Norada Real Estate Investments

About Marco Santarelli

Marco Santarelli is an investor, author, Inc. 5000 entrepreneur, and the founder of Norada Real Estate Investments – a nationwide provider of turnkey cash-flow investment property.  His mission is to help 1 million people create wealth and passive income and put them on the path to financial freedom with real estate.  He’s also the host of the top-rated podcast – Passive Real Estate Investing.

Chicago Real Estate Market: Prices, Trends, Forecast 2022-2023

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We'll discuss the latest trends and projections for the Chicago housing market. Is the Chicago-area housing market vulnerable to a recession? Home prices are expected to decline slightly over the next twelve months but the forecast for the fourth quarter of 2022 is still positive (+4.5%). The forecasts also indicate positive annual growth for the state as a whole with no decline in home values.

The median home sale price in the Chicago Metro Area in October 2022 was $300,000, up 3.2 percent as compared to last year. In the nine-county Chicago Metro Area, 7,645 homes (single-family and condominiums) were sold last month, a 32.4 percent decrease from the 11,303 homes sold in October 2021.

The median price of a home in the city of Chicago in October 2022 was $320,000, an increase of 2.2 percent from $313,000 in October 2021. In Chicago, home sales (single-family and condominiums) in October 2022 totaled 1,709 homes sold, a 30.8 percent decrease from October 2021 sales of 2,469 homes.

<<<READ: Illinois Housing Market Forecast>>>

The annual home price growth in the United States is forecasted to be slower than in 2021, but still, be strong by historical standards. So, what are the projections for the state of Illinois in 2022? Well, according to the housing forecast published by the Illinois Association of Realtors and presented by the Regional Economics Applications Laboratory, Institute of Government and Public Affairs University of Illinois, in 2022, median prices are expected to grow continuously within a narrower and lower range than in 2021 (source).

In the last twelve months, median prices maintained positive annual growth in each month while sales experienced a more mixed trend. The median sale prices in both Illinois and the Chicago PMSA generally experienced a lower than-forecasted annual growth rate at the beginning and end of the year while the growth rate was higher than forecasted in midyear.

Actual sales in both Illinois and the Chicago PMSA experienced similar or higher annual growth rates than forecasted.  In 2022, median prices are expected to rise steadily in a lower and narrower range than in 2021. Year over year, these gains will range from 2.0% to 7.9% in Illinois and from 1.4% to 7.7% in the Chicago PMSA.

By December 2022, the median price of homes is forecasted to be $261,561 in Illinois and $306,134 in Chicago PMSA, respectively 7.9% and 7.6% higher on an annual basis. Sales are forecasted to experience overall negative gains in 2022 for both Illinois and the Chicago area. The annual growth in monthly sales is forecasted to range from -4.1% to 11.5% for Illinois, with negative gains for most months. The comparative range for the Chicago PMSA is from -11.0% to -5.0%, with negative gains for all months.

Chicago Housing Market Trends

Chicago Housing Market
Data by Illinois REALTORS®

Below is the latest report on the “Chicago Housing Market.” The source of this report is the Illinois REALTORS® and the counties included are Cook, DeKalb, DuPage, Grundy, Kane, Kendall, Lake, McHenry, and Will. The report compares the Chicago metro and the city's housing metrics from October 2022 to October 2021.

In the nine-county Chicago Metro Area, 7,645 homes (single-family and condominium) were sold in October, a 32.4 percent decrease from the 11,303 homes sold last year. The median home sale price in the Chicago Metropolitan Area was $300,000, up 3.5 percent from $289,745 in October 2021.

  • Closed Sales were down -32.4% year-over-year.
  • The previous month's closed sales were 9,323.
  • The median sales price rose from $289,745 to $300,000, a growth of 3.5%.
  • The median sales price of single-family homes was $330,000, up 4.1%.
  • The median sales price of condos was $240,000, up 4.4%.
  • The inventory of available homes decreased by 16 percent year-over-year, from 22,974 to 19,299 units for sale.
  • The Days on the Market Until Sale remained unchanged at 26.
Illinois Housing Market Trends
Infographic Courtesy: ILLINOIS REALTORS®

Is Chicago a Buyers or Sellers Market?

The following Chicago housing market trends are based on single-family, condo, and townhome properties listed for sale on realtor.com. Land, multi-unit, and other property types are excluded. This data is provided as an informational resource only. Chicago is a balanced's market, which means that the supply and demand of homes are about the same.

In October 2022, the median list price of homes in Chicago, IL was $349.9K, trending up 1.7% year over year. It seems like the housing boom is losing steam in Chicago due to rising interest rates. The median price per square foot for listings was $245. The median price of a home sold was $320,000.

The sale-to-List Price Ratio was almost 98.36%, which shows that homes sold 1.64% below the asking price on average. Chicago has 78 distinct neighborhoods. As the most expensive neighborhood, Lincoln Park boasts a median listing price of $675,000. A median listing price of $165K in Roseland makes it the most affordable neighborhood in the city.

City of Chicago Housing Trends for October 2022

According to Illinois REALTORS®, sales of single-family and condominium homes in the city of Chicago reached 1,709 units in Oct 2022, representing a 30.8 percent decrease over the previous Oct's total of 2,469 units. Home Prices are rising moderately in Chicago. The median price of a home in Chicago in Oct 2022 was $320,000, representing a 2.2 percent increase over the previous year's median price.

  • Closed sales in the City of Chicago decreased by 30.8 percent year on year.
  • The median sales price was $320,000, representing a 2.2 percent increase over the previous year.
  • The median sales price of single-family homes was $306,000, up 5.6%.
  • The median sales price of condos was $330,000, down 4.3%.
  • The inventory of available homes decreased by 18.7 percent.
  • The Days on the Market Until Sale decreased from 35 to 34 days.

Chicago Rent Prices 2022

The Zumper Chicago Metro Area Report analyzed active listings last month across the metro cities to show the most and least expensive cities and cities with the fastest growing rents. The Illinois one bedroom median rent was $1,289 last month. Chicago was the most expensive city with one bedroom priced at $1,830 while Gary was the most affordable city with rent at $740.

The Fastest Growing Cities For Rents in Chicago Metro Area (Y/Y%)

  • Chicago had the fastest growing rent, up 22% since this time last year.
  • Aurora saw rent climb 21.6%, making it the second fastest growing.
  • Oak Park was third with rent increasing 17.4%.

The Fastest Growing Cities For Rents in Chicago Metro Area (M/M%)

  • Aurora had the largest monthly rental growth rate, up 6%.
  • Oak Park & Palatine were tied for second with rents both climbing 5.9%.
  • Naperville was third with rent rising 5.1% last month.
Chicago Rental Market Trends
Source: Zumper

Chicago Real Estate Market Forecast 2022 and 2023

The Chicago housing market is shaping up to continue the trend of the last few years as one of the hottest markets in the United States. It is also one of the hottest real estate markets for investing in rental properties. What are the Chicago real estate market predictions for 2023? NeighborhoodScout.com's data shows that over the last ten years the Chicago annual appreciation rate has been averaging 5.37%.

The cumulative appreciation rate over the ten years has been 68.79%. Over the last twelve months, from 2021 Q2 – 2022 Q2, Chicago's appreciation rate has been 9.59%, which is lower than appreciation rates in most communities in America. Between 2022 Q1 – 2022 Q2, the house appreciation rates in Chicago were at 2.59%, which equates to an annual appreciation rate of 10.78%.

Let us look at the price trends recorded by Zillow over the past year. Since the last October, Chicago metro home values have increased by around 9.6% (Current Zillow Home Value Index = $311,225). Here is Zillow's housing forecast for Chicago MSA.

  • Chicago-Naperville-Elgin Metro home values have gone up 9.6% over the past year.
  • Zillow predicts that home values in Chicago MSA may drop by 1.4% between Oct 2022 to Oct 2023.
Chicago Real Estate Market Forecast
Source: Zillow

The sales forecast presented by UIC Stuart Handler Department of Real Estate to Illinois Realtors for November, December, and January suggests a decrease on a yearly and monthly basis for both Illinois and the Chicago PMSA.

  • Annually for Illinois, the three-month average forecasts point to a decrease in the range of -19.2% to -26.0%.
  • The comparative figures for the Chicago PMSA are a decrease in the range of -28.3% to -38.3%.
  • On a monthly basis, the three-month average sales are forecast to decrease in the range of -7.4% to -10.1% for Illinois and decrease in the range of -11.0% to -14.9% for the Chicago PMSA.

The median price forecast indicates positive annual growth for November, December, and January in both Illinois and the Chicago PMSA.

  • In Illinois, the median price is forecast to change by 0.1% in November, 1.6% in December, and 2.1% in January 2023.
  • For the Chicago PMSA, the comparable figures are 3.4% in November, 3.2% in December, and 3.6% in January 2023.

These numbers can be positive or negative depending on which side of the fence you are — Buyer or Seller?  In a balanced real estate market, it would take about five to six months for the supply to dwindle to zero. In terms of months of supply, Chicago can become a buyer’s real estate market if the supply increases to more than five months of inventory.

And that’s quite unlikely to happen. This housing market is skewed to sellers due to a big imbalance in supply and demand. Real estate market forecasts given in this article are just educated guesses and should not be considered financial advice. Many variables such as mortgage rate trends in 2023 could potentially impact the value of a home in Chicago (or any other market) and some of these variables are impossible to predict in advance. Real estate prices are deeply cyclical and much of it is dependent on factors you can’t control.

Chicago Real Estate Investment Overview

Is Chicago a Good Place Real Estate Investment? You need to drill deeper into local trends if you want to know what the market holds for the year ahead. We have already discussed the Chicago housing market forecast for answers on why to put resources into this market. Chicago is a strong renter market. Over 50% of the population rents in this city. Chicago is the 6th most walkable city in the nation. Chicago metro area has a population of approximately 8,865,000, a 0.03% increase from 2019. It is the most populous city in the U.S. state of Illinois, and the third-most-populous city in the United States.

Chicago has a mixture of owner-occupied and renter-occupied housing units. According to Neighborhoodscout.com, a real estate data provider, one and two-bedroom large apartment complexes are the most common housing units in Chicago. Other types of housing that are prevalent in Chicago include single-family detached homes, duplexes, rowhouses, and homes converted to apartments. Single-family detached homes account for roughly 25.98% of Chicago's housing units.

Chicago has been one of the hottest real estate markets in the country for many years. In the past ten years, the annual Chicago real estate appreciation rate has amounted to 4.88%, according to NeighborhoodScout.com. Chicago metropolitan area or Chicagoland is an area that includes the city of Chicago and its suburbs. So if you buy a Chicago real estate investment to use as a rental property, you could benefit in this market.

Although the recent population loss has been a concern for real estate investors, Chicago is still the most populous city in the Midwestern United States. About three million people live in Chicago and another ten million in the surrounding metro area. Chicago MSA is the third-largest metropolitan area in the U.S. It has a large population, a diverse economy, and a stable market. It is home to 32 Fortune 500 companies, with very high private sector employment.

Chicago's 58 million domestic and international visitors in 2018 made it the second most visited city in the nation, as compared with New York City's 65 million visitors in 2018. These are just some of the highlights that make Chicago a great place to live and invest in real estate. The list can go on and on. Chicago is also a major world financial center, having the second-largest central business district in the United States.

Top Reasons To Invest In The Chicago Real Estate Market?
  • Chicago was ranked first in the 2018 Time Out City Life Index (Time Out Group).
  • On the UBS list of the world's richest cities.
  • Often rated as having the most balanced economy in the United States.
  • Ranked seventh in the entire world in the 2017 Global Cities Index.
  • Home to 12 Fortune Global 500 companies and 17 Financial Times 500 companies.
  • Third-largest gross metropolitan product in the United States.
  • Strong Rental Market – Over 50% of the population rents.
  • Fully renovated single-family homes with great ROI.
  • Solid blue-collar areas with high rents.
  • High private sector employment.
  • Major transportation hub in the United States.
  • It has the largest number of federal highways & railroads in the nation.
  • Strong economic and job growth.
  • The tourism and hospitality industries have added thousands of jobs, generating billions of dollars in direct spending by visitors.
  • An international hub for finance, culture, commerce, industry, education, technology, telecommunications, and transportation.

