Pricier, More Populated Metros Making a Comeback

Big cities could be making a comeback, with more expensive, populated housing markets appearing on the quarterly Wall Street Journal/® Emerging Housing Markets Index.

The top 20 emerging markets listed averaged 500,000 residents this quarter, more than 100,000 people more than last quarter. It is a mix of coastal, Southern, and Midwestern markets.

Six of the 100 largest U.S. metros made the list: Raleigh, NC; Colorado Springs; North Port, Fla; San Jose, CA.; Cape Coral-Ft. Myers, Fla; and Oxnard-Thousand Oaks, CA.

“It could signal a reorientation of the real estate market,” says Chief Economist Danielle Hale.

The rankings and their median list price are as follows:

  1. Naples, FL ($667,000)
  2. North Port, FL ($445,000)
  3. Kahului, HI ($937,000)
  4. San Luis Obispo, CA ($899,000)
  5. San Jose, CA ($1,224,000)
  6. Cape Coral, FL ($380,000)
  7. Fort Wayne, IN ($215,000)
  8. Huntsville, AL ($362,000)
  9. Raleigh, NC ($387,000)
  10. Burlington, NC ($285,000)

“Some of what we’re seeing is a bit of a seasonal shift,” Hale said. “This happens when the weather turns colder and buyers in the North and Midwest may look for homes down South to escape the snow. These real estate markets tend to be more active this time of year.”

Rising mortgage interest rates could also be at play, which could explain why San Jose, CA, which has an average list price of $1,224,000, took fifth place. Buyers might not want to wait any longer for fear increasing rates could price them out of the market.

“That could be accelerating these markets in pricier areas,” says Hale.

A recent Redfin report found the national monthly mortgage payment rose 21.6% annually in December, the largest increase in Redfin’s data history.

“The growth in mortgage payments has been driven by both climbing prices and climbing mortgage rates,” said Redfin Chief Economist Daryl Fairweather. 

“And those rising mortgage costs push more potential homebuyers into renting instead, which pushes up demand and prices for rentals. Mortgage rate increases are accelerating, which will cause both mortgage payments and rent to grow throughout 2022.”

“Some lenders I work with say they have had more first-time homebuyer applications in the last couple of weeks than they’ve seen in 20 years,” Paul Legere, a buyer’s agent with The Joel Nelson Group in Washington, D.C., told CNBC. He called the rush to lock in a mortgage before rates rise further “unprecedented.”