The coronavirus pandemic saw many real estate markets leap upward. Some saw home prices jump over 50% in a single year!

In early 2023, those days seem like a lifetime ago. While year-over-year home price growth still looks strong in many counties, the picture changes when you look at the current trends and quarterly home value growth. Or shrinkage, as is the case in an increasing number of counties.

Strap in, because the bumpy ride in real estate values isn’t smoothing out any time soon. 


The 100 Hottest Real Estate Markets in 2023

Using data from Zillow, we calculated and mapped the top 100 hottest real estate markets in the US.

Notice any patterns?

You’ll probably spot first that they’re largely concentrated in the West and Southeast. The Upper Midwest got shut out completely.

Nearly all of these hot markets are smaller cities rather than major metropolises. For example, the fastest growing real estate market over the last year was Wooster, OH with an eye-popping 44.26% jump in home prices. Rounding out the top five are Kapaa, HI (37.90%), Sanford, NC (31.50%), The Villages, FL (29.09%), and Naples, FL (28.19%). High as those numbers are though, they represent a sharp drop from the top five markets’ appreciation last quarter.  

Still, some large cities made the list at the start of 2023. Miami saw home prices leap 22.63%. Tampa real estate spiked 19.55%. But nearly all of fastest appreciating cities in 2023 are secondary or tertiary markets. 

If you’re looking to invest in real estate long-distance, consider researching these markets. But beware that higher prices don’t necessarily mean higher rents, and you could just find yourself with weaker cash flow. Make sure you do your due diligence, and consider buying turnkey properties if you’re out of state. You can even potentially buy properties with tenants already paying rent, particularly if you use a platform like Roofstock.


Heat Map: Fastest Appreciating Counties

Cities are all well and good, but I like the depth that county-level data provides.

Here’s how real estate performed in (nearly) every county in the US over the last year:

Some counties saw year-over-year home price increases of more than 30%!

One trend we witnessed in 2020-2022 was an acceleration of the de-urbanization trend, particularly in the largest, most expensive cities. But in many cases, residents simply moved out to the suburbs surrounding the same city, and therefore stayed in the same county.

We also keep an eye on nationwide migration trends, particularly the extent to which Americans are leaving high-tax states in favor of lower-tax states. But these migration trends can’t perfectly explain the hottest real estate markets in 2020-2023.

Take New Jersey, one of the states with the highest taxes and greatest outbound migration. Many counties in the Garden State still saw year-over-year home price growth of over 10%.

Note: The gray counties didn’t have sufficient MLS sales data for Zillow to provide median home values.

At the moment however, annual real estate appreciation doesn’t tell the whole story.


Quarterly Home Price Changes

Housing may have started 2022 with a bang, but as interest rates lifted off to the moon, property prices have come back down to earth. 

So while annual price changes still reflect the astronomic growth of 2021 and early 2022, they don’t showcase just how quickly housing markets have cooled in the last few months. 

To get a clearer picture of current trends, here’s the quarterly home price changes by county:

Not quite so much purple, eh?

I kept the grading scale the same, on a 0-6% grade for quarterly change: a fourth of the 0-24% grade for the annual change map. 

In fact, many of the counties are now showing negative price growth: shrinking home values. Entering 2023, a whopping 758 counties have seen falling real estate prices over the previous quarter. 

I fully expect that to get worse next quarter. Although it also means more opportunities for investors to find good deals on real estate!

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Best Cities for Investing Based on GRM & Cap Rates

Appreciation isn’t everything, of course. You still need the property to cash flow well, or you end up coming out of pocket.

If you’re looking for the best housing markets in the US for cash flow, here’s a map of the 100 largest cities in the US, contrasting their gross rent multiplier (GRM). Remember, lower is better!

For the first time in years, GRMs actually came down. That indicates that rents rose faster than home prices, marking a better deal for investors.

Alternatively, see this list of the cities with the best cap rates. (If you’re not familiar with them, here’s an overview of how cap rates work).

Before buying a rental property, always run the numbers through a rental income calculator. Most new real estate investors underestimate expenses and fail to calculate real estate cash flow property.


