hour drive. If there was a pace bullet prepare or one thing, perhaps it will be a special story, I don’t know. But it surely’s at all times lagging.

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

James:Don’t they run out of water? Isn’t there an enormous water difficulty in Reno too, prefer it’s dry virtually? I simply bear in mind I went to Lake Tahoe, they had been speaking about it. The water’s low and so they’re attempting to determine learn how to get extra water in.

Kathy:I believe generally, that was California.

Dave:And Nevada.

James:Effectively, 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 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 wish to get out of that revenue tax and it’s like, so you will have 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 revenue tax.

Jamil:No, that’s fascinating.

Dave:All proper, effectively we’ve talked concerning the draw back. Once more, I believe that a few of these markets may very well be nice sooner or later. We’re simply speaking about 2023, not without end. Let’s transfer on to markets that we do suppose are going to outperform or do effectively within the subsequent yr. Kathy, on the opposite facet, you didn’t like Detroit. What do you want for subsequent yr?

Kathy:Effectively, as you recognize, like I stated, we at all times take a look at job development, inhabitants development and infrastructure development mixed with affordability. I wish to be in markets that money circulate at present and so you may maintain these properties. They don’t should money circulate so much. This can be a long-term play however cowl their prices so that you just’re actually capable of maintain these as they recognize.Tampa actually suits that for me. Tampa has utterly redefined itself within the final decade. In reality simply in 2021, there have been 9 firms that relocated their headquarters. There’s an article that claims tech firm relocations to Tampa Bay soar in 2021. 94 new firms had been added to St. Pete’s pipeline. A lot of job development and that’s actually essential to us.Now with that comes inhabitants development. In Tampa, it was 1.3% up final yr. That is the essential factor trying ahead, it’s projected to develop 3.3% yearly. The expansion has simply began. Greater than 128,000 new residents are forecast to maneuver to the metro space. How on earth by subsequent yr, by 2024, there’s not sufficient housing for all these individuals.We’re nonetheless shopping for homes within the one $150,000-$200,000 vary nearly 45 minutes exterior 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 places of work 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 the event you might nonetheless get a home for $200,000, $300,000 in an space that’s rising like that, to me that’s a steal.Median lease is $2,300 per 30 days for a three-bedroom dwelling. There’s a variety of markets the place it is perhaps a two-bedroom residence or one thing. However in accordance with Zumper, $2,300 for a three-bedroom dwelling, that’s fairly good. Rents have elevated by 16% final yr, and 48% of households in Tampa lease relatively than personal. I believe we will all agree that Florida generally 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 present.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 a variety of exercise.

Jamil:That’s my fault.

Dave:It’s Jamil, he’s calling you.

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

Dave:All proper. Effectively, I like Tampa too. That’s an excellent decide. I imply I believe there’s a variety of … Florida, it simply appears to be this cut up metropolis, cut up state. Some markets appear to be overheated proper now, however markets like Tampa simply appear to nonetheless have actually sturdy fundamentals. We’ll should control 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 slightly bit extra alternative to get in at present 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 yr?