Chicago Real Estate For Sale

Let’s take a look at the number of positive things going on in the Chicago real estate market which can help investors who are keen to buy an investment property in this city.

Chicago Rental Market Is Very Strong

What makes Chicago such a hot market for rental real estate? Over 50% of the population rents. The large population of renters means that rental income for properties is far better than you’d see if you invested elsewhere in the country. Luxury Rentals Are a Profitable Niche in Chicago. Many people know that there are solid blue-collar areas with high rents, but it isn’t just the working class that rents townhomes and condos. According to Crain’s, the number of upper-income households in Cook County that rent has nearly doubled over the past ten years.

The Institute for Housing Studies at DePaul University found that the number of rental households among those earning at least $132,000 a year nearly doubled, while those earning $80,000 to $132,000 saw the number of renting households increase by just over 50%. Chicago has a booming supply of high-end rentals, especially luxury apartments downtown. Home prices in the Chicago area are low compared to regional income.

Yet economic uncertainty and shifts in the employment market are leaving many who want to live in a single-family home unable to afford to buy one. This is causing many to rent single-family homes instead. Crain’s last year's April report found that the hottest areas for detached single-family homes were in Calumet Heights, Gage Park, and West Ridge. However, home prices are low compared to rents almost everywhere in the Chicago metropolitan area.

The workforce in Chicago is shifting from high-paying but slow-to-no growth manufacturing jobs to lower-paying and less stable retail, business services, and healthcare jobs. This is causing many who would have been able to afford a middle-class home to rent apartments instead. Crain’s last year's April report stated that the hottest Chicago markets for condos and townhomes were Grand Boulevard, Kenwood, and Lincoln Square.

Chicago Rental Prices Trends

As of November 27, 2022, the average rent for a 1-bedroom apartment in Chicago, IL is currently $1,800. This is an 18% increase compared to the previous year. Over the past month, the average rent for a studio apartment in Chicago increased by 4% to $1,350. The average rent for a 1-bedroom apartment decreased by -3% to $1,800, and the average rent for a 2-bedroom apartment remained flat.

  • Two-bedroom apartment rents average $2,200 (a 23% increase from last year).
  • Three-bedroom apartment rents average $2,595 (a 30% increase from last year).
  • Four-bedroom apartment rents average $2,900 (a 9% increase from last year).

53% of the households in Chicago, IL are renter-occupied while 48% are owner-occupied. The most expensive neighborhoods in Chicago are River West, Streeterville, and River North.

Chicago Real Estate Prices Are Reasonable

Because households at all income levels choose to rent instead of buy, they are reducing demand for houses for sale, slowing the rise in home prices. This also explains why housing prices haven’t skyrocketed despite the limited supply. Chicago’s inventory of homes for sale is very tight. Both attached and detached single-family home inventory has been declining since 2012.

At the end of 2017, potential buyers in Chicago had about five thousand fewer properties on the market to select from than if they’d been shopping at the end of 2016. This contributed to homes closing five days faster than the year before. If you start shopping for rental real estate, you could find something and rent it out.

Chicago’s real estate market has been one of the slowest to recover since the housing bubble burst at the start of the Great Recession. Home prices were 19% below their pre-crash levels in 2017, and they aren’t expected to hit peak values yet. This means that the Chicago real estate market is likely going to continue its slow, upward market trend.

Chicago Rehabbed Homes Are Readily Available

Chicago is seeing a surge in fully renovated single-family homes. The Chicago Association of Realtors’ data found that most of the strong suburbs are on the south side of Chicago, and this is where many homes are being rehabbed and sold. Calumet Heights is in this category; a quarter of properties sold were either rehabbed or candidates for rehabilitation. These properties are ideal for investors who want to buy a property to rent out.

Chicago's Job Growth Keeps People Coming

Chicago is not only home to several corporate headquarters; there has been a recent trend of companies moving their headquarters to Chicago as well. The steady increase in jobs has contributed to a slow but steady increase in rents. Many businesses are attracted by Chicago’s labor pool, the largest in the nation. As these businesses move into the area and attract relocating professionals, many are forced to rent because they can’t find houses fast enough in the areas they want to live in or simply choose to rent upon relocation in one of the luxury apartments downtown.

The Chicago metropolitan area is made up of four metropolitan divisions—separately identifiable employment centers within the larger metropolitan area. The current economic uncertainty and inflation keep many who can afford to buy a home renting. It also keeps the rental market itself strong, since many want to remain free to follow their jobs as required.

Where to Invest in Chicago Real Estate Market?

In Chicago, arts and culture abound at top institutions like The Art Institute. Although the winters can test anyone's resolve, Chicago summers are among the best in the world, with things to do every weekend, outdoor festivals, and Lake Michigan at your doorstep. Chicago has an incredibly deep pool of potential renters at all levels of the market. Several factors guarantee that they’re not going to turn into new home buyers any time soon.

Chicago real estate market is a prime destination for investors who would like to buy where the ROI is going to be high and likely to improve over time. It won't be long before Chicago makes you feel right at home. Good cash flow from Chicago rental property means the investment is, needless to say, profitable. A bad cash flow, on the other hand, means you won’t have money on hand to repay your debt. Therefore, finding the best investment property in Chicago in a growing neighborhood would be key to your success.

When looking for the best real estate investments in Chicago, you should focus on neighborhoods with relatively high population density and employment growth. Both of them translate into high demand for housing. If the housing supply meets housing demand, real estate investors should not miss the opportunity since entry prices of homes remain affordable.

The neighborhoods should be close to basic amenities, public services, schools, and shopping malls. A cheaper neighborhood in Chicago might not be the best place to live in. A cheaper neighborhood should be determined by these factors – Overall Cost Of Living, Rent To Income Ratio, and Median Home Value To Income Ratio. It depends on how much you are looking to spend and if you are wanting smaller investment properties or larger deals in Class A neighborhoods.

There are 76 neighborhoods in Chicago. Lincoln Park has a median listing price of $649.9K, making it the most expensive neighborhood. Auburn Gresham is the most affordable neighborhood, with a median listing price of $189.9K (on Realtor.com).

Some of the popular neighborhoods in Chicago, Illinois are Near North Side, Lakeview, West Town, Andersonville, South Loop, Bronzeville, Norridge, Logan Square, Old Town, Wicker Park, Bridgeport, Irving Park, Norwood Park, Bucktown, West Loop, and Hyde Park.

Chicago's North Side is the city's most densely populated residential section. For $200,000 price, you can purchase properties with one or two bedrooms and one or two baths. Chicago's West Side is home to the University of Illinois at Chicago. With a $200,000 budget, you can buy condos that typically offer one to two bedrooms and one or two baths.

You can buy Chicago investment properties in the Pilsen neighborhood. Pilsen is a great area for those who want a diverse portfolio of investment properties without having to run all over the city. Pilsen is located on Chicago’s Lower West Side. It features a mix of condos, apartment buildings, and single-family homes. The area is suburban enough to attract families. Its schools are a C+, which is close to the Chicago average. Parks and other amenities explain why Niche.com gave the area a B- for families.

CHECK OUT → Some Good Neighborhoods in Chicago Where You Can Buy Investment Properties.

Humboldt Park is another good neighborhood to buy investment properties in Chicago. The home prices in Humboldt Park peaked in 2006 but fell dramatically during the Great Recession. Home prices here hit a record low in 2012. Humboldt’s housing prices are on the rise again, though they remain below their 2006 peak. The average home price is around 300,000 dollars, while rents are around 1700 dollars a month. The area is notable for the number of foreclosed and distressed properties available to investors, and this helps pull the average rental rate down.

Highest Appreciating Chicago Neighborhoods Since 2000 (By Neighborhoodscout.com)

  1. W Wabansia Ave / N Whipple St
  2. W Cortland St / N Mozart St
  3. W Wabansia Ave / N Francisco Ave
  4. Humboldt Park Northeast
  5. Logan Square East
  6. Palmer Square East
  7. Palmer Square
  8. Logan Square West
  9. Logan Square Northwest
  10. W Cortland St / N Albany Ave

Illinois is in the midwestern United States. Surrounding states are Wisconsin to the north, Iowa and Missouri to the west, Kentucky to the south, and Indiana to the east. Illinois also borders Michigan, but only via a northeastern water boundary in Lake Michigan.

Apart from the Chicago real estate market, you can also invest in the housing market of Indianapolis. The median sales price in Indiana saw a year-over-year increase of 9.7 percent to $170,000. Not surprising is the fact that Indianapolis house prices are also on the rise in the year 2020. Demand is still outpacing the supply, the new construction is slow, and competition for quality homes remains tough.

Like most cities nationwide, Indianapolis has experienced real estate appreciation over the last couple of years. The real estate appreciation rate in Indianapolis in the last quarter was around 0.81%, which amounts to an annual rate of 3.3%. However, it is quite unclear whether the rate of appreciation would remain steady or not due to the short-term effects of the ongoing pandemic.

Economic uncertainty might hold back sales volume for a short period in 2020. Most housing analysts expect Indianapolis house prices to remain flat or drop by a small fraction for the remainder of the year 2020.

If you head towards the west of Illinois, you should consider investing in Kansas City, MO. There is probably no hotter market right now than Kansas City, Missouri. A large, prosperous, self-sufficient, and culturally rich city, it is no wonder why it has seen a continuous rise in its employment, directly impacting the local real estate.

The Kansas City real estate market is very hot and in many ways the envy of housing pundits on both coasts. It is the largest city in the U.S. state of Missouri, famous for its distinct barbeque cuisine and jazz heritage. Also nicknamed the City of Fountains, Kansas City is now emerging as a growing market for real estate investments.   High demand and low inventory are driving up both home prices and the speed of home sales in the Kansas City Housing Market.

Buying or selling real estate, for a majority of investors, is one of the most important decisions they will make. Choosing a real estate professional/counselor continues to be a vital part of this process. They are well-informed about critical factors that affect your specific market areas, such as changes in market conditions, market forecasts, consumer attitudes, best locations, timing, and interest rates.

NORADA REAL ESTATE INVESTMENTS has extensive experience investing in turnkey real estate and cash-flow properties. We strive to set the standard for our industry and inspire others by raising the bar on providing exceptional real estate investment opportunities in many other growth markets in the United States. We can help you succeed by minimizing risk and maximizing the profitability of your investment property in Chicago.

Consult with one of the investment counselors who can help build you a custom portfolio of Chicago turnkey properties. These are “Cash-Flow Rental Properties” located in some of the best neighborhoods of Chicago.

Not just limited to Chicago or Illinois but you can also invest in some of the best real estate markets in the United States. All you have to do is fill up this form and schedule a consultation at your convenience. We’re standing by to help you take the guesswork out of real estate investing. By researching and structuring complete Chicago turnkey real estate investments, we help you succeed by minimizing risk and maximizing profitability.

Let us know which real estate markets in the United States you consider best for real estate investing! 

Remember, caveat emptor still applies when buying a property anywhere. Some of the information contained in this article was pulled from third-party sites mentioned under references. Although the information is believed to be reliable, Norada Real Estate Investments makes no representations, warranties, or guarantees, either express or implied, as to whether the information presented is accurate, reliable, or current. All information presented should be independently verified through the references given below. As a general policy, Norada Real Estate Investments makes no claims or assertions about the future housing market conditions across the US. 