Rent Changes

Real estate values aren’t the only thing cooling. Rent growth has slowed in most U.S. cities nationwide, and a small but growing minority of cities have seen rents decline in the last quarter, per Rentometer’s quarterly rent report

But don’t start moping just yet. Fully 99% of U.S. cities saw rents increase over the last year, and 75% of cities saw rents rise by double digits. 

It’s still a great time to be a landlord just less so than it was six months ago. 


What Drives Hot Housing Markets?

Real estate prices rise for many reasons. But at their core, they rise because demand for homes outstrips a limited supply of available housing.

As you scout for the best cities for real estate investing, keep the following trends in mind.


Population Growth

It sounds obvious, and it is. But where there’s strong population growth, there’s nearly always strong real estate appreciation.

Unfortunately, official Census Bureau data on population growth lags by a year or two. That leaves investors relying on less official data to try to track population trends.


Economic & Job Growth

What drives population growth? Job growth, at least traditionally. A booming local economy attracts people to move from all over the country. In fact, job growth often serves as a leading indicator of population growth.

However, in an age of greater telecommuting, inherent amenities like shoreline or a historic vibe can draw inbound migration even without abundant local jobs.


Increase in First-Time Homebuyers

When a homeowner goes to move, and simultaneously sells their old home while buying a new one, it doesn’t change the total housing inventory available. They add their own home to the inventory for sale, and they take their new home off the market.

First-time homebuyers, however, don’t have an existing home to sell. So they take a home off the market by buying it, without adding to the available inventory.

In other words, they add to the demand for housing, but not the supply. Which drives up home prices.

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What Happens When Hot Real Estate Markets Cool?

Even the best housing markets in the US, the hottest real estate markets, eventually cool off. It can happen gradually, or it can happen (relatively) suddenly, such as we saw in the housing bubble collapse after 2008. 

Housing markets go through predictable cycles. A dearth of housing supply spurs more new home construction. Home builders gradually build up a head of steam, as the process from finding sites through pulling permits to building the home to marketing and selling them all takes time. At a certain point, housing developers start building more homes than the local demand actually needs or wants, but by the time they discover that, they still have months or even years to go in order to finish existing construction projects. 

At that point, supply exceeds demand, and you see a housing market correction. Developers stop building, and eventually supply gets pinched again, and the cycle repeats itself. 

Here’s a handy visual aid for good measure: 


Is the US in a Housing Bubble Currently?

While parts of the US clearly experienced a short but intense real estate bubble (I’m looking at you Boise), I doubt that most of the country’s markets are in a bubble. 

To begin with, supply — particularly of starter homes — remains insufficient to cover demand, to put it mildly. Building material and labor costs hover around record highs, putting additional upward pressure on home prices. 

Meanwhile, millennials have reached the “settle down in the suburbs and pop out some kids” phase in their lives. See above about the increase in first-time homebuyers supercharging demand for housing. 

So no, I don’t see a real estate bubble, at least for most markets in the US. 


Final Thoughts

At the moment, I see a great reshuffling of the deck taking place in real estate markets. While the largest, most expensive cities like New York and LA will never become irrelevant, even before the pandemic we saw rents and demand dipping. The rise in telecommuting should exacerbate that trend even after the pandemic is in the rearview mirror. 

I see continued hot housing markets in areas with natural charm. Areas with beautiful beaches or lakes, with great skiing and hiking, with history and culture. Post-industrial cities will need to reinvent themselves if they want to retain high-income residents after they discover they can live anywhere and telecommute to work. 

Keep an eye on all of the hottest real estate markets in 2023 showcased in the maps above. And note that the best housing markets in the US are mostly satellite towns, seeing astronomical growth.


Where are you currently investing in real estate? What do you consider the best housing markets in the US?



More Real Estate Investing Reads:

About the Author

G. Brian Davis is a landlord, real estate investor, and co-founder of SparkRental. His mission: to help 5,000 people reach financial independence by replacing their 9-5 jobs with rental income. If you want to be one of them, join Brian, Deni, and guest Scott Hoefler for a free masterclass on how Scott ditched his day job in under five years.

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