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Top 10 List Reveals Homebuyers are Saying “Why Don’t You Just Meet Me In The Middle”

With high demand, low inventory, and a precarious supply chain for building materials, 2021 is the perfect storm for rising real estate prices. But the house value boom is not spread evenly across the country.

Home prices are increasing quickly in some metro areas, they remain relatively unaffected in others.

It appears the middle U.S. is receiving a lot of attention.

Below are the 10 metro areas with the greatest year-over-year increases from the first quarter of 2020 to the first quarter of 2021, according to the Federal Housing Finance Agency (FHFA) Housing Price Index (HPI). See the full top 100 list here.

As a baseline, the HPI for the United States rose 12.6% over the last year and 3.5% from last quarter.

Metro areaYear-over-year API increaseQuarter-over-quarter API increaseMedian listing home price*
Boise City, ID28.2%7.6%$489.9K
Austin-Round Rock-Georgetown, TX22.7%8.2%$600K
Tacoma-Lakewood, WA21.6%7.6%$425K
Salt Lake City, UT18.4%5.7%$470K
Phoenix-Mesa-Chandler, AZ18.4