James:What I like for subsequent yr is … It’s humorous once I was researching all this. There have been a variety of the anticipated markets which might be going to carry out rather well in 2023. It’s all primarily based off math equations. Once I was taking a look at all these lists, I’m like, okay, I get it. It’s a really low value level. The median revenue is up. There’s low stock, in order that they’re predicting development. That completely is smart.However for me as an investor, I additionally like to purchase stuff the place individuals wish to stay. And so I picked Raleigh, North Carolina, which I do know did actually good this final yr. The reason is is it’s ranked on quite a few lists as the very best locations to stay in the US. It was ranked quantity six just 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 wish to stay in high quality locations however nonetheless preserve their capital.Plenty of our mates, 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 rationale they did is as a result of they had been sick of freely giving that 13%. They had been sick of paying an excessive amount of cash for housing and so they’re going to areas like this.In the event you take a look at how reasonably priced that is for the standard of residing, so that is the sixth rank metropolis of locations to stay that you would be able to have an ideal life to stay in. The median dwelling value is $410,000, which did develop by 16% final yr and that’s my concern. It did have a variety of fast development. However the family revenue is $98,000. So individuals can afford to … They will transfer there, have an ideal life and nonetheless stay comfortably.All people that I’ve identified, and I additionally go off of what are individuals saying. Folks have been reloading to Raleigh, North Carolina, Charlotte, and so they like it. They love every 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 simply wish to get pleasure from life and stay someplace that they’ll elevate their youngsters, and that is a kind of sizzling locations.The opposite factor I preferred 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 stated prefer it’s rising at a fast charge, it has traditionally grown round 1.5%. It’s been rising close to 3% the final three years. And so it has the thrill. That is the place individuals are 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 if you’re taking a look at a top quality place to stay, they’ve good revenue. The median dwelling value remains to be very, very reasonably priced. The colleges 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 individuals wish to stay there.The one factor that I did see that could be a little regarding is the price of lease. That’s one thing that I’m actually taking a look at now in all my metrics once 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 might lease or purchase, however that’s nonetheless under that 21-point threshold that they discuss.There’s nonetheless slightly bit extra room, it nonetheless makes extra sense to personal than it does to lease. And so these are issues that I believe are actually wholesome for development for 2023. Folks wish to stay there, they’ll afford it and it’s nonetheless cheaper or a greater state of affairs to purchase. I believe that it has a variety of room to develop.One other factor I noticed really, the markets I’ve been watching are these hockey stick markets. Raleigh has jumped dramatically, 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 charge 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 actually dig into this market. I like all of the stuff I learn on it. I do know I like every thing I hear about individuals, and I actually do love markets the place individuals wish to stay. Raleigh is considered one of them.

Dave:Superior. Yeah, I imply it’s anchored by very, very sturdy financial system. Three of the most important analysis universities within the nation, Duke, UNC, NC State are all in that space. When you will have that type of training degree, you see a variety of firms 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 you need to like, what’s it known as? It’s a must to pay some price to take the home off the market. It’s placing earnest cash down, nevertheless it goes laborious instantly. Have you ever ever heard of this?

Jamil:Choice price?

Dave:Yeah, it’s like an possibility price. Final yr, they had been like 20 grand earlier than you even have an inspection. It’s loopy.

James:Yeah, I used to be simply speaking to somebody about that and so they stated, 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 yr, I talked to an agent down there as a result of I used to be interested by shopping for in Durham. They had been saying like in regular yr, it’s like 500 bucks. So it’s like, all proper. However final yr with how aggressive it acquired, it was like 20 or 25 grand. That was earlier than you even acquired an inspector in there, earlier than you even essentially stroll the property.So if individuals had been … I imply, that’s loopy. That’s why I simply didn’t do it. However hopefully on this subsequent yr, it received’t be as aggressive when you are able to do one thing like that.

James:The shopping for situations had been so bizarre although. We used to jot down gives 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’d write earnest cash at $448,000 and launch it to vendor day after Mutual. We might write the weirdest phrases we might just do to attempt to get that deal. They’re like, “Wait, what do you imply?” We’re like, “No, no, we’re going to offer you all the cash till we shut for two,000 bucks.”We had been attempting every thing simply to lock a deal down. It was like, however I believe that that can go away from what I hear from individuals which might be shopping for there. It’s again right down to 500 bucks. Folks aren’t throwing loopy numbers at it anymore.

Dave:For certain it’s wild. However agree that it’s a really sturdy market. All proper. Jamil, what do you bought? What’s your favourite marketplace for subsequent yr?

