AgentReal Estate

Knock: The housing market favors buyers in 2023

Especially in pandemic hot spots

Home finance technology company Knock released its Buyer-Seller Market Index on Thursday, which found the U.S. housing market will tilt toward buyers following the spring home-buying season, depending on the area they want to relocate to.

Knock found that “the top 5 buyers’ markets are west of the Mississippi, while the top 5 sellers’ markets are concentrated in the East Coast,” the index says. 

The index predicts that by the end of this year, 36 markets will be favorable to buyers, 41 markets to sellers and 23 will be neutral. That compares to November, when there were 14 buyers’ markets, 46 sellers’ markets and 40 neutral markets.

The 100 largest housing markets will remain neutral in the next few months, will inch toward sellers in spring and then strongly favor buyers by summer, a trend that will continue until the end of the year, according to Knock. Home sales are projected to decline by 16.3% year over year, with Fayetteville, Arkansas seeing the largest decrease of -22.9%.

Looking back at the housing market in 2022

Knock’s November 2022 index on buyers and sellers indicated inventory rose in 80 of the 100 largest housing markets and most favored buyers. In these 100 markets during the first 11 months of last year, 2,336,520 homes were sold, down by 19% from 2021. The median time these houses spent on the market was 22 days, an increase from 13 days in November 2021.

Other observations of this report include the 98% average sale-to-list ratio, a measurement of the margin between the asking price and selling price. This number was down from 99% in October 2022 and 100% in 2021.

What will happen to popular pandemic markets?

Knock Co-Founder and CEO Sean Black believes the relocation spots which were popular during the pandemic will favor buyers in 2023, while “more mid-sized markets offering good job opportunities and affordable housing” will be the top performing real estate markets in 2023.

“This will usher in a more balanced housing market,” Black said.

The index also predicts that the top five buyers’ markets in 2023 will be Phoenix-Mesa-Chandler, Colorado Springs, Las Vegas-Henderson-Paradise, Dallas-Fort Worth-Arlington and Denver-Aurora-Lakewood.

These metros were popular relocation areas during the pandemic, rising 44.6% on average between January 2020 and December 2022, while other parts of the U.S. saw a growth of 34.9% during this period.

The index forecasts that the median home-price growth in the pandemic hotspots would moderate this year, possibly falling from their pandemic peaks, but remaining 38% over pre-pandemic levels, 3% higher than the change in the national average.

Inventory will also grow (54.4% on average) in the top buyers’ markets, with Denver experiencing an inventory growth of nearly 100%, following Charlotte, which is expected to have the highest inventory growth in the nation of 148.3%.

Smaller markets will favor sellers this year

The index says top sellers’ markets are expected to be on the East Coast and to grow in terms of home sales and listing prices in 2023. The market sizes will range from smaller to mid-size markets with more affordable houses and populations of under 1 million.

The best markets for sellers will be Fayetteville, Harrisburg-Carlisle, Syracuse, Hartford-East Hartford-Middletown, and York-Hanover. The prices in these markets will remain below the national median home price of $374,000, despite increasing by almost 50% since the beginning of 2020, per the index.

Moreover, home sales in the sellers’ markets are expected to increase by a range of 5% to 18% this year.

While sales grow, the median home price may also increase by 8.3%, compared to the less than 1% national average increase. The number of days a house spends on the market is an average of 15 days, while the national average is 30 days. In Colorado Springs, this number may reach 121 days.

Median sales price is forecast to reach its height in June 2023 at $386,000, decreasing to $374,000 in November. 

The Knock index based its observations on the ratio of average sale to asking price, number of homes sold, number of active listings, median days on market, median sale price and the rolling supply of homes in a given month. The company collected data on more than 150 million properties in the 100 largest and active metropolitan areas since November 2016.

The founders of launched Knock in 2015. The company currently operates in 75 markets in the U.S. and has raised $900 million in debt and equity from investors including Foundry Group, Greycroft, RRE, Parker89 and The National Association of Realtors.