The real estate market may be changing, but Dallas is still one of the hottest in the U.S. as we head into 2023.

The Urban Land Institute (ULI)'s annual Emerging Trends in Real Estate report, released October 27, names Dallas-Fort Worth the No. 2 U.S. market to watch in 2023, behind only Nashville.

The report, a joint project between ULI and PricewaterhouseCoopers, "provides an outlook on real estate investment and development trends, real estate finance and capital markets, property sectors, metropolitan areas, and other real estate issues throughout the United States and Canada."

It is based on surveys and interviews with real estate industry professionals.

After an in-depth analysis, the report identifies the top U.S. markets to watch, based on overall real estate prospects. Austin, San Antonio, and Houston join DFW in the top 15, at at Nos. 4, 12, and 14, respectively.

A top trend heading into 2023 is the continued "normalization" of markets following the post-COVID boom. Notes the report: "Almost every market in the country received lower ratings for both investment and development prospects this year, illustrating that outlooks are darkening just about everywhere following the brief post-COVID exuberance shown in last year’s survey across a variety of metrics."

However, it continues, "the pandemic seems to have reinforced some trends, notably the dominance of what we called the 'Magnet' markets — many of which are in warmer Sun Belt regions — at the top of the Emerging Trends 'Markets to Watch' standings."

Those "Magnet" markets include Dallas-Fort Worth, as well as Austin, San Antonio, Houston, and others. The report further categorizes markets into subgroups, with Dallas, along with San Antonio and Houston, falling into the "Super Sun Belt" group.

"These markets are large and diverse but still affordable, forming powerhouse economies that attract a wide range of businesses. Despite their large population bases, most are among the fastest-growing markets in the United States. Moreover, their economic performance has been solid through thick and thin," the report states.

"Though every market lost jobs during the pandemic recession, recovery has been much quicker and more complete in the Super Sun Belt markets. These metro areas collectively have the highest average rating of any subgroup, as it did last year."

Austin is classified as a real estate "Supernova," defined as a smaller metro area (1 to 2 million residents) that has "exploded into prominence over the past decade or so."

According to the report, Austin has the highest investor demand of any market, with Dallas just two spots below. Dallas, meanwhile, tops the list for development/redevelopment opportunities, with Austin at No. 6. Both cities boast the strongest local economies among the markets studied, with Austin at No. 1 and Dallas at No. 2.