Jamil:Effectively, once more, taking a look at this from the angle of a dealer, so I’m on the lookout for alternatives which might be fast the place my patrons can get in and do initiatives the place they received’t get slammed and have a home sitting available on the market for months and months and months the place mortgage charges aren’t going to be a substantial state of affairs. Now, taking a look at what we’ve seen, we’re seeing throughout the US in virtually each market that costs are declining. Nonetheless, there’s a unicorn market proper now that a variety of of us aren’t speaking about the place that’s not occurring, 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 gives, 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 thing that we had been seeing main as much as this entire market shift, all of the craziness in many of the markets throughout the US, 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 value over there’s 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 individuals from Florida transferring there. You bought individuals from New England transferring there. It’s acquired a variety 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 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 mates who grew up in New York with me now moved to Connecticut, largely to Stanford, Bridgeport, locations near 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 slightly 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 acquired their headquarters there. Cigna’s acquired their headquarters there. We all know that there’s sturdy alternative in healthcare. There at all times might be. That’s one of many industries that we perceive will at all times have a variety of demand and a variety of alternative.I believe it’s considered one of these markets that we’ll take a look at in 5 years and say, who knew? Jamil did.

Dave:Yeah. Connecticut has underrated pizza. I don’t know if anybody is aware of that, however has higher pizza than 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 must go on a tour. All proper. Effectively for mine, I wished to do one thing just like Jamil, slightly contrarian, some locations that individuals haven’t heard of or aren’t speaking about a lot. For some motive, perhaps not in 2023, however I’m lengthy on the Midwest. I believe just like how the Southeast 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 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 yr. Its unemployment charge is at about 2%, which is far decrease than the nationwide common. It’s a extremely, extremely educated workforce.To James’s level, I’m simply going primarily based on affordability. Folks can afford to stay there and it has a excessive scores for high quality of life, and it’s nonetheless rising. It’s nonetheless persistently 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 remains to be going to continue to grow over the subsequent yr. 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 stated, type of among the key indicators for long-term efficiency for purchase and maintain markets.I attempted to do one thing slightly bit bizarre and slightly bit totally different, however I believe Madison’s going to be a winner.

James:Brutal winters.

Dave:Sure, undoubtedly. Brutal winters.

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

Dave:It will get rated excessive for high quality of life, individuals prefer it there. However I suppose these are all like James stated, it’s a math equation. They’re like, what was your rating on air high quality and what was … It’s these issues. You most likely must look into slightly little bit of the methodology.

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

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

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

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

Dave:Yeah, precisely. However I simply suppose usually, I believe the Midwest has gotten hit laborious and there’s different cities within the Midwest additionally I believe are Chicago I imagine will rebound over the subsequent couple of years. I imply, I believe it’s doing tremendous 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 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 the whole nation. We had been going out and we went and acquired 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 a variety of enjoyable.

James:I ate lunch yesterday once I was prepping, performing some work and consuming, I acquired a sandwich and a soda and it was $33. I used to be like, it’s ridiculous. What’s going on? Yeah. I imply, now Chicago would possibly soar up my checklist 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 a minimum of?

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

Jamil:Oh, he failed to say it was a first-rate rib sandwich. It is smart.

James:Yeah. It’s a wagyu beef.

Jamil:Yeah, when you will have wagyu between bread, it’s going to be 33 bucks.

James:However that was a $20 meal earlier than the pandemic. That was like a $19.94 with a $3 tip on there.

Dave:All proper, effectively thanks guys. It’s been a variety of enjoyable. Let’s simply sum this up. Kathy’s picks had been worst performing marketplace for subsequent yr might be Detroit, however greatest might be Tampa. James had San Diego because the worst performing market, and his greatest was …

James:Raleigh.

Dave:Raleigh. There we go. Jamil selecting Hartford for his greatest one, bringing a brand new state onto the map. He had Ventura County, California as his worst performing. For me, I believe Reno’s going to take a success, however Madison, Wisconsin is my darkish horse for subsequent yr.All proper, effectively thanks all everybody. We might love to listen to on the boards, we simply placed on the BiggerPockets boards a query to ask you what all you 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 yr, ensure to go to the BiggerPockets boards. Simply go to biggerpockets.com/boards and also you’ll discover it there.Jamil, James, Kathy, thanks a lot for being right here. We recognize you. We recognize you all for listening, and we’ll see you subsequent time for On The Market.On The Market is created by me, Dave Meyer and Kailyn Bennett. Produced by Kailyn Bennett, modifying by Joel Esparza and Onyx Media. Analysis by Pooja Jindal, and a giant because of the whole 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.