Home Blog Housing Market Trends

New Redfin Report Shows Which Housing Markets Are Gaining—And Losing Sun Belt cities continue to lose ground while less notable markets begin to accelerate.

Anna Cottrell
3 min read
New Redfin Report Shows Which Housing Markets Are Gaining—And Losing

If you read anything about the housing market during the pandemic, you will remember a few metro areas that became the fastest-growing hotspots. Now, according to a recent report by Redfin, these same metro areas are the fastest-cooling ones. Why the sudden shift? Let’s take a closer look at what caused the fast-paced growth in the first place.

Where Did The Growth Come From?

A combination of factors led to what became known as the Sun Belt homebuying surge—a sustained migration of home buyers to up-and-coming metro areas in states such as Arizona and Texas that offered great alternatives to the overinflated housing prices that had defined coastal areas for years.

First-time homebuyers eager to realize their dream of homeownership created the trend of moving towards up-and-coming cities like Phoenix and Austin, creating housing hotspots. In 2021, Austin was suddenly one of the most in-demand and increasingly unaffordable metro areas in the United States. Home price growth in some popular relocation destinations reached dizzying double-digit numbers. Las Vegas, for example, saw home price growth rates of 31% year-over-year in February 2022.

Now, according to October data, home prices in Las Vegas are growing at the rate of 6.8%. This is still high, but the cooling-off factor is marked. The same is happening across all of the pandemic hotspots, including Phoenix, Boise, Austin, and Colorado Springs. Popular Californian destinations such as Sacramento and San Jose have also suffered, with San Jose hit the hardest. Prices there actually declined by -1% year-over-year in October 2022.

MetroFebruary YoY Price Change (Price Per Square Foot) October YoY Price Change (Price Per Square Foot)
Austin, Texas24.2%1.3%
Phoenix, Arizona28.7%6.0%
San Jose, California20.4%-1.6%
Las Vegas, Nevada29.3%8.0%
Boise, Idaho20.1%0.0%
Oakland, California19.3%-0.6%
Sacramento, California20.8%1.2%
Riverside, California25.6%6.8%
Colorado Springs, Colorado22.5%3.8%
Seattle, Washington22.2%3.6%
U.S. Metros Where Price Growth Is Decelerating Fastest (Feb. – Oct. 2022) – Redfin

The fact of the matter is that the pandemic turned a lot of these places into exactly the types of housing markets relocating buyers had hoped to avoid. Redfin reports that the average home price in destinations like Austin, Phoenix, and Boise is now almost $500,000.

As uncertainty about the U.S. economy continues mounting, buyers are growing warier of purchasing expensive properties. Buyer pull-back is creating buyer’s market conditions. Mortgage rates are now averaging nearly 7%—more than double what they were a year ago. “The forces slowing the housing market, such as high mortgage rates, are having an outsized impact on places like Austin and Boise that saw home prices skyrocket over the last few years,” said Redfin Senior Economist Sheharyar Bokhari. Buyer confidence is directly proportionate to mortgage affordability, which has plummeted in recent months. 

For a while, these housing market hotspots were being propped up by the extra cash offered by out-of-town buyers who could get more for their money. Now that this surge is over, locals put off by high home prices and mortgage rates can afford to be bolder in negotiations, increasingly buying at below the asking price.  

Where Are The Next-Best Markets?

So, what will homebuyers do next? And if you are a real estate investor, what emerging housing markets should you be considering before they too succumb to the problems of unaffordability and excessive demand? Well, the data set suggests that people are looking for affordable locations that avoided the worst of the pandemic home price surges. Paradoxically, investors need to look beyond sensational growth in order to capitalize on places with stable, healthy housing markets that are growing at a good pace but are still affordable for buyers. 

The top metros with this profile that emerge from the report are Albany, New York; Bridgeport, Connecticut; McAllen, Texas; Milwaukee, Wisconsin; and Wilmington, Delaware.

MetroFebruary YoY Price Change (Price Per Square Foot) October YoY Price Change (Price Per Square Foot)
Albany, New York2.8%11.2%
Bridgeport, Connecticut4.0%7.5%
McAllen, Texas16.1%18.7%
Milwaukee, Wisconsin8.4%10.8%
Wilmington, Delaware10.3%11.9%
U.S. Metros Where Price Growth Is Accelerating Fastest (Feb. – Oct. 2022) – Redfin

These locations are attractive to buyers because they offer a combination of below-average home prices and a healthy housing economy that won’t see home prices crashing any time soon.

Conclusion

These cities also exemplify the growing popularity of the mid-sized metro. The trend emerged during the pandemic when savvy homebuyers decided to move out of the biggest metro areas and into smaller but still sophisticated urban centers, driven by remote work opportunities and the reemergence of suburban appeal. As the allure of Sun Belt cities like Austin and Phoenix fades, it’s time for the less obvious metros to shine.

Find an Agent in Minutes

Match with an investor-friendly real estate agent who can help you find, analyze, and close your next deal.

  • Streamline your search.
  • Tap into a trusted network.
  • Leverage market and strategy expertise.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.