REFERENCES

Market Prices, Trends & Forecasts
https://www.illinoisrealtors.org/marketstats/
https://www.zillow.com/chicago-il/home-values
https://www.illinoisrealtors.org/wp-content/uploads/2021/11/Annual_forecast_2022.pdf
https://www.neighborhoodscout.com/il/chicago/real-estate
https://www.realtor.com/realestateandhomes-search/Chicago_IL/overview
https://www.forbes.com/sites/ingowinzer/2016/05/25/should-you-invest-in-chicago-real-estate/#64c07e3c2ad1
http://www.chicagobusiness.com/realestate/20171221/CRED0701/171229976/2018-real-estate-forecast-foggy-lukewarm

Housing Price Forecasts Illinois and Chicago PMSA, August 2020
https://www.illinoisrealtors.org/wp-content/uploads/2020/08/Forecasts_August_2020.pdf

Upper household rental rates
http://www.chicagobusiness.com/realestate/20180411/CRED0701/180419970/more-upper-income-households-renting-in-chicago-area

Housing inventory numbers
http://www.chicagonow.com/getting-real/2018/04/chicago-real-estate-market-worst-home-sales-decline-in-20-months/

2016 to 2017 housing inventory decline data
http://www.chicagotribune.com/business/ct-biz-chicago-home-sales-supply-20180124-story.html

Labor pool stats
https://www.homeunion.com/real-estate-investment-locations/chicago-illinois/

Trump’s Tax Plan Makes Many Reluctant to Buy
http://www.chicagobusiness.com/realestate/20171221/CRED0701/171229976/2018-real-estate-forecast-foggy-lukewarm

Foreclosures
https://www.realtytrac.com/statsandtrends/il/cook-county/chicago/

Crain’s April real estate report
http://www.chicagobusiness.com/realestate/20180419/CRED0701/180419837/heres-where-the-real-estate-market-has-been-hottest-in-2018

Housing Market Forecast 2024 & 2025: Predictions for Next 5 Years

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Housing Market Predictions for Next 5 Years

Here's what some of the experts predict will happen in the housing market in the next five years. According to Zillow, the current typical value of homes in the United States is $357,589. United States home values have gone up 13.5% over the last twelve months and are predicted to rise by 1.2% by October 2023. Home values remained nearly flat from September to October (+0.1%), as buyers and sellers potentially settled on a new market equilibrium.

The housing market forecast remained generally unchanged in October, as the housing market continued to slow amid rising mortgage rates and broader economic uncertainty. Zillow projects home values remain flat through the end of the year, and increase by 1.2% in the twelve months ending October 2023. Many sellers are waiting for the market to cool down, at least evidenced by the flow of new for-sale listings hitting the market, now down 23.9% from last year’s flow.

Fewer homes are being listed for sale, which may force more listings to reduce their prices to match decreasing housing demand. These long-term housing predictions may change as the housing market rebalances and faces headwinds. Buyers and sellers face rising and fluctuating mortgage rates. Demand is capped and prices are lowered by affordability barriers at record highs. New listings are lower than a year earlier, supporting prices but limiting sales. As year-end approaches, the housing market faces considerable downside risks.

  • Zillow expects home value growth to continue to slow over the coming months.
  • Zillow’s home sales forecast now calls for 5.2 million existing home sales in the calendar year 2022.
  • This forecast is up slightly from last month’s expectations for 5.1 million sales.
  • The forecast is up following a better-than-expected reading on home sales in August.
  • However, the housing market predictions for 2023 and the long term are bleaker.
  • The recent reductions in mortgage applications and pending house sales indicate significant negative risks to home sales volume through 2023.
  • Las Vegas (-2.3%) and Austin (-2.2%) saw the sharpest home value declines in October.

Also Read: The Latest U.S. Housing Market Report 

National home values were still rising by double digits over the previous year, but at a much slower rate than in the spring. Affordability constraints have triggered a power rebalancing in the housing market. Home sales are predicted to stay lower than in recent years – at least for the near future predictions. Year-over-year home price growth slowed in the third quarter as mortgage rates rose sharply, resulting in worsening housing affordability.

With mortgage rates still rising (at 7.08 percent as of this writing), resulting in rapidly declining home purchase demand, home prices are expected to fall further in the near term. Some housing markets are on the verge of a drop in home values within the next 12 months. Home prices are expected to dip over the next 12 to 18 months before stabilizing and then recovering, according to experts. Overall the predictions for the next five years are that home price appreciation is likely to range between 15 and 25%, but they will be uneven.

A drop in demand due to rising mortgage rates causes homes to stay on the market longer and slows price increases. Many would-be sellers are tied to low rates, making the switch to a more expensive mortgage difficult, and reducing inventories. This rebalancing gives wealthy purchasers more time to make decisions, less competition, and greater negotiation leverage than in recent years.

The forecast for 5.2 million existing home sales in 2022, also reflects recent market changes and continued weakness in leading indicators of the metric. Homebuyers continued to be deterred by mortgage affordability problems, resulting in less competition and a larger supply of available houses. Since last year, the housing market has cooled dramatically, and homes are now staying on the market for much longer, whether they sell or not.

Days on Zillow – a measure of the median amount of time a for-sale listing has been on the market – was 54 days as of the week of October 16, up from the series' lowest-ever recorded figure of just 19 days in early April and 38 days in the same week in 2021. At this rate, Days on Zillow will likely reach 68 by the end of the year, ten days higher than it was at the end of 2021.

However, this expected level would still be significantly below pre-pandemic time on the market, demonstrating that some market competition exists, even as purchasers drawback in the face of affordability issues, owing in part to a slow influx of new for-sale listings. The pace of buying has slowed as well. The share of inventory that has been on the market for at least 60 days rose to 46% in mid-October.

As rates, and thus mortgage payments, stay high, many potential buyers are being priced out of the market, and affordability will likely not be on their side any time soon.  Sellers who list their home today could expect it to be on the market until Christmas, which is about two weeks later than what would have been predicted last year. While this may appear to be a long predicted wait in comparison to last year's inferno-hot circumstances, it's crucial to note that this time on the market is still far below pre-pandemic standards.

Housing Market Forecast 2024, 2025, 2026

There is an abundance of speculation regarding the forecast of the housing market in 2023. However, what about the real estate forecasts for 2023, 2025, and so on? Although, it is quite difficult to forecast the housing market for the next five years here is an insight into what most experts predict can happen.

Mortgage rates are at their highest point in 20 years, which is having a chilling effect on the housing market and driving down prices. But as supply remains constrained, housing prices in many U.S. markets have not yet begun to level off. Some experts have predicted the future of the housing market over the next five years. Only an oversupply can cause a crash.

The housing shortfall will last another year, with supply eventually catching up with demand by five years. The seller's market will persist as long as home inventory stays low. By five years, it is predicted to become a balanced housing market in which neither buyer nor seller has a monopoly. Instead, negotiation power between parties will be more equal and will vary depending on the circumstances.

Chief economist for the National Association of Realtors Lawrence Yun believes we are likely to see total price growth across the country of between 15% – 25% over the next five years. This forecast is likely to manifest as a decline in the coming year, a plateau in 2024, and then a period of relatively robust growth.

According to Greg McBride, the chief financial analyst at Bankrate, over the next five years, the US housing market is predicted to generate an average annual return in the mid to low single digits. In the long term, we are aware that real estate provides consistent returns above the rate of inflation. The longer the time frame, the more certain we can be about the general direction of travel, which has historically been upward in the real estate market.

According to Goldman Sachs, home prices in the United States will fall 5 to 10% over the next year. According to the same Goldman Sachs research, the housing market will bottom out in late 2023. Prices are projected to level off and remain relatively stable until mid-2024, so a turnaround is not anticipated to occur quickly.

Strong household finances and a relative lack of available homes in the United States could cushion a slowdown in the housing market. The economists believe it is unlikely that there will be a large wave of forced sales in the United States because a recession would likely be mild, the housing market is tight, mortgage quality is high, and the majority of mortgages have a fixed interest rate.

30-year fixed rate mortgage will remain around seven percent for the rest of 2022 and most of 2023. Assuming no major shocks occur, we should see rates of 5.5–6% within the next two years. Despite the fact that the residential real estate market has been exhibiting bubble-like characteristics, most experts do not anticipate a housing market crash. However, housing slowdowns brought on by rising mortgage rates have a tendency to weigh on GDP by reducing residential investment and weakening consumption.

The Zillow home price expectations survey found that the housing market is likely to become a buyer's market by 2023. The panel also predicts rent growth to outpace inflation during the next 12 months, as priced-out potential home buyers exert additional pressure on the rental market.

When will the housing market turn into a buyer's market, according to the panel?

  • The majority of panelists (56%) forecast a big shift in favor of buyers within the next year (sometime in 2023).
  • All 107 survey respondents project home price deceleration in 2023.
  • The share of panelists who believe their long-term outlook might be too optimistic jumped up to 67% from 56% last quarter.
  • Another 24% predicted that the housing market shift would come in 2024.
  • 13% expect the market to favor home buyers in 2025.
  • While just 8% expect that to happen by sometime in 2026 or sometime in the next five years.
  • Metros in the South and Midwest are the least likely to see price declines over the next year.
  • Vacation market areas are most likely to see price declines.
  • Rent growth and inflation should outpace stocks and home price appreciation over the next year.

Housing Markets Which Are Predicted to See a Decline in Home Prices

Prospective buyers are finally seeing a calmer market after the frantic rush for real estate over the last two years. Those who can still afford to own a home are quickly regaining lost leverage, but the transition to a more balanced market is still in its early stages. Home buyers priced out of the market face additional challenges, as high and rising rents may reduce their ability to save for a down payment even further.

According to survey respondents, the inexpensive Midwest markets that are least likely to see home price declines over the next 12 months are Columbus, Indianapolis, and Minneapolis, with only 36% reporting that home price declines from current levels were likely over the next 12 months. A majority of panelists expect fast-growing Southern markets like Atlanta, Nashville, and Charlotte to keep their hot streak going, with 44% predicting declines.

Markets expected to cool the fastest — with 77% of respondents expecting declines — are those that experienced the most growth during the pandemic, such as Boise, Austin, and Raleigh. The panel expects suburban and exurban areas to retain their heat over the next 12 months, while vacation and urban areas are expected to see price declines.

Rent growth should remain strong in the short term as high home prices keep many would-be first-time buyers in the rental market. Over the next 12 months, rents are expected to grow more than inflation, stocks, and home values. The panelists predict an average of 5.4% rent growth throughout 2023 – lower than the 8.6% annual growth they expect to see by the end of this year, but still higher than what Zillow data show to be just under 4% annual growth in the years prior to the pandemic.

Housing Market Predictions For Next 5 Years
Source: Zillow Home Price Expectations Survey

Real Estate Forecast Next 5 Years

According to some experts, the real estate forecast for the next 5 years shows that it will be a balanced market. Despite declining buyers' optimism that now is a good time to buy a house, the number of households interested in becoming homeowners remains high. This is especially true for younger homebuyers, who are likely first-time buyers and are struggling to save for a down payment as rents continue to reach record highs.

Simultaneously, seller expectations for larger down payments appear to be increasing, fueled by a still-competitive housing market and repeat buyers with relatively more available equity. The housing market is unlikely to shift from a seller's to a buyer's market anytime soon. Rising mortgage rates may take some of the steam out of the market, allowing inventory to rise slightly. It would also slow the rate of home price appreciation and reduce the possibility of a red-hot housing market resulting in an overheated market.

The supply of available homes is so low that even a significant drop in demand due to higher interest rates will not turn this into a buyer's real estate market, according to industry experts. Because there are not enough houses available to meet demand, home prices will continue to rise, but the combination of rising home prices and elevated mortgage rates means fewer people will be able to afford to buy.

There would still be continuous price appreciation, scarcity of inventory, and good demand. Some markets will experience lower appreciation rates than others, with the Sunbelt performing particularly well. Home prices do not appear to be decreasing, even in some of the country's most expensive markets, the tier-one markets.

CoreLogic expects to see a more balanced housing market, with year-over-year appreciation slowing to 3.9% by Sept 2023. The CoreLogic HPI Forecast indicates that home prices will increase on a month-over-month basis by 0.0% from September 2022 to October 2022 and on a year-over-year basis by 3.9% from September 2022 to September 2023.

Nationally, home prices increased 11.4% year over year in September 2022. On a month-over-month basis, home prices declined by 0.5% in September 2022 compared with August 2022. No states posted an annual decline in home prices. The states with the highest increases year over year were Florida (23%), South Carolina (17.6%), and Tennessee (17.4%). Large cities continued to experience price increases in September, with Miami on top at 25.6%, followed by Phoenix at 13.8%, and Las Vegas at 13.6% year over year.

