The housing market will continue to move in the direction of buyers following the spring home buying season, according to the Knock Buyer-Seller Market Index 2023 forecast.
The Index, which analyzes key housing market metrics to measure the degree to which the nation’s 100 largest markets favor home buyers or sellers, indicated 14 markets favored buyers based on November 2022 data, 46 markets favored sellers, and 40 markets remained neutral. However, by year-end 2023, 36 markets are forecast to be buyer's markets, 23 markets are projected to remain neutral, and 41 markets will remain seller's markets.
According to the index, the top five buyer's markets for 2023 will all be located west of the Mississippi River: Phoenix; Colorado Springs, Colorado; Las Vegas; Dallas; and Denver.
According to Knock, Phoenix—projected to be the top market for buyers in 2023—remains an affordable alternative to high-cost West Coast markets, is home to five Fortune 500 company headquarters, and offers residents ample access to recreational activities. Knock projects the median home price in Las Vegas will fall below the national median level in 2023, and it forecasts that buyers will have more choices as the market’s months’ supply increases throughout 2023. The large inventory of homes on the market in Dallas and the strong job market in the metro will benefit buyers in 2023, according to Knock. Colorado Springs will remain appealing to buyers this year as an affordable alternative to nearby expensive metros in the West. Buyers in Denver are forecast to benefit from a large shift in housing demand, with the time spent on the market for homes increasing to 36 days by November 2023, according to Knock.
“With home prices and interest rates cutting into purchasing power, the relocation hot spots where prices grew quickly during the pandemic will increasingly favor buyers in 2023, while more midsized markets offering good job opportunities and affordable housing will be the top-performing real estate markets in 2023,” says Knock co-founder and CEO Sean Black.
According to Knock, the top-performing buyer's markets in 2022 were all popular pandemic relocation spots and experienced home price appreciation at a faster pace than the national average. Prices in the top five buyer's markets last year rose on average by 44.6% between January 2020 and November 2022, compared with an average of 34.9% for the rest of the nation during the same period.
While the top buyer's markets of 2022 are projected to experience home price moderation or declines from pandemic peaks this year, prices are still forecast to end 2023 38% above pre-pandemic levels, 3% higher than the national average change, according to Knock. Additionally, the top buyer's markets are also projected to experience significant inventory growth in 2023, with an average growth of 54.4% across the top markets.
According to Knock’s index, the 100 analyzed housing markets will “teeter in neutral territory” over the first months of 2023, “gain some momentum toward sellers in the spring,” and “move firmly into buyer's market territory by summer.”
As the housing market cools, Knock projects the 100 analyzed markets will experience home sales decline by an average of 16.3% on a year-over-year basis in 2023. The median sales price is forecast to peak in June at $386,000 before decreasing to $374,000 by November. Knock projects the median days on the market will rise throughout 2023, reaching an average of 30 days by November.
The top seller's markets in 2023 will be concentrated on the East Coast in midsized markets with populations under 1 million, according to Knock. Fayetteville, North Carolina; Harrisburg, Pennsylvania; Syracuse, New York; Hartford, Connecticut; and York, Pennsylvania, top the list of Knock’s best markets for sellers in 2023.
Knock’s Buyer-Seller Market Index comprises six measures: the ratio of average sale to asking price, the number of homes sold, the number of active listings, median days on the market, median sale price, and the rolling supply of homes in a given month. Index values ranger from -4 to 4, with lower values indicating a relatively favorable market for buyers and higher values indicating a relatively favorable market for sellers.