Summer 2023 WSJ/Realtor.com Emerging Housing Markets Index
The Wall Street Journal/Realtor.com Emerging Housing Markets Index
As the Summer heats up, the housing market remains stuck in the doldrums due to a pattern of low inventory and high prices. Mortgage rates have remained in the 6-7% range for the majority of the last 10 months which has allowed some buyers to adjust expectations and step back into the market. However, many homeowners hold a mortgage loan at a lower rate than today’s, making them hesitant to sell. As a result, for-sale inventory has fallen and existing home sales have stalled as the mismatch of buyer demand and for-sale inventory constrain the market. Buyers have instead turned to new home inventory, leading to a 12.2% increase in new home sales in May.
June’s CPI inflation data showed significant progress, a welcomed sign that the Fed’s contractionary policy is having the intended effect. Though the latest data is moving in the right direction, the Fed has signaled that last meeting’s pause will not be a full stop– more rate hike activity is likely coming in upcoming meetings. Employment activity also slowed in June, adding only 209,000 jobs throughout the month, a step lower than in recent months. Overall, however, unemployment remains near record lows, meaning that consumers remain in a stable position to weigh housing decisions.
The summer’s market is neither as red-hot as previous years, nor freefalling as many feared it might. Instead, the market is a display of the tension between a smaller number of buyers looking for a deal and low for-sale inventory preventing the price drops that buyers were hoping for. Homes are spending longer on the market, but still selling more quickly than pre-pandemic at a national level. While the market has slowed, it has not come to a full stop and the lack of new homes listed for sale has kept supply and demand relatively matched, and prices roughly stable. Buyers continue to zone in on affordable areas as emphasized in previous Emerging Housing Markets Index releases.
Summer 2023 Top 20 Emerging Housing Markets
As consumers face still-elevated inflation and home prices, as well as limited for-sale inventory, the Wall Street Journal/Realtor.com Emerging Housing Markets Index highlights housing markets that offer shoppers a lower cost of living, including for homes, and thriving local economies that are attractive, but not too crowded. The index identifies markets that those considering a home purchase should add to their shortlist–whether the goal is to live in it or rent it as a home to others.
We reviewed data for the largest 300 metropolitan areas in the United States. The Summer 2023 ranking surfaced the following top areas:
|Rank||Metro||Population||Unemployment Rate (%)||Median Home Listing Price June 2023|
|1||Lafayette-West Lafayette, Ind.||224,709||3.0%||$355,000|
|2||Fort Wayne, Ind.||423,038||2.9%||$350,000|
|5||Sioux City, Iowa-Neb.-S.D.||149,265||2.4%||$342,000|
|8||Johnson City, Tenn.||208,068||3.4%||$422,000|
|9||South Bend-Mishawaka, Ind.-Mich||323,695||3.9%||$292,000|
|14||La Crosse-Onalaska, Wis.-Minn.||139,211||2.1%||$337,000|
|15||Portland-South Portland, Maine||556,893||2.0%||$626,000|
|18||Milwaukee-Waukesha-West Allis, Wis.||1,566,487||2.7%||$380,000|
|19||Jefferson City, Mo.||150,706||2.1%||$267,000|
|20||Norwich-New London, Conn.||268,805||3.6%||$537,000|
Emerging Markets Offer Lower Cost Living
Home prices have begun to ease nationally, falling 0.9% in June. However, the cost of purchasing a home continues to strain many buyers. Similar to previous quarters, Summer 2023’s emerging markets continue to lean heavily on affordability. Home list prices in all but four of the top 20 markets are lower than the median-priced U.S. home for sale, which was $445,000 in June. The lowest priced locale on the list, Akron, Ohio, offered 49% savings on the median priced home relative to the national level in June. Though homes in this quarter’s emerging markets offer significant savings, the effective property tax rates in these markets are slightly higher than U.S. average at 1.2%. Nevertheless, the lower price tag offsets the higher tax rate in the majority of these markets.
Sustained Demand Drives High Price Growth, Quick Market Pace
The median price of the typical home for sale is just slightly lower than last June nationwide but these top markets continue to see significant annual price growth. While the national market has slowed, this quarter’s emerging markets have continued to attract attention due to their affordability and desirability, which has kept price growth strong. Still-high prices and mortgage rates have shifted buyer preferences towards areas that offer more bang for the buck.
The average increase in listing price was 25% among the top 20 markets compared to 8.9% nationally for the 12 months ending in June 2023. All of the top markets except Akron, OH saw price growth exceed the national rate. These markets all saw double-digit price growth in the time period.
