As people continue to move to smaller towns, there are 5 “undervalued” US real estate markets where home prices could rise by more than 10% over the next year.
Small and mid-sized towns are having their moment when it comes to home prices going up.
The National Association of Realtors says that the 10 US cities with the most significant appreciation rates over the past year are all small markets. Here they are, with how much they have grown in value from year to year:
From the end of Q2 2022 to the end of Q2 2023, they all went up by more than 10%. During the same period, the typical home price across the country fell by 2.4%.
Fond du Lac, Wisconsin (25.3%)
New Bern, North Carolina (19.7%)
Duluth, Minnesota (14.6%)
Davenport-Moline-Rock Island, Iowa/Illinois (12.6%)
Allentown-Bethlehem-Easton, Pennsylvania/New Jersey (11.7%)
Kingsport-Bristol-Bristol, Tennessee/Virginia (11.5%)
Peoria, Illinois (11.5%)
Green Bay, Wisconsin (10.9%)
Trenton, New Jersey (10.5%)
Cape Girardeau, Missouri (10.4%)
For Anthony Hitt, president and CEO of Engel & Volkers Americas, a real estate company headquartered in Germany, the rise of small markets is a sign of a culture change. Since the pandemic, people moved out of big cities and into more rural places because it has become easier to work from home after the pandemic. But he thinks people can now find a good balance between living in the country and a big city by moving to smaller or more mid-size towns.
He thinks the trend will keep going.
Hitt said in an email, “Looking at both industry and Engel & Volkers data, as well as the anecdotal information we are getting from our local real estate advisors, I am optimistic that this trend of double-digit appreciation will continue to spread to other similar non-coastal metro markets over the next few months and year.”
In a call with Insider last week, he talked about five “undervalued” areas where he thinks home prices will go up by double digits next year because of this trend.
Some areas are Indianapolis, Indiana; Kansas City, Missouri; Portland, Maine; Phoenix, Arizona; and Spokane, Washington. Phoenix is the fifth-biggest city in the US but is still smaller than New York, Los Angeles, or Chicago. It has a population of about 1.6 million, which makes it an oddball on the list.
“I think that these have the best of both worlds. “I am far enough away, and I can get to those more rural areas faster,” he said. “But I am connected to a major airport or the infrastructure they need to do their work. And the culture now makes it possible for many people to work from those places.”
Hitt thinks home prices will increase by 3-4% nationwide over the next year. But he thinks prices will increase by 10% or more in the five areas he named.
According to Redfin, we have compiled a list of the five places’ population, median home prices, and home-price growth rates over the last 12 months.
1. Indianapolis, IN
880,621 people live here.
The average price of a home is $240,000
Over the past year, home prices have gone up by 0.8%.
2. Kansas City, MO
509,297 people live here.
The price of the average home is $285,000.
Over the past year, home prices have gone up by 5.6%.
3. The city of Portland, Maine
Number of people: 68,424
Price of the average home: $550,000
Over the past year, home prices have gone up by 7%.
4. The city of Phoenix, Arizona
Number of people: 1,644,409
Price of the average home: $440,000
Over the past year, home prices have gone up by 2.6%.
5. Spokane, Wash.
There are 229,513.
Price of the average home: $380,000
Over the past year, home prices have gone up by 1.9%.