The CoreLogic Market Risk Indicator (MRI), a monthly update of the overall health of housing markets across the country, predicts that Crestview-Fort Walton Beach-Destin, Florida is at a very high risk (70%-plus probability) of a decline in home prices over the next 12 months. Bremeton-Silverdale, Washington; Bellingham, Washington; Eugene, Oregon and Tacoma-Lakewood, Washington are also at very high risk for price declines in 2023.

A worldwide research firm, Capital Economics, predicts that the U.S. house price rise will likely slow in 2023, not this year. Capital Economics forecasted that the U.S. housing market will experience a 5 percent decrease in house price growth by mid-2023, followed by a “gradual rebound” to a 3 percent annual price rise by the end of 2024. It's a major analysis that arrives as the U.S. housing market begins to shift, with increasing mortgage rates pricing out or discouraging potential homeowners.

However, the firm does not forecast a spectacular “price decline” or a housing bubble bust similar to that of 2006, which precipitated the global financial crisis and the Great Recession. A 5 percent fall would definitely constitute a price decrease, but it would not cause home prices to spiral out of control. Remember that house prices have risen steadily for several years and surged significantly during the COVID-19 epidemic.

A price drop is noteworthy, but in the grand scheme of things, it is relatively little. Before the housing bubble of 2006, the U.S. housing market was primarily supported by exceedingly risky bank lending methods that produced a synthetic demand for housing, allowing those who could not afford to retain their homes to acquire them. According to analysts, today's market does not have the same circumstances.

According to analysts, today's market does not have the same circumstances. Capital Economic forecasts that mortgage rates would increase to 6.5 percent by 2023. According to Matthew Pointon, a senior property economist at Capital Economics, if home price growth follows our earlier predictions and declines to zero by mid-2023, mortgage payments would remain above their mid-2000s peak until mid-2023.

“That looks unsustainable and house prices are therefore set to fall. However, our previous point about a lack of forced sellers remains. Therefore, we expect lower home demand to lead to a relatively small fall in house prices, with annual growth dropping to -5% (year over year) by mid-2023,” Pointon added. “That would bring the mortgage payment burden back under the mid-2000s level by the start of 2023.”

Where Will Home Prices Rise the Most in 2024?

Fortune magazine reached out to Moody’s Analytics to get access to its latest proprietary housing analysis, and according to it, home prices will increase by zero percent in 2023—a dramatic decrease from the 19.7 percent price growth the housing market experienced in the last 12 months. However, analysts anticipate that price changes will vary significantly between regions of the United States.

In its analysis, the financial intelligence firm calculated how home prices are likely to shift in 414 regional housing markets between the fourth quarter of 2022 and the fourth quarter of 2024. Among the nation’s 414 largest housing markets, Moody’s Analytics forecast model predicts that 210 markets are on the verge of seeing home prices decline over the coming two years and 204 markets are poised to see home prices rise over the coming two years.

These cities are expected to report the biggest rise in home prices in 2024:

  1. Albany, Georgia (5.5 percent)
  2. Casper, Wyoming (4.52 percent)
  3. Columbus, Georgia (4.09 percent)
  4. Rocky Mount, North Carolina (3.97 percent)
  5. San Jose, California (3.83 percent)

Housing Market Forecast For Next 5 Years

References

  • https://www.zillow.com/research/daily-market-pulse-26666/
  • https://www.zillow.com/research/zillow-2022-hottest-markets-tampa-30413/
  • https://www.zillow.com/research/zhpe-q3-2022-buyers-market-31481/
  • https://www.zillow.com/research/zillow-home-value-and-sales-forecast-september-2022-31431/#
  • https://fortune.com/2022/08/15/falling-home-prices-to-hit-these-housing-markets-in-2023-and-2024/
  • https://www.capitaleconomics.com/publications/us-housing/us-housing-market-update/surge-in-mortgage-rates-makes-house-price-falls-likely/

Is it a Good Time to Buy a House or Should I Wait Until 2023-2024

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Is it a Good Time to Buy a House or Should I Wait?

Check out the latest housing trends for the previous month if you're unsure whether it is a good time to buy a house or if should you wait until 2023. It’s becoming harder to buy a house as prices are up year over year, and mortgage rates are soaring in 2022. At the same time, consumer prices on everything are also on the rise making it even more difficult to save money to buy a house next year.

In an effort to tamp down inflation, the Federal Reserve is raising interest rates. The Federal Reserve raised the target range for the federal funds rate by 75 bps to 3.75%-4% during its November 2022 meeting. It marks a sixth consecutive rate hike and the fourth straight three-quarter point increase, pushing borrowing costs to a new high since 2008. The decision came in line with market forecasts.

Policymakers also said that ongoing increases in the target range will be appropriate and that they will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments when deciding on the size of further increases.

The message could signal a smaller rate hike in December but during the press conference Chair Powell also noted the ultimate level of interest rates will be higher than previously expected. The Fed aims to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2%, which remains elevated around 40-year highs.

The cumulative effect of these sharp rate increases has cooled the housing market and caused the economy to slow, but has done little to lower inflation. Although Fed doesn't control mortgage rates it has a ripple effect on the mortgage industry. The recent rate hike will correspond with a rise in the prime rate and immediately send financing costs higher for many forms of consumer borrowing. On the flip side, higher interest rates also mean savers will earn more money on their deposits.

Don’t expect much relief in the form of lower rates in the coming months. Therefore, it certainly does not seem to be a good time to buy a house as rates have risen much more rapidly in 2022 than most industry analysts and economists had initially predicted. But when it comes to the possibility of significant savings, looking for the best mortgage offer provides an outstanding return on investment. Because it only takes a little more effort to browse around for the greatest mortgage rate, why not take advantage of it?

<<< Will the Housing Market Crash? >>>

Is it a Good Time to Buy a House or Should I Wait?

Fannie Mae released a nationwide housing survey for October 2022 that reveals only 16 percent of respondents believe it is a good time to buy a house in 2022.

“The HPSI reached an all-time survey low this month, in line with expectations that the housing market will continue to cool in the months ahead,” said Doug Duncan, Fannie Mae Senior Vice President, and Chief Economist. “Consumers are increasingly pessimistic about both homebuying and home-selling conditions. Amid persistently high home prices and unfavorable mortgage rates, the ‘bad time to buy' component increased to a new survey high this month, while the ‘good time to sell' component continued its downward trend.”

The Home Purchase Sentiment Index® (HPSI) decreased in October by 4.1 points to 56.7. The HPSI is down 18.8 points compared to the same time last year. Five of the six index components decreased month over month, including those associated with home buying and selling conditions, as persistently high home prices and unfavorable mortgage rates continue to fuel consumers' housing affordability concerns. Year over year, the full index is down 18.8 points.

Is it a Good Time to Buy a House?

The percentage of respondents who say it is a good time to buy a home decreased from 19% to 16%, while the percentage who say it is a bad time to buy increased from 75% to 80%. As a result, the net share of those who say it is a good time to buy decreased 8 percentage points month over month.

Is it a Good Time to Sell a House?

The percentage of respondents who say it is a good time to sell a home decreased from 59% to 51%, while the percentage who say it's a bad time to sell increased from 33% to 42%. As a result, the net share of those who say it is a good time to sell decreased 17 percentage points month over month.

Home Price & Mortgage Rate Expectations

The percentage of respondents who say home prices will go up in the next 12 months decreased from 32% to 30%, while the percentage who say home prices will go down increased from 35% to 37%. The share who think home prices will stay the same decreased from 28% to 26%. As a result, the net share of those who say home prices will go up decreased by 4 percentage points month over month.

The percentage of respondents who say mortgage rates will go down in the next 12 months decreased from 9% to 6%, while the percentage who expect mortgage rates to go up increased from 64% to 65%. The share who think mortgage rates will stay the same increased from 20% to 24%. As a result, the net share of those who say mortgage rates will go down over the next 12 months decreased 4 percentage points month over month.

Is It a Good Time to Buy a House or Wait Until 2023?
Source: Fannie Mae

The HPSI is constructed from answers to six of 100 national housing survey questions that solicit consumers’ evaluations of housing market conditions and address topics that are related to their home purchase decisions.

As of November 11, 2022, the average rate for the benchmark 30-year fixed mortgage is 6.91 percent (source: Bankrate). It is a decrease of 44 basis points from a week ago. Last month on the 11th, the average rate on a 30-year fixed mortgage was higher, at 7.20 percent. At the current average rate, you’ll pay a combined $659.27 in principal and interest for every $100,000 you borrow to buy a house. That’s down $29.70 from what it would have been last week.

The average 15-year fixed mortgage rate is 6.26 percent, down 25 basis points over the last week. At that rate, monthly payments on a 15-year fixed mortgage will be around $858 per $100,000 borrowed to buy a house. The larger monthly payment may be harder to fit into your budget than a 30-year mortgage payment, but it has huge advantages: You'll save several thousand dollars in interest and create equity much faster.

Let's compare the figures between now and eleven months ago when the buyers financed their houses with a mortgage. On a $300,000 loan, a 30-year, fixed-rate mortgage at December’s rate of 3.11% would have meant a monthly payment of about $1,282 (Principal & interest).

  • Loan amount = $300,000
  • Total interest paid = $161,923
  • Total cost of loan = $461,923

Today’s rate of 6.91% (30-year) brings the monthly payment to $1,977 (Principal & interest). That’s an extra $695 a month or $8,340 more a year and $250,765 more over the lifetime of the loan.

  • Loan amount = $300,000
  • Total interest paid = $412,688
  • Total cost of loan = $712,688

The Fannie Mae (FNMA/OTCQB) Economic and Strategic Research (ESR) Group revised downward its forecast for total home sales growth through 2023. They now project 2022 total year existing sales to decline 16.5 percent from 2021, followed by a further decline of 13.3 percent in 2023.

Their forecast for 2022 purchase volumes remains at $1.7 trillion, essentially unchanged from last month. The group now expects purchase volumes to fall about 1.5 percent in 2023 to just under $1.7 trillion, a downward revision of $17 billion from last month’s forecast, driven by downward revisions to their forecast for home sales.

The rise in rates is having the Fed’s desired effect on housing, as house price growth began to slow in June. They expect the slowdown in housing to continue through 2023 as affordability constraints mount for potential homebuyers, considering, too, that refinance activity has been significantly curtailed by the rise in mortgage rates. The group continues to anticipate a strong deceleration in home price growth going forward due to the lagged effects of higher mortgage rates and the slowing economy weighing on purchase demand.

If the economy suffers a downturn, mortgage interest rates will very probably fall to about 4% or even lower. If it does, this could be a good time to put off buying a home and save some money, especially for first-time buyers. Fannie Mae forecasted at the start of the year that the average 30-year fixed mortgage rate will rise from 3.1% to 3.3% by the end of 2022.

The Mortgage Bankers Association was somewhat more optimistic about mortgage rates, projecting that the average rate will increase to 4% by the end of 2022. It is now evident that neither Fannie Mae's nor the Mortgage Bankers Association's predictions were even somewhat accurate.

The 30-year fixed mortgage rate, which hovered at 3% throughout 2021, is treading close to 7 percent, a steep increase from last year. It has almost doubled since last year. Some experts are forecasting that the 30-year, fixed-mortgage rate will vary from 5% to 7% by the end of 2022. According to Nadia Evangelou, director of Forecasting for the National Association of Realtors, rates may exceed 6 percent. They did momentarily before the Federal Reserve's June announcement of a rate rise, but have subsequently backed off.

The most likely scenario is that the Fed will continue to raise the fed funds rate to combat inflation and will continue to reduce its position in the market for mortgage-backed securities. The Federal Reserve is expected to continue its course of raising short-term interest rates and anticipate an additional 75 basis point hike at its September meeting, though markets are partially pricing in the possibility of a full 100 basis point increase.

As a buyer, you do not want to hear this because higher interest rates make home loans less affordable. Rising rates make homes more expensive for buyers, and, for prospective borrowers, steeper monthly mortgage payments. It will thereby reduce the demand for home purchases. The latest housing stats for August already point to an increasing inventory amidst moderating demand.