High demand led to less active inventory build up than was typical in the US. The average increase in homes for sale across the top 20 markets was 16% compared to roughly 40% nationwide compared to the prior year. Among the top 20, just two saw the number of homes on the market climb faster than the national average: Elkhart-Goshen, Ind. and Knoxville, Tenn.
Although 17 of the top 20 emerging markets saw an increase in time on market, homes sold on average 10 days faster than the average across the 300 markets ranked for the index (38 vs. 48 days). Additionally, all 20 markets outperformed the US average time on market for the year ending in June 2023.
Mid-sized Markets with Strong Employment and Convenient Commutes
Similar to last quarter, this quarter’s emerging markets are smaller markets. The average population of these markets is roughly half that of the 300-market average. The largest market on the list is Columbus, Ohio with a population just over 2 million, followed by Milwaukee, Wis., which has roughly 1.5 million residents. Knoxville, Tenn., Akron, Ohio and Portland, Maine each have over half a million residents, but the other 15 markets on the list all fall well below this population level.
The jobs market has remained near recent unemployment lows, notching 3.6% unemployment in June, a tick down from May’s level. Remarkably, the emerging markets have even better employment trends, with an average unemployment rate of just 2.9% in these markets in May. Only three of the top 20 markets had an unemployment rate above the 300-market average (3.5%). Conveniently, commutes in these areas are relatively short, clocking in at just under 22 minutes compared to nearly 24 minutes on average across all markets reviewed in the index. Only the Boston-adjacent Manchester-Nashua, N.H. sees longer-than-average commute times at nearly 26 minutes.
Typical wages lagged behind the U.S. with an average weekly wage of $1,094 among the top markets compared to $1,104 among the broader market average. However, this $20 per month difference is more than covered by the lower cost of homeownership and overall lower cost of living. Prices in the top emerging markets on average are less than 93% of the national price level, and only two markets have prices that are slightly higher than the national average. The lower cost of living allows residents to utilize amenities, and as a result, the top 20 markets have 14% more amenity stores per resident than was typical in the analyzed areas.
Affordability Attracts Out-of-Market Shoppers
Though this quarter’s emerging markets generally see slightly less out-of-market activity than is typical in the 300 largest metros, these areas have seen significant growth in out-of-metro viewership. On average, the emerging markets saw out-of–metro viewership climb 10 percentage points compared to the previous year, reaching 71.5%. The Columbus, Ohio metro area saw a 16.3 percentage point increase in out-of-metro viewership, followed by a 12.2 percentage point increase in Manchester-Nashua, N.H. and an 11.7 percentage point increase in each Sioux City, Iowa-Neb.-S.D. and Columbia, Mo..
The emerging markets saw a similar sized increase in out-of-metro attention as the top 300 metros, emphasizing the increasing willingness of shoppers to look outside of their current location to find a suitable home. This quarter’s markets saw a larger increase in out-of-metro viewership than in the previous quarter, showing the increasing pressure shoppers feel to seek out affordability.
Continuing on last quarter’s deviation from previous trends, Summer 2023 markets have residents who are, on average, somewhat less mobile than residents in the top 300 markets with the share of those moving just 13.4% compared to 13.6% overall. The most significant exceptions to this trend are Columbia, Mo. and this quarter’s number one market, Lafayette-West Lafayette, Ind. In each of these markets, more than 1 in 5 residents live in a different house than one year ago.
City Spotlight: Columbus, OH
This month’s highest-ranked emerging market is Lafayette-West Lafayette, Ind., the same as last quarter and in our Winter 2023 Emerging Housing Markets Index. While many of the last quarter’s top-ranking metros stayed near the top, Columbus, Ohio moved up 6 spots to become the number 6 emerging market this quarter and stands out for being the most populous market among the top 20. Columbus offers home shoppers the amenities of a larger town, but at a lower price point. Home to The Ohio State University, residents of this area can enjoy top-notch college sports, as well as the exciting Short North Arts District and a bustling food scene.
The Columbus area is home to multiple large employers, ranging from banking to retail to shipping and logistics. The area serves as headquarters for retail brands Abercrombie & Fitch, Bath & Body Works and Big Lots, among others. The largest employers in the area include JPMorgan Chase & Co., Nationwide, Amazon, Honda and DHL. Notably, the Biden administration recently announced the launch of a workforce hub in the area this summer as a part of an initiative to meet high-skill labor demands being driven by infrastructure and manufacturing investments.
The typical home for sale in Columbus was listed for $399,000 in June, a 10% discount compared to the national median. However, the popularity of the market kept upward pressure on prices, which rose 14.1% year-over-year in June. Homes spent 23 days on the market in Columbus in June, almost 50% longer than last year, but still three weeks fewer than was typical nationally. The number of homes for sale fell slightly in the area in June as a lower rate of new listings started to move through the market.
