The No. 1 emerging property market in America is NOT in Texas or Florida — you may never

The Emerging Housing Markets Index from The Wall Street Journal and Realtor.com analyzed the 300 largest metropolitan areas across the country. Each housing market was evaluated based on a range of factors related to real estate, economic vitality and quality of life.

The top growing markets, therefore, were the places that are expected to see the greatest home price growth in addition to other attractive amenities.

Top of the list was Coeur d’Alene, a city of some 44,000 people located amid the mountains of northwestern Idaho just over the border from Spokane, Wa. After Coeur d’Alene, Austin, Texas, came in at No. 2.

Austin was not the only Sun Belt city on the list — Reno, Nevada, (No. 7) and Santa Cruz, California (No. 10) also featured.

But the rest of the top 10 from the Emerging Housing Markets Index were spread across all parts of the country.

The list includes cities in New Hampshire, Ohio and Montana. Looking to the top 50 cities in the index, fewer than half were located in the Sun Belt.

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To an extent, this nuance of the index is a reflection of its focus on home-price growth, said Danielle Hale, chief economist at Realtor.com. In these markets, “demand is really high, and supply is also relatively tight,” Hale said. “They’re not oversupplied.”

That contrasts with the broad Sun Belt region where “builders have done a better job of keeping up and building, so they don’t have quite the same supply constriction,” Hale added.

Nevertheless, the new index hints at broader migration trends occurring across the country that are prompting the rise of new real-estate hotspots.

How the Sun Belt came to dominate American real estate

The Sun Belt, roughly speaking, incorporates the Southeastern and Southwestern United States. Over the past 50 years, it has experienced significant population growth.

States like Florida and Arizona became popular retirement destinations, particularly as central air-conditioning became commonplace. The year-round warm weather makes the region popular among tourists, as well.

“These areas have had tailwinds for 30 or more years,” said Edward Pinto, director of the Housing Center at the American Enterprise Institute. “And those tailwinds have only gotten stronger.”

Besides the warm weather, other attributes in these states have made them popular for migrants from other parts of the country.

These states generally have lower tax burdens, particularly for income taxes, and generally have offered strong job markets, Pinto said. And, echoing Hale, Pinto noted that they’ve managed to maintain a steady pace of home construction.

“Even taking growth into account, they’re still building a lot more than the rest of the country,” he said. As a result, home prices have remained relatively affordable, making them attractive for Americans looking to relocate.

The impact of COVID-19

Even before the pandemic, markets outside the Sun Belt were starting to heat up. St. George, Utah, Bend, Ore., and Coeur d’Alene were among the top 20 counties nationwide based on the percentage increase in net migration, said Auction.com vice president of market economics Daren Blomquist, citing U.S. Census Bureau data.

Interest from real-estate investors has followed those migrants. “We’re seeing real estate investors buying on Auction.com gravitate toward these markets, and rural markets in general,” Blomquist said.

What’s so appealing about these markets in the northwest and mountain west?

Many of them feature more temperate climates, but do have all four seasons. Their location in more rural, mountainous areas mean that residents can avail themselves of outdoor activities such as hiking, rock-climbing and skiing more readily than in other parts of the country.

Plus, most of these cities are still small compared to major metropolitan areas, meaning they offer a calmer, slower way of life.

“It seems to fit with what I’m going to call the New American Consumer,” said Bill Dallas, a mortgage industry veteran and president of Finance of America Mortgage. “This area is probably broadly the next big hotspot.”

Dallas says this region represents his company’s highest-growth area, though it still isn’t the most dominant by volume. “Your big states are still, Texas, California, New York and Florida,” he said.

But the changes brought on by the pandemic are influencing where people want to live. The rise of working from home, in particular, is set to allow new markets a chance at basking in the spotlight. And many of those markets are located in the broader Rocky Mountain-Northwestern region, according to housing experts.

“Pre-pandemic the migration was driven by affordable housing, low taxes, and a lifestyle appealing to outdoor enthusiasts, but it was limited to markets with close proximity to plenty of jobs,” Blomquist said. “Post-pandemic, that access-to-jobs limitation has been removed for many thanks to the broader acceptance of remote work.”

The Rocky Mountain region holds particular appeal for people leaving the high-cost housing markets along the West Coast. People in places like San Jose and Los Angeles would probably first be inclined to relocate further inland in California, Pinto said.

But the high cost of living in the Golden State is pushing people out. Many of them are moving to more remote destinations such as Boise, Idaho, where they can work remotely easily, but can also hop on a short flight back to their company’s headquarters when needed.

Will the Sun Belt remain popular?

Americans continue to move to the Sun Belt in droves, as evidenced by the latest…