Zillow's Predictions for 2023
Though I'm certainly no fan of Zillow, I have to admit with their access to data and resources they are in a good position to predict what may happen with real estate at any given time. They published those predictions a few days ago, and here are the highlights:
The Midwest should have a hot real estate market next year.
Recently Florida lead the way in the hot housing market with Tampa being the #1 most popular large city to move to this year. In fact for every person who moved out of Tampa so far this year, 1.84 moved in. Other Florida cities were close behind with Orlando being #2, Jacksonville being #6 and Miami #13.
Although Florida will likely continue to grow, affordability and low housing supply are likely going to shift growth more to the Midwest where home prices and rents are still more affordable and there are more homes to choose from.
Purchasing a home with friends and family will likely be on the rise even more next year.
In January of 2022, a typical US home needed 27% of the median household income for mortgage payments. By October that number had risen to 37% which is far beyond the 30% threshold where housing becomes a financial burden.
Affordability crisis will stabilize but may not improve.
Did you know the average hourly wage has grown by 23% over the past 5 years, while rents are up 37%? Housing affordability is definitely a problem in most of the country. Zillow predicts home values to remain relatively flat in 2023, and maybe even fall in the most affordability-challenged markets. Mortgage rates have seen some recent downward progress and may continue if the Federal Reserve eases its interest rate hikes as many predict. Those are both very good news for stabilizing and possibly improving housing affordability.
Expect a surge in first-time landlords in 2023.
The record-low mortgage rates in recent years prior to 2022 caused many people to purchase 2nd homes. As rent rates continue to rise, the temptation to rent those homes for a nice profit over the mortgage payment grows as well. Couple that with the low expectations for the stock market in 2023 and possible home value decreases, and you have a perfect scenario for owners of 2nd homes to rent them out.
New construction will likely be more rentals.
Post pandemic, many single family home builders upped the number of units they began building. During that process the home prices have begun to fall leading builders to offer lower prices and other incentives and drastically reduce the new home starts. However, multi-family builders predicting continued high demand for rentals have not pulled back. We may even see more construction of build-for-rent homes where tenants may need to utilize for much longer due to the affordability crisis.