More than half (55.3%) of views to properties in Columbus come from outside of the metro, with particularly sizable out-of-metro attention from the New York City area. This share increased by 16.3 percentage points in Q2 of 2023 compared to the previous year, indicating a pick up in out-of-metro demand.
Columbus locals can enjoy the summer weather at the Franklin Park Conservancy and Botanical Gardens or cool off in one of the area’s museums, such as the Columbus Museum of Art or the Center of Science and Industry.
Columbus, OH Housing Highlights
|Realtor.com – Columbus, OH : June 2023 Inventory Metrics|
|YoY % Change|
|Median List Price||$ 399,000||14.1%|
|Days on Market||23||+7 days|
Home Shoppers From New York Drive Columbus Demand
There are many familiar places on the list of the top 20 emerging markets: 12 members of the Spring 2023 list, most notably number 1, Lafayette-West Lafayette, Ind. This is the third quarter that this market has held the top spot. Among the markets that have remained on our list are the ever-popular southern locales Johnson City, Tenn., and Knoxville, Tenn., as well as the midwestern hotspot of Columbus, Ohio, and various small- to mid-sized midwestern cities that offer affordable housing and low costs of living. Notably, the popular and fast-moving northeastern metro of Manchester-Nashua, N.H. also remained on the list, continuing the reign of Boston metro area locales.
|Market||Summer Rank||Spring Rank||Rank Change|
|Lafayette-West Lafayette, Ind.||1||1||Same|
|Fort Wayne, Ind.||2||5||3 spots higher|
|Bloomington, Ill.||4||2||2 spots lower|
|Sioux City, Iowa-Neb.-S.D.||5||7||2 spots higher|
|Columbus, Ohio||6||12||6 spots higher|
|Topeka, Kan.||7||6||1 spots lower|
|Johnson City, Tenn.||8||14||6 spots higher|
|Manchester-Nashua, N.H.||11||10||1 spot lower|
|Knoxville, Tenn.||12||20||8 spots higher|
|Columbia, Mo.||13||18||5 spots higher|
|La Crosse-Onalaska, Wis.-Minn.||14||13||1 spot lower|
Markets Falling Out of the Top 20
Of the eight markets that did not remain on the list from the Spring into the summer, most fell out of the top 50. The two biggest movers, Burlington, N.C. and Omaha-Council Bluffs, Neb.-Iowa, which fell 79 spots and 151 spots, respectively, remained near the top half of areas studied, ranking 96th and 159th this quarter. The markets that departed the top 20 in our index included two Southern markets of Hickory-Lenoir-Morgantown, N.C. and Burlington, N.C. as well as Lebanon, Pa., and the midwestern markets of Springfield, Ill., Waterloo-Cedar Falls, Iowa, Janesville-Beloit, Wis., Springfield, Ohio and Omaha-Council Bluffs, Neb.-Iowa. As buyers adjusted to the higher-rate environment, these markets were replaced by slightly higher priced markets.
Taking the places of the 8 descended markets are the five affordable Midwestern locales, plus the two Northeast metros of Portland-South Portland, Maine and Norwich-New London, Conn. and the Southern Kingsport-Bristol-Bristol, Tenn.-Va. All of the markets except South Bend-Mishawaka, Ind.-Mich, which climbed 108 spots, ascended from within the top 50. Much like the markets that stayed in the top 20, the Midwest and Southern new markets were more affordable than the national market, while the Northeast markets were higher priced, but affordable relative to nearby Boston and New York metros. In a reversal of last quarter’s trend, these newly added markets are larger in population than the recently descended markets.
The ranking evaluates the 300 most populous core-based statistical areas, as measured by the U.S. Census Bureau, and defined by March 2020 delineation standards for eight indicators across two broad categories: real estate market (50%) and economic health and quality of life (50%). Each market is ranked on a scale of 0 to 100 according to the category indicators, and the overall index is based on the weighted sum of these rankings. The real estate market category indicators are: real estate demand (16.6%), based on average pageviews per property; real estate supply (16.6%), based on median days on market for real estate listings, median listing price trend (16.6%). The economic and quality of life category indicators are: unemployment (6.25%); wages (6.251%); regional price parities (6.25%); the share of foreign born (6.25%); small businesses (6.25%); amenities (6.25%), measured as the average number of stores per specific “everyday splurge” category (coffee, upscale/specialty grocery, home improvement, fitness) per capita in an area; commute (6.25%); and estimated effective real estate taxes (6.25%).