Small towns are making big gains in homebuyers this spring.
Case in point: Rapid City, SD—a tiny metro better known for Mt. Rushmore than a real estate hotspot—took #1 spot in the latest quarterly Wall Street Journal/Realtor.com® Emerging Housing Markets Index.
The index examines the 300 largest metropolitan areas and attempts to identify which real estate markets are likely to be strong in the coming months – based on factors such as a robust local economy, low unemployment, high wages and conveniences such as easy access to business parks. The index also takes into account the local housing market, examining average days on the market, property taxes and more. (Metro systems include the capital and surrounding cities, suburbs, and smaller urban areas.)
Why Rapid City is recognized as the most important emerging market right now
How did little Rapid City beat all other subways for this top honor?
With a small population of 144,514, it has a robust economy with a low unemployment rate of 2.4%, thanks to a strong government presence including Ellsworth Air Force Base and the Army National Guard. This modestly sized community also has less competition for jobs and relatively uncrowded outdoor areas.
And possibly capping Rapid City’s appeal for homebuyers? There is no state income tax.
“These factors underpin a solid and attractive housing market averaging about $437,000 that is aligned with national trends,” he says George Ratiu, manager of economic research for Realtor.com. “The price of a typical home in the city has risen sharply from last year as nearly 70% of buyers on Realtor.com viewed properties in the city outside of South Dakota.”
Home shoppers from three major cities—Washington, DC; Denver; and Omaha, NE – made up 1 of 5 views of the Rapid City subway housing stock. The homes spent around 30 days on the market before being auctioned, but there are signs the market is heating up further.
“Two weeks ago I sold a house that had only been on the market for nine days,” he says Christina Kason, co-founder and real estate investor at Texas Family Home Buyers. “It was not a lavish home in an excellent neighborhood or cheap. It was just ordinary in the truest sense of the word. The market situation in Rapid City shows that.”
Why homebuyers are flocking to small towns
Aside from Rapid City, the warm climes of Florida and California continue to attract buyers this spring, with Santa Cruz, CA and Northport, FL taking second and third place on the list. The markets have average home prices of $1,262,500 and $575,000 respectively – far more expensive than the national median, further underscoring the importance of quality of life for some wealthy homebuyers.
Overall, the Spring Emerging Markets List made some notable detours from three months earlier. Nine markets from the winter 2021 top 20 – all southern and western territories – dropped from the list this quarter. This could be due to seasonal variations, as warmer weather lures homebuyers farther north.
Seasons aside, homebuyers today face a rapidly changing real estate landscape, punctuated by a shortage of available homes, record-breaking home prices that climbed to a national median of $405,000 in March, and rising mortgage rates that hit 5% for the first time. climbed, is plagued time since 2011.
With affordable housing becoming increasingly difficult to find, this is an area where small and medium-sized cities shine. In fact, 8 of the top 20 markets have median list prices below the national median.
“In recent years, midsize cities across the country have risen in profile as Americans, faced with social distancing and remote working, have sought a more balanced lifestyle during the pandemic, with a particular focus on outdoor activities,” says Ratiu. “Additionally, homebuyers struggling with rising prices in major metro areas have found safe havens in the relative affordability of smaller markets.”