The mortgage credit availability again decreased in August as investors reduced their offerings of ARM and non-QM loan programs. With the overall origination volume expected to shrink in 2022, some lenders continue to streamline their operations by dropping certain loan programs to simplify their offerings, according to the Mortgage Bankers Association.

The MCAI fell by 0.5 percent to 108.3 in August. A decline in the MCAI indicates that lending standards are tightening, while increases in the index are indicative of loosening credit. The index was benchmarked to 100 in March 2012. The Conventional MCAI decreased by 1.0 percent, while the Government MCAI remained essentially unchanged. Of the component indices of the Conventional MCAI, the Jumbo MCAI decreased by 0.7 percent, and the Conforming MCAI fell by 1.2 percent.

The competition for housing results in fewer options, higher prices, and faster sales. In a seller's housing market, there are more interested buyers than available homes and that makes it difficult time to buy a house, especially for first-time buyers. According to the NAR, the national median price for existing homes sold in October was $384,800, up 8.4% from the same month in 2021.

This is the longest streak of year-over-year growth ever recorded, spanning 127 months. However, it was the third month in a row that the median sales price retracted after reaching a record high of $413,800 in June, the usual seasonal trend of prices declining after peaking in the early summer.

Is it a Good Time to Buy a House for First-Time Buyers?

According to a recent Fannie Mae survey, many consumers are hesitant to buy a home in 2022. About 67% of survey respondents expect mortgage rates to increase, and there are rising concerns about job stability and escalating housing prices. Some homebuyers will find the current market conditions easier, while others will find them more difficult to buy a house. The current upward trend in home prices is likely to continue throughout the year, which could price out some prospective buyers.

However, it is anticipated that prices will rise at a slower rate than they did in 2021. The current lack of entry-level supply and the rapid increase in mortgage rates appear to be negatively impacting potential first-time homebuyers in particular, as evidenced by the larger proportion of younger respondents (aged 18 to 34 years old) who believe it is a bad time to buy a house. The advantage of the historically low mortgage rate environment of the previous year appears to have diminished for first-time homebuyers, and affordability is projected to become an even greater constraint for them in the future.

In September 2022, first-time buyers were responsible for 29% of sales, unchanged from August 2022 and slightly higher than 28% from September 2021. According to NAR, the annual share of first-time buyers was 34% in 2021. Individual investors or second-home buyers, who make up many cash sales, purchased 15% of homes in September, down from 16% in August, but up from 13% in September 2021.

In 2022, rising mortgage rates are piling onto record-breaking home prices, locking even more potential buyers out of the red-hot housing market. Historically, rising interest rates cause more prospective buyers to delay purchases, and the recent increase in financing terms has already resulted in a decline in mortgage applications.

The prices are not going down in 2022. The various forecasts from experts show that 2022 will remain a moderate sellers' housing market, and home values may still increase by single-digit percentage points. While affordability concerns continue to grow, low mortgage rates, increased savings, and a strengthening job market all contribute to making homeownership more accessible to a wide number of prospective buyers.

Realtor.com’s October 2022 data shows that the housing market is continuing to moderate.  Homebuyers continue to cite high home prices and high-interest rates as primary deterrents. The housing data shows that listing price growth continues to moderate but is still in the double digits. In October, the median listing price of homes grew by 13.3% year-over-year, slightly down from a growth rate of 13.9% in September, but it remains elevated at $425,000.

Moreover, more consumers are still expecting mortgage rates to continue to increase in the next 12 months. The share of respondents who believe rates will go up is almost 11 times higher than the share of respondents who believe rates will decrease. However, more buyers are expecting home prices to decline within the next 12 months which negatively impacts current plans to purchase in favor of deferring plans to the future.

In October, the inventory of homes that are actively listed for sale continued to grow and caught up to 2020 levels. However, this growth in active inventory was primarily due to the typical home spending more time on the market than last year, as seller sentiment remained muted and fewer homes were listed compared to the previous year. Listing price growth remained within the double-digits but continued to moderate.

  • The median list price grew by 13.3% in October and is slowly decelerating.
  • Time on the market was 51 days, 6 days more than last year but 20 days less than typical pre-pandemic levels.
  • The national inventory of active listings increased by 33.5% over last year.
  • The total inventory of unsold homes, including pending listings, increased by just 0.5% year-over-year due to a decline in pending inventory (-30.0%).
  • Sellers are less active than last year, as newly listed homes declined by 15.9% on a year-over-year basis.
  • Midwestern metros led the charge in active listing price growth, growing by 12.9% on average over the past year.
  • Western metros saw the greatest increase in the share of price reductions (+18.9 percentage points), followed by southern metros (+13.6 percentage points).

Housing Markets that saw the largest year-over-year increase in listing prices in October 2022:

  • Milwaukee, where the median listing price grew by +34.5%
  • Miami, where the median listing price grew by +25.1%
  • Kansas City, where the median listing price grew by +21.4%

Housing Markets that saw the greatest increase in their share of price reductions compared to last year:

  • Phoenix (+35.9 percentage points)
  • Austin (+31.2 percentage points)
  • Las Vegas (+24.4 percentage points)

Conclusion: The Best Time To Buy A Home Depends On You

Higher interest rates pose a challenge to existing homeowners looking to buy a new home at the same time as selling their current home. Existing homeowners may benefit from lower interest rates than those offered right now because they already have mortgages. Their monthly expenses could rise dramatically as a result of the purchase of a new property.

In other words, if you don't have a specific date in mind for when you want to buy a new property, you may be better off waiting till it does. Every potential buyer's best time to buy a property is different, and the greatest time to buy a house is not the same for everyone. It’s essential to consider your financial situation and understand how buying will impact your bottom line each month.

Sources:

  • https://www.realtor.com/research/october-2022-data/
  • https://www.bankrate.com/mortgages/todays-rates/
  • https://www.nar.realtor/research-and-statistics/housing-statistics/existing-home-sales
  • https://www.bankrate.com/mortgages/will-mortgage-rates-go-up-in-july-2022/
  • https://www.fanniemae.com/research-and-insights/surveys-indices/national-housing-survey
  • https://www.mba.org/news-and-research/research-and-economics/single-family-research/mortgage-credit-availability-index-x241340

NYC Housing Market: Prices, Trends & Forecast 2022-2023

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Here are the latest trends in the NYC real estate market as well as the statewide market. A prolonged scarcity of properties on the market across the Empire State, along with high prices and growing mortgage rates, continues to impede the New York housing market in 2022. In September 2022, closed sales fell 12.6 percent from 13,797 units in September 2021 to 12,057 homes last month, a drop of 12.6 percent, according to the New York State Association of REALTORS®

Pending sales declined 11.2 percent, from 12,686 last September to 11,269 in September 2022. New property listings also fell from 16,656 in September 2021 to 14,461 in September 2022. In year-over-year comparisons, this is a 13.2 percent reduction. The median sales price of homes in New York State jumped slightly in September, climbing 2.4 percent from $370,255 in September 2021 to $379,000 this month.

In September 2022, there will be only 39,370 available properties for sale. This marks a 14.4 percent decline from the 45,987 properties on the market in September 2021. A balanced market has a supply of six to six and a half months whereas New York has now 3.3 months. The housing affordability index decreased by 22% to 99 as compared to September of last year when it was 127. An index of 120 means the median household income is 120% of what is necessary to qualify for the median-priced home under prevailing interest rates. A higher number means greater affordability.

New York Real Estate Market Trends
Source: NYSAR.com

NYC Real Estate Market: Are Home Prices Dropping?

The New York resale housing market (statewide data) slowed down in the third quarter of 2022 as increasing inflation and soaring mortgage interest rates finally caught up with most market players. Many buyers looking to purchase a home have lost eligibility for a mortgage or are unable to purchase a home in the present economic situation, resulting in a precipitous decline in buyer interest. The Housing Affordability Index in New York dropped by 25.6% QoQ to 93. A higher number means greater affordability. As borrowing costs continue to rise, many buyers and sellers are choosing to wait while the market resets before making their next move.

  • Pending Sales in New York State were down 9.8 percent to 37,292.
  • They are considered a forward-looking indicator of home sales based on contract signings
  • Closed Sales decreased 10.9 percent to 38,743.
  • Inventory shrunk 14.4 percent to 39,370 units.
  • Prices gazed upward as the Median Sales Price was up 5 percent to $400,000.
  • The average sales price was up 6.2 percent to $530,937.
  • Sellers received, on average, 102.5% percent of their original list price at sale, a year-over-year improvement of 0.5 percent.
  • Days on the Market decreased by 10.9 percent to 41 days.
  • Months Supply of Inventory was down 8.3 percent to 3.3 months.

NYC Real Estate Market Trends in September 2022

Let us now look at the most recent trends in the New York City real estate market. New York has also been one of the hardest hit by the COVID-19 pandemic, with the highest job losses among the country's major metropolitan areas. It has been recovering from the economic effects of the pandemic. Inventory shortages and strong buyer demand continued to drive up home prices, with multiple offers on a limited number of homes being a common occurrence in the majority of market segments.

Data by Redfin shows that the median sales price of homes (all types) in New York was $800,000 last month, up 0.1% since last year.

  • In September 2022, New York home prices were up .0% compared to last year, selling for a median price of $800K.
  • On average, homes in New York sell after 54 days on the market compared to 58 days last year.
  • There were 3,185 homes sold in September this year, down from 3,815 last year.
  • The average sale price per square foot in New York is $617, down 4.8% since last year.

New York Migration & Relocation Trends

  • In Jul '22 – Sep '22, 27% of New York homebuyers searched to move out of New York, while 73% looked to stay within the metropolitan area.
  • Across the nation, 3% of homebuyers searched to move into New York from outside metros.
  • Philadelphia homebuyers searched to move into New York more than any other metro followed by Boston and Los Angeles.
  • 73% of New York homebuyers searched to stay within the New York metropolitan area.
  • Miami was the most popular destination among New York homebuyers followed by Philadelphia and Los Angeles.

The current market dynamics point to a slowdown in New York City housing market as well. According to StreetEasy data, the cancellation rate – listings under contract that have returned to the market without closing, as a percentage of all in-contract listings – increased to 1.7% by September, the highest level since the pandemic began.

The rise in cancellation rates in early 2020, which reached 2.1% by June of that year, was an outlier when the NYC real estate market ground to a stop due to the COVID-19 epidemic. When mortgage rates were mainly below 3% (a historically low level) in 2021, the cancellation rate averaged under 1%. The median number of days listings spend on the market is low, and the fraction of listings providing price decreases are similar to seasonal behavior before the pandemic, suggesting NYC is still in a seller's market.

Homebuyers shouldn't expect a buyer's market soon despite lowering prices. After a fierce spring shopping season as buyers raced to beat rising mortgage rates, properties stayed on the market longer, boosting inventory.  Any significant mortgage rate decline will attract purchasers who have been sidelined. Due to low mortgage rates during and before the epidemic, homeowners had little motivation to sell, reducing new listings. Rising seller reluctance will restrict home price declines.

Realtor.com's latest data shows that NYC was a buyer's real estate market in September as it had a total sales to total listings ratio below 0.12 which tends to favor buyers. In other words, the supply of homes is greater than the demand for homes.

  • In September 2022, the median list price of homes in New York, NY was $828K, trending down 5.4% year-over-year.
  • The median listing price per square foot was $823.
  • The median sale price was $635,000.
  • The sale-to-List Price Ratio was 97.77% — homes sold for approximately the asking price on average.
  • A buyer would prefer a sale-to-list price ratio closer to 90%, whereas a seller would always prefer scenarios that yield a ratio of 100% or higher.
  • The median days on market (109 days) in New York City have decreased somewhat over the past month and decreased slightly over the last year.
  • Tribeca is the most expensive neighborhood, with a median listing price of $3.9M.
  • Riverdale has a median listing price of $360,000, making it the most affordable neighborhood in New York.

NYC Real Estate Market Forecast 2022 and 2023

Among metropolitan areas, the New York City metro remains the country’s largest real estate market by value, but by a narrowing margin. The NYC-area housing market is valued at $3.51 trillion, with the Los Angeles metro right behind at $3.27 trillion, according to a report published by Zillow.

What are the New York City real estate market predictions for 2022 & 2023? New York City has a track record of being one of the best long-term real estate investments in the U.S. The New York real estate market has been booming year over year. NYC home prices nearly doubled over the last decade. With supply and demand continuing to favor sellers, prices continue to rise year over year.

According to NeighborhoodScout's data, the cumulative appreciation rate over the ten years has been 77.08%, which ranks in the top 40% nationwide. This equates to an annual average real estate appreciation rate of 5.88%. Despite the pandemic drastically affecting the New York real estate market, during the period between 2021 Q2 – 2022 Q2, New York's appreciation rate has been 10.54%. In the latest quarter tracked by NeighborhoodScout's data (2022 Q1 – 2022 Q2), they show that house appreciation rates in New York were at 0.91%, which equates to an annual appreciation rate of 3.71%.

Let us look at the price trends recorded by Zillow over the past few years. ZHVI is not the median price of homes that are sold in a month within a geographic region. It is calculated by taking all estimated home values for a given region and month (Also called Zestimates), taking a median of those values, and applying some adjustments to account for seasonality or errors in individual home estimates. It, therefore, represents the whole housing stock and not just the homes that list or sell in a given month.

By this calculation, the current typical home value of homes in NYC is $781,622. It indicates that 50 percent of all housing stock in the area is worth more than $781,622 and 50 percent is worth less (adjusting for seasonal fluctuations and only includes the middle price tier of homes). In Sept 2021, the typical value of homes in NYC was around $730,055. NYC home values have gone up 7.1% since last September.

  • Typical Home Value: $781,622 (September 30, 2022)
  • 1-year Value Change: +7.1%
  • 0.990 Median sale-to-list ratio (August 31, 2022)
  • 27.6% Percent of sales over list price (August 31, 2022)
  • 56.2% Percent of sales under list price (August 31, 2022)

Here's Zillow’s housing market forecast for New York-Newark-Jersey City Metro. According to their forecast, the supply and demand dynamics will likely push prices south over the next 12 months.

  • New York-Newark-Jersey City Metro home values have risen by 9.66% to $619,306.
  • The New York Metro housing market forecast ending September 2033 is slightly negative.
  • Zillow predicts that New York Metro home values may decline by 1% by Sept 2023.
  • If this forecast is correct, New York Metro home prices will be lower in the 3rd Quarter of 2023 than they were in the 3rd Quarter of 2022.
NYC Real Estate Market Forecast
Source: Zillow

Impact of Rising Mortgage Rates on The NYC Real Estate Market (New York City)

Let's discuss some more interesting trends. The StreetEasy Market Reports are a monthly overview of the Manhattan, Brooklyn, and Queens sales and rental markets. It’s been two years of unpredictability in the New York City market. Their latest data shows that the rising mortgage rates are not only discouraging buyers but also causing more purchases to fall through.

The average 30-year mortgage rate has nearly doubled in the last nine months, reaching 6.7% by the first week of October. The last time it soared so quickly was in the spring of 1980. The cancellation rate—the percentage of in-contract listings that have returned to the market without closing—rose to 1.7%, the highest level since the pandemic began.

Mortgage rate fluctuations have hurt low-income buyers, especially first-time buyers. By September, 2.8% of purchases below $800K—the median closing price of NYC sales this year—were canceled. That's double the 2021 rate for this sector and more than three times the cancellation rate for in-contract sales above $800K.

However, two data factors indicate that we are still in a seller's market: the median number of days listings are on the market is low, and the share of listings suggesting price reductions is consistent with seasonal practice prior to the pandemic. Despite declining prices, homebuyers should not anticipate a buyer's market in the near future.

Although NYC is still in a seller's market purchasers are progressively regaining bargaining power. Listings in New York City lingered on the market for longer, with the median days on the market increasing to 80 days in September from 69 days in August, although they went under contract 10 days earlier than the average house around this time of year between 2017 and 2019.

As properties linger on the market for longer, more listings are lowering asking prices in 2022. In Q3 2022, nearly one in every four (24%) listings offered on StreetEasy reduced asking prices at least once, significantly more than one in every five (19%) in Q3 2021. This, however, is not cause for fear.

Buyer demand roared back in 2021, pushed by low borrowing rates, and greater price drops are common in September as sellers try to generate more interest in their summer listings that are still on the market. The present share of price reduction is consistent with pre-pandemic sales market norms. Bidding wars with many offers above the asking price will become less prevalent as the market rebalances.

NYC Home Prices Are Falling

According to the StreetEasy Price Index,  NYC home prices are past their peak reached in July since the start of the pandemic. The index fell modestly by 0.7% month-over-month in September after staying essentially unchanged in August. The indices for Manhattan (-0.5%), Brooklyn (-1.1%), and Queens (-0.8%) also declined modestly in September from the previous month, while still being higher than one year ago.

The citywide median asking price rose slightly to $995K in September from $975K in August, just slightly below the mansion tax threshold of $1M, due to a large influx of higher-priced listings mostly in Manhattan after the Labor Day holiday. In September, the citywide median asking price for new listings was $999K, with 25% priced above $2M.

In September, Manhattan accounted for half of all new listings, with a median asking price of $1.475M – 48% higher than the citywide norm. As a result, Manhattan's median asking price reached $1.5 million, the highest amount since the pandemic. The most expensive listing in September was on Billionaires' Row, asking $250 million.

New York's Recovery From The Pandemic

Changes in house prices, rents, and mortgage interest rates can affect households' income and wealth, as well as how much money they spend and on what. Housing costs and policies can also shape where people chose to live, work, and study, as well as their ability to move or change jobs. Rising house prices, by discouraging potential migrants, could significantly reduce the growth potential of the economy, shifting the balance of labor market growth from employment to wages, with a consequent deterioration in competitiveness.

When it comes to the job market and real estate, the relationship is generally correlative: when one rises, so does the other, and when one falls, so does the other. According to preliminary figures released on October 20, 2022, by the New York State Department of Labor, New York State’s seasonally adjusted unemployment rate increased from 4.3% in July to 4.7% in August 2022. From September 2021 to September 2022, the unemployment rate (not seasonally adjusted) fell from 5.7% to 3.9%.

The number of private sector jobs in New York State increased over the month by 17,400, or 0.2%, to 8,061,500 in September 2022. The number of private sector jobs in the U.S. also increased by 0.2% in September 2022. New York State's private sector jobs (not seasonally adjusted) increased by 361,400, or 4.7%, over the year in September 2022, which exceeded the 4.2% increase in the number of private sector jobs in the U.S.

On a net basis, the total number of nonfarm jobs in the state increased by 15,600 over the month, while private sector jobs rose by 17,400,
in September 2022. At the same time, the total number of nonfarm jobs in the nation increased by 263,000, while private sector jobs increased by 288,000.

  • New York City’s unemployment rate decreased over the month from 6.6% to 5.6%.
  • Outside of New York City, the unemployment rate increased from 3.2% to 3.3%.
  • The number of unemployed New Yorkers decreased over the month by 39,400, from 445,100 in August to 405,700 in September 2022.
New York Unemployment Rate
Source: New York State Department of Labor

New York Rental Market Report

The Zumper New York City Metro Area Report analyzed active listings across 15 metro cities to show the most and least expensive cities and cities with the fastest growing rents. The New York one-bedroom median rent was $2,334 last month. New York City was the most expensive market with one-bedrooms priced at $3,950 whereas Newark was the most affordable city with rent at $1,350.

Here are the places where it makes sense to invest in rental properties in the New York City Metro Area. These are the places where the demand for rentals is growing strong in 2022.

The Fastest Growing Cities For Rents in New York City Metro Area (Y/Y%)

  • Jersey City had the fastest growing rent, up 49.7% since this time last year.
  • West New York saw rent climb 47.3%, making it rank as second.
  • New York City was third with rent jumping 33.9%.

The Fastest Growing Cities For Rents in New York City Metro Area (M/M%)

  • West New York had the largest monthly rental growth rate, up 6.1%.
  • Jersey City rent grew 6% last month, making it the second fastest growing.
  • Yonkers was third with rent climbing 4.9%.
NYC Rental Market Trends
Source: Zumper

Where to Buy a House in NYC?

New York is dominated by renter-occupied one or two-bedroom apartments. 76.75% of New York's dwellings are rentals. As per Neigborhoodscout.com, a real estate data provider, one and two-bedroom large apartment complexes are the most common housing units in NYC. Other housing types prevalent in NYC include single-family detached homes, duplexes, rowhouses, and homes converted to apartments.

The New York housing market has affordable townhomes. New York's single-family homes account for just 1.15% of the city’s housing units. During the latest twelve months, the New York real estate did cool off. However, the cumulative appreciation rate over the ten years has been 38.81%, which ranks in the top 30% nationwide. Evaluate the specifics of the NYC housing market at the time you intend to purchase. Hiring a local property management company can help in finding tenants for your investment property in NYC.

New York City's housing market is one of the most costly and competitive in the country. There are 237 neighborhoods in New York (as per Realtor.com). Tribeca has a median listing price of $3.9M, making it the most expensive neighborhood. Riverdale is the most affordable neighborhood, with a median listing price of $360K.

There are some buyer-friendly neighborhoods in New York City where buyers have a bit more negotiating power in neighborhoods as compared to sellers. Jackson Heights is one of New York City’s most buyer-friendly neighborhoods at the moment with home prices under $700,000. Other buyer-friendly markets with a median sales price below $700,000 include Rego Park, where the median sales price in Oct 2021 was $389K, trending down -by 8.9% year-over-year. The sale-to-list price ratio was 100 percent.

The median list price of homes in Sheepshead Bay was $499K in Oct 2021, trending down -by 5% year-over-year. The sale-to-list price ratio was 97.72 percent. The median list price of homes in East Flatbush was $650K, trending up 8.9% year-over-year. The sale-to-list price ratio was 100 percent. The median list price of homes in Brighton Beach was $569K, trending up 16.4% year-over-year. The sale-to-list price ratio was 97.03 percent.

Buyers have a bit more negotiating power in neighborhoods where the median home price falls between $700,000 and $1 million. In areas like Midtown East, where the median sales price is $872,500. Homes in Midtown East sold for approximately the asking price on average in Oct 2021. The other neighborhoods best for buyers looking to spend between $700,000 and $1 million are Bayside, where the median sales price in Oct 2021 was $720,000 and the sale-to-list price ratio was 99.37 percent; Gravesend ($684,500, 96.98 percent); Flushing ($838,000, 96.38 percent); and Bay Ridge ($499,000, 98.14 percent).

All of this could vary from time to time and can be checked on Realtor.com. Check out some of the best neighborhoods for investing in New York for the long term→ These neighborhoods have been selected from all five boroughs.

If you think of investing in NYC, you have decided on a long-term investment property. Here are the ten neighborhoods in NYC having the highest real estate appreciation rates since 2000—List by Neigborhoodscout.com.

  1. Inwood North
  2. Marble Hill
  3. Washington Heights Southeast
  4. Roosevelt Island
  5. W 115th St / Amsterdam Ave
  6. E 57th St / Madison Ave
  7. Madison Ave / E 52nd St
  8. W 58th St / Grand Army Plz
  9. Tribeca South
  10. W 70th St / Amsterdam Ave

Top Real Estate Estate Markets in New York

Buffalo real estate market

The Buffalo real estate investment offers a surprisingly good deal with low prices and relatively high rental rates. The Buffalo real estate market is dominated by older homes. A majority of homes in the Buffalo housing market were built before World War 2. Interestingly, this also means that many small apartment buildings are designed to serve a population that rented small units close to their jobs.

For example, roughly a third of homes are single-family detached homes, while almost half take the form of small apartment buildings. This creates an excellent opportunity for those in the market for Buffalo rental properties. You could buy a small apartment building with multiple tenants for the cost of a single rental property in a more expensive New York real estate market.

Syracuse real estate market

Syracuse's real estate market offers cheaper property with a higher return on investment and a less hostile legal climate. It is one of the better choices if you want to invest in New York state. Another issue that factors into the equation is the job market. Lots of cities have a great quality of life but almost no one can afford to live there.

The Syracuse housing market ranked 6.3 out of 10 for its job market. That’s better than rural and much of upstate New York. And it is why there is a slow trickle of people moving in to replace those who leave. That’s why the Syracuse real estate market has a net migration of 5 or a stable population. This is in sharp contrast to the depopulation seen in most Rust Belt cities. It also means Syracuse's real estate investment properties will hold their value for the foreseeable future if they don’t appreciate it.

Albany real estate market

Albany is a steadily appreciating real estate market. While it isn’t as famous or hot as NYC, it offers an affordable entry point and a massive pool of perpetual renters. Though it may not be somewhere you want to live, many locals are choosing to stay and make their homes here. And that will continue to drive demand for Albany real estate investment properties as long as they are priced right.

Rochester real estate market

You can also consider Rochester. The Rochester real estate market is stable, offering slow appreciation, affordable properties to outsiders, and good returns. It has strong, long-term potential that is only buoyed if NYC collapses. And this is one of the reasons why being everything the Big Apple isn’t is in your favor.

The Rochester real estate market enjoys a healthy population profile. Roughly a quarter of the population consists of children, and many are likely to remain due to the healthy job market. It also means that the Rochester housing market won’t crash if the job market weakens the way San Francisco collapses whenever the tech bubble bursts. Others choose to remain here because of the low cost of living.

Some of this article's information came from referenced websites. Norada Real Estate Investments provides no explicit or implied claims, warranties, or guarantees that the material is accurate, trustworthy, or current. All information should be validated using the below references. Norada Real Estate Investments does not predict the future US housing market. Buying a rental property needs research, planning, and budgeting. Not all investments are good. Always do research and consult a real estate investment consultant.

References

  • https://www.nysar.com/news/market-data/reports
  • https://www.redfin.com/blog/data-center
  • https://www.zillow.com/new-york-ny/home-values
  • https://www.realtor.com/realestateandhomes-search/New-York_NY/overview
  • https://streeteasy.com/blog/nyc-housing-market-data/
  • https://www.redfin.com/city/30749/NY/New-York/housing-market
  • https://www.elliman.com/corporate-resources/market-reports

Nashville Real Estate Market: Prices, Trends, Forecast 2022-2023

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Nashville's housing market has been one of the hottest markets in the US during this pandemic. The demand in the Nashville area remained solid, driven by the continued migration of residents from other parts of the country. Last month, home sales in the Nashville area continued their midsummer decline. Greater Nashville Realtors report a 30.2% decrease in closings in October 2022 compared to the same month last year. This follows earlier this year's modest year-over-year declines.

These numbers are the latest indication that the Nashville housing market is cooling after a period of extremely hot conditions. The current slowdown is viewed by experts as a healthy return to equilibrium & normalcy following record peaks. The demand in the Nashville area remained solid, driven by the continued migration of residents from other parts of the country.

According to Greater Nashville Realtors, there were 2,832 closings last month, down from 4,047 in October of last year. As sales slow and houses remain on the market for longer periods, the housing supply is increasing. However, prices remain stable. The median price of a single-family home was $478,500, up from $429,900 the previous year. The median sold price for a condominium was $346,510, up from  $295,990 the previous year.

Housing inventory is increasing in the Nashville Metro Area. Total inventory at the end of October 2022 was 10,128 units for sale, up from 5,260 units for sale in the previous year. It is expected that the Nashville real estate market will continue in favor of sellers because of the demand-supply imbalance. For buyers, Nashville's quality of life and relative affordability compared to the rest of the country makes it a great place to invest or buy a house nonetheless.

<<<Also Read: Tennessee Real Estate Appreciation & Forecast>>>

Here's the October 2022 housing data for the Nashville Metropolitan Ara released by Greater Nashville REALTORS®. Monthly home sales data includes the following counties in Middle Tennessee: Davidson, Cheatham, Dickson, Maury, Robertson, Rutherford, Sumner, Williamson, and Wilson.

Days on Market: 39 (-12 days from the previous year)

Pending Sales in October were 2,003 (A pending sale status means the seller has accepted an offer from a hopeful buyer, but the deal hasn't closed yet)

Housing Type Closings Median Price Inventory
Total 2,832 — 10,128
Residential 2,299 $478,500 7,277
Condominium 391 $346,510 1,012
Multi-Family 14 — 80
Farm/Land/ Lots 128 — 1,759
Nashville housing market
Source: Greaternashvillerealtors.org

Nashville Housing Market Trends & Stats

Earlier, Nashville was ranked sixth on Zillow's new list of the hottest housing markets for 2022. The list is compiled using a variety of variables, including job growth and rising home prices. According to Zillow, the most active real estate market in the country will be in Tampa, Florida, followed by Jacksonville, Florida, and Raleigh, North Carolina. Nashville is ranked #6 out of the 50 largest metro areas in the United States, with an average home value of $384,321 that is expected to increase over the next year.

We have seen people move from big towns to suburbs throughout the country. Nashville too has seen an influx of buyers coming from larger markets like Seattle, New York, and California. Another factor in the increase in out-of-state homebuyers is that Tennessee is one of only seven states that does not impose an income tax and one of two that doesn’t collect tax on earned income.

This has multiplied the demand for housing. High demand and low inventory are causing home prices in Nashville to rise rapidly. Nashville home prices are rising due to low-interest rates, low inventory, and changing demographics in larger cities. This is a fantastic trend for sellers in For Greater Nashville. Currently, inventory is still low, and prices will continue to rise over the next year albeit at a very slow rate.

Redfin.com, a real estate brokerage, also considers the Nashville housing market to only be somewhat competitive. Hot homes on the market can sell for about around the list price and go pending in around 18 days. The average homes sell for about 2% below the list price and go pending in around 39 days.

  • In October 2022, Nashville home prices were up 16.3% compared to last year, selling for a median price of $465K.
  • On average, homes in Nashville sell after 43 days on the market compared to 30 days last year.
  • There were 847 homes sold in October this year, down from 1,301 last year.
  • 19 percent of homes sold above the list price.
  • 32.8 percent of homes were sold with price drops.
  • Sale-to-List-Price Ratio = 98%
  • The sale-to-list price ratio is calculated as the final sale price divided by the last list price.

Nashville Real Estate Market Forecast 2022 & 2023

What are the Nashville real estate market predictions for 2022 and 2023? Property values across Nashville and Davidson County are expected to rise moderately over the next twelve months.  Let us look at the price trends recorded by Zillow over the past few years. Nashville has a record of being one of the best long-term real estate investments in the U.S.

According to NeighborhoodScout.com, Nashville real estate appreciated by nearly 166.38% over the last ten years. Its annual appreciation rate has been averaging 10.29%. This figure puts Nashville in the top 10% nationally for real estate appreciation.

  • During the twelve months, from 2021 Q2 – 2022 Q2, the Nashville appreciation rate was about 25.01%.
  • It was higher than appreciation rates in 96.49% of the cities and towns in the nation
  • From 2022 Q1 to 2022 Q2, the appreciation rate was 5.35%, which annualizes to a rate of 23.52%.
  • However, current mortgage interest rates, which are impacted by the federal funds rate and other market rates, influence the price of housing.
  • Higher mortgage rates are putting a damper on the Nashville housing market as well.

Here is Zillow's home price forecast for Nashville Metropolitan Area. The forecast is until October 2023.

  • Nashville-Davidson–Murfreesboro–Franklin Metro home values have gone up 22% over the past year.
  • Zillow forecasts that they will rise by 1.3% between October 2022 to October 2023.
Nashville Housing Market Forecast
Courtesy of Zillow.com

Here are the ten neighborhoods in Nashville having the highest real estate appreciation rates since 2000—List by Neigborhoodscout.com.

  1. Maxwell Heights
  2. Rolling Acres / Lockeland Springs
  3. East Nashville
  4. Greenwood / Lincoln College of Technology Nashville
  5. Shelby Hills
  6. East Hill
  7. North Nashville
  8. Germantown
  9. Edgehill / Historic Waverly
  10. Fisk Meharry / Fisk University

Nashville Real Estate Investment Outlook

Nashville Real Estate Investment

Is Nashville a Good Place For Real Estate Investment? Many real estate investors have asked themselves if buying a property in Nashville is a good investment. You need to drill deeper into local trends if you want to know what the market holds for real estate investors and buyers in 2023. Nashville is a minimally walkable city in Davidson County with a population of approximately 601,201 people.

Nashville, Tennessee is famous for the Grand Ole Opry, the recreation of the Parthenon, and country music. It is best known as a tourist attraction in middle America. Nashville itself is home to just over six hundred thousand people. That alone makes it the 24th most populous city in the country. If you count semi-independent parts of Davidson County, then the Nashville real estate market is home to about 700,000 people. The Nashville metropolitan area contains more than two million people.

Many of those live in Davidson and Murfreesboro. Nashville has a mixture of owner-occupied and renter-occupied housing units. According to Neighborhoodscout.com, a real estate data provider, one and two-bedroom single-family detached homes are the most common housing units in Nashville. Other types of housing that are prevalent in Nashville include large apartment complexes, duplexes, rowhouses, and homes converted to apartments.

The Nashville housing market has been good for sellers in the past years due to the rising prices, and it is considered one of the hottest housing markets in the U.S. The Nashville real estate boom began about 10 years ago and investors expect these trends to continue in 2021 and the foreseeable future, making Nashville one of the most desirable housing markets in the country.

Several long-term trends make the Nashville market a good place to invest in real estate without any fear of boom and bust like what hit Arizona during the Great Recession. In 2020, Nashville came in at No. 4 in the country for expected activity and price appreciation, in comparison to 25 large markets around the country, according to a survey published by Zillow.

Nashville was the only market analyzed in which no panelists said they expected home values to fall in 2020. The home values (nationally) were expected to grow by 2.8% in 2020. 59% of panelists expected Nashville home values to appreciate faster than their expected national rate of 2.8%. 31% of panelists expected Nashville home prices to appreciate slower than they do nationally while 10% of panelists expected them to grow about the same as they do nationally.

One of the best features of the Nashville real estate market is the median property price in the city, which is considered more affordable than most of the other top markets for investing in real estate in the U.S. As the inventory remains limited, it means that Nashville will remain among the fastest-moving housing markets in the U.S. Also, as the mortgage rates remain at record lows, it makes buying a property more affordable now than it was in previous years.

Let’s take a look at the number of positive things going on in the Nashville real estate market which can help investors who are keen to buy an investment property in this city.

Total Annual Home Sales Reported in Greater Nashville in 2021

For many, the Nashville real estate market in 2021 was a frenzy. Final statistics for 2021 indicate that 47,172 homes were sold in the region, up 5% from 44,850 in 2020, according to Greater Nashville Realtors. In Middle Tennessee, the median home price increased by approximately 22.4 percent. The median price for a residential single-family home was $437,362 and for a condominium, it was $298,918. This compares to median home and condominium prices of $345,000 and $245,000, respectively, last year.

  • Total sales = 47,285
  • Residential = 37,638
  • Condominium = 6,582
  • Multi Family = 355
  • Farm/Land/Lots = 2,710
Nashville housing market trends
Courtesy of Greaternashvillerealtors.org

1. A Strong Economy And Job Opportunities

In early 2018, a Quartz article joked that Nashville could give up the nickname Music City and be called Job City. Nashville’s claim to the title was having the lowest unemployment rate of any metropolitan area with more than a million people. Nashville real estate market demand will remain strong as long as people want to move here for work, and unlike some areas, they can find it here. The Nashville area economy includes thriving technology, service, education, health, and manufacturing sectors.

Notable job growth has occurred in the professional and business services, leisure and hospitality, manufacturing, and mining, logging, and construction sectors. Financial enterprises have also discovered the benefits of doing business in Nashville, giving abundant employment prospects to bankers, accountants, and budget analysts. While the tourism industry is thriving, white-collar jobs are expanding rapidly, too.

Almost anyone with a marketable skill can find a good-paying job in Nashville. This trend is expected to continue for at least the next 10 years, with opportunities especially robust for healthcare, IT, and design/media specialists. Average incomes on the city's west side are higher than in areas east of downtown.

2. Strong Demographic Trends In Nashville

The average age of Nashville residents is around 33, much younger than the national average of 40. This means the Nashville real estate market contains a larger than an average number of young families, and given the strong job market, these adults and their children will contribute to housing demand for years to come.

3. Quality of Life in Nashville Attracts People of All Ages

Nashville was ranked the fastest-growing large metropolitan area in the United States in 2017. This is in no small part due to its high rankings in various quality-of-life surveys such as U.S. News and World Report. That publication ranked Nashville the 17th best place to live in America in 2020-2021 — giving it high marks on desirability and value.

It was also ranked 12th in its list of best places to retire and 23rd in the fastest-growing places. This means many are choosing to move here because of the quality of life whether or not they’re coming for work. Nashville is also known as the Country Music Capital of the World and it has unique museums and architecture.

Today, Nashville is a hot relocation destination with a thriving economy, continuous population growth, and a diverse, ever-growing services base. Consumers who act aggressively to break into the local real estate market should enjoy both a high quality of life and rising home values for the foreseeable future.

Demographics of the Nashville:

  • College-educated: 40%
  • Homeowners: 65.6%
  • Married: 43%

4. Known Redevelopment Opportunities

Redevelopment can be hit and miss since you can’t be sure a waterfront area or community slated for revitalization goes up in value. One benefit of the Nashville housing market is that there are known areas of redevelopment where returns are nearly certain. The area around the future professional sports stadium comes to mind. East Nashville is gentrifying, as well.

5. A Large Student Population

The Nashville housing market presents a prime opportunity for real estate investors who would like to cater to students. This is partially due to the fact it is the capital of the state, and it is partially because it is simply the largest city in the state. Local universities include but are not limited to Tennessee State University, Lipscomb University, Belmont University, Aquinas College, Fisk University, and Vanderbilt University.

American Baptist College, Trevecca Nazarene University, Meharry College, Welch College, and Nashville State Community College are also located here. If you want to invest in the suburban Nashville housing market, Middle Tennessee State University is located in Murfreesboro. The presence of several colleges and universities, along with both private and public secondary schools, presents rich possibilities to academic professionals.

6. The Tourism-Related Rental Market

The Nashville housing market provides two different tourism-related rental markets. One is, of course, renting homes to tourists who are more likely to be families and retired couples than swinging singles. Another possibility is renting to young adults who work in the tourism industry themselves.

Just over a third of the market rents, a figure similar to the national average. This means that a sudden decline in tourism isn’t going to hurt the Nashville housing market much. The city is currently arguing over limits for AirBnB rentals for non-residents, but no restrictions on this are in place yet or in the foreseeable future.

7. Affordable Nashville Real Estate

The typical home price in Nashville is around $457,360 (Zillow). Nashville is relatively affordable compared to other major U.S. metro areas, though the housing market has become increasingly competitive. You can buy two moderately large single-family homes here for the price of a cheap condo in California, and you can buy half a dozen rental properties in the Nashville real estate market for the price of one good house in New York City. Nor will the area see a building boom that causes real estate to go down dramatically in value, since rentals had a vacancy rate of around 4% in 2016.

Some new housing stock may come onto the market, but not enough to hurt the value of existing homes. The area has seen an increase in its population, as well as a rise in home values. The Southern Suburbs submarket, which includes the cities of Murfreesboro and Franklin, is the fastest-growing submarket in Nashville Metro Area. Since Tennessee is one of the few states that doesn't tax wages, residents can keep more of their income, though there is a 6% hall tax on investment interest and dividends.

The state Legislature agreed in 2016 to start phasing out the Hall income tax, with its total elimination beginning on Jan 1, 2021. This is considered among the most important tax reforms in the history of Tennessee. From a 6 percent tax rate on investment income, the levy was to be reduced by 1 percent each year through 2020. For the year that started Jan. 1, the rate is 2 percent. Hence, Tennessee is on its way to becoming a truly no-income-tax state, to join seven other states — Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming.

8. Stability

We’ve touched on the subject of rental market stability. Nashville has high employment rates and low vacancy rates, but none of those numbers are enough to throw the market into overdrive, whether it leads to a glut of supply to meet high demand or a boom-bust cycle. The Nashville Business Journal ranked Nashville as the most stable housing market in the state in 2018. The city’s relatively slow permitting process slows down the construction of new units, keeping home prices stable and high.

9. It Is Landlord Friendly

Tennessee like much of the south is landlord-friendly. Landlords in the Nashville real estate market don’t have to have a written lease unless the rental agreement is longer than three years, though that’s always recommended. There is a limited payment grace period. Receipts aren’t required for rent and deposit payments, though again, that would be wise. Interest isn’t due on deposits. You can charge late fees but have to specify them in the lease. The only minor issue is that you have to have a rental license before you can be a landlord.

10. The Good Return on the Investment

Interestingly, the average annual salary is about $62,000 (source: Payscale.com), leading many here to rent instead of buy. According to RENTCafe, 46% of the households in Nashville, TN are renter-occupied while 53% are owner-occupied. However, the rental market isn’t so hot that it is guaranteed to collapse anytime soon. Renter household growth has outpaced the construction of rental units and the conversion of single-family homes to rental units since 2010.

That is why average rent hovers around $1,400 a month, providing decent returns to landlords who don’t over leverage but without worrying about a condo boom to cash in on rental demand diminishing profits over the long term. Also, the fact that rents in the Nashville real estate market are almost $200 per month greater than the Tennessee average is a strong reason to buy real estate here than elsewhere in the state. And know that rental rates for large apartments and condos are even higher – commanding rents in the $1500-2000 range. About 25% of the apartments fall in this price range whereas 47% fall in the range of $1,001-$1,500.

As of November 20, 2022, the average rent for a 1-bedroom apartment in Nashville, TN is currently $1,700. This is a 9% increase compared to the previous year. Over the past month, the average rent for a studio apartment in Nashville remained flat. The average rent for a 1-bedroom apartment decreased by -3% to $1,700, and the average rent for a 2-bedroom apartment remained flat.

  • Two-bedroom apartments in Nashville rent for $1,795 a month on average (a 9% increase from last year).
  • Three-bedroom apartment rents average $2,195 (a 12% increase from last year).
  • Four-bedroom apartment rents average $2,705 (a 10% increase from last year).

The most affordable neighborhoods where the asking prices are below the average Nashville rent of $1,428/mo are:

  • West Meade where the average rent goes for $1,628/mo.
  • Hickory Hills where the average rent goes for $1,650/mo.
  • Bellshire Terrace where the average rent goes for $1,675/mo.

Other famous neighborhoods in Nashville, Tennessee are Green Hills, Inglewood, Urbandale Nations, Nolensville, Joelton, Downtown Nashville, Crieve Hall, Hermitage Estates, Hermitage Hills, Donelson-Hermitage-Old Hickory, Madison, Sylvan Park, Antioch-Priest Lake, Old Hickory Village, West Nashville, Green Hills, East Nashville, and Antioch Park.

The Sunnyside neighborhood is one such neighborhood that has grown massively since its founding. It has over 800 homes with historic or architectural significance alone, which should appeal to many homebuyers. Home prices have dropped by 23.6% since last year for those looking for a deal in this neighborhood. The average sale price per square foot in Sunnyside is $270, down 23.1% since last year. Redfin says that the homes sell for 2.6% under their list price. Average Price: $717K. Buyers who can afford to buy at this price point should make a move as they hold the upper hand in price negotiations.

Downtown Nashville is another dynamic, urban neighborhood that is the hub of the entertainment and nightlife that defines Music City. It has a lot of great apartment options for rent, but you can also consider buying a property that will keep you close to work, public transit, and all the entertainment you can hope for. It is also a buyer's market and much cheaper than Sunnyside. A great market for buyers because it is not very competitive. According to Redfin, the average sale price of a home in Downtown Nashville was $450K last month, down 31.8% since last year. The average sale price per square foot in Downtown Nashville is $566, down 3.7% since last year. Typically homes in this neighborhood receive 1 offer on average and sell in around 76.5 days. A high average DOM signals a weak market that favors buyers.

Buying or selling real estate, for a majority of investors, is one of the most important decisions they will make. Choosing a real estate professional/counselor continues to be a vital part of this process. They are well-informed about critical factors that affect your specific market areas, such as changes in market conditions, market forecasts, consumer attitudes, best locations, timing, and interest rates.

NORADA REAL ESTATE INVESTMENTS has extensive experience investing in turnkey real estate and cash-flow properties. We strive to set the standard for our industry and inspire others by raising the bar on providing exceptional real estate investment opportunities in many other growth markets in the United States. We can help you succeed by minimizing risk and maximizing the profitability of your investment property in the United States.

Consult with one of the investment counselors who can help build you a custom portfolio of Nashville investment properties. Depending upon the availability, we can help you to find “Cash-Flow Rental Properties” located in some of the neighborhoods in Nashville. Not just limited to Nashville or Tennessee but you can also invest in some of the hottest real estate markets for rental properties in the United States.

Another housing market to go for diversifying your investments is the Austin real estate market. The Austin housing market may be one of the more expensive ones in the state of Texas, but it stands out for its large rental market and high rental rates. It is an excellent place to invest in real estate in the Lone Star State. Homes in Austin are 23% cheaper than the national average. It may be the second most expensive housing market in the state with a median home price of around $350,000, but it is still far cheaper than California or New York. Buy up condos or townhomes, and you’ll be able to see a sizable return on the investment.

Similarly, Salt Lake City is another great market for investing in real estate for your retirement. The Salt Lake City real estate market is booming because of an ideal combination of business growth triggering in-migration and strong native population growth. Downtown Salt Lake City properties near the Mormon Temple command a premium, but that isn’t the only upscale market in the area. Park City and the northern side of Oakley, too, have properties that cost on average well over a million dollars. As you move up Highway 80 toward Hoytsville and Wanship, properties routinely cost more than a million dollars despite the hour commute to Salt Lake City.

All you have to do is fill up this form and schedule a consultation at your convenience. We’re standing by to help you take the guesswork out of real estate investing. By researching and structuring complete Nashville turnkey real estate investments, we help you succeed by minimizing risk and maximizing profitability.

Let us know which real estate markets in the United States you consider best for real estate investing! 

Remember, caveat emptor still applies when buying a property anywhere. Some of the information contained in this article was pulled from third-party sites mentioned under references. Although the information is believed to be reliable, Norada Real Estate Investments makes no representations, warranties, or guarantees, either express or implied, as to whether the information presented is accurate, reliable, or current. All information presented should be independently verified through the references given below. As a general policy, Norada Real Estate Investments makes no claims or assertions about the future housing market conditions across the US.

References

Housing Market Data, Trends & Statistics
https://www.greaternashvillerealtors.org/pages/market-data-news/
https://www.zillow.com/Nashville-tn/home-values
https://www.deptofnumbers.com/rent/tennessee/nashville
https://www.redfin.com/city/13415/TN/Nashville/housing-market
https://www.realtor.com/realestateandhomes-search/Nashville_TN/overview
https://www.neighborhoodscout.com/tn/nashville/real-estate#description
https://www.msn.com/en-us/money/realestate/nashville-housing-market-trends-and-prices
https://www.tennessean.com/story/money/real-estate/2021/06/04/what-know-nashville-housing-market/5253078001/

Demographics
https://suburbanstats.org/population/tennessee/how-many-people-live-in-nashville
https://en.wikipedia.org/wiki/Nashville,_Tennessee

Landlord friendly
https://www.avail.co/education/laws/tennessee-landlord-tenant-laws

Quality of life
https://www.nashvillechamber.com
https://realestate.usnews.com/places/tennessee/nashville

Stability
https://thinkrealty.com/nashville-housing-market-room-grow
https://www.bizjournals.com/nashville/news/2018/05/23/report-card-tennessee-best-places-to-buy-a-house.html

Stadium / redevelopment
https://www.tennessean.com/story/sports/2018/09/05/nashville-mls-stadium-pro-soccer-team/1200230002/
https://www.theringer.com/features/2017/11/21/16678002/airbnb-nashville

Employment
https://qz.com/1251382/nashville-tennessee-has-the-uss-lowest-unemployment

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(949) 218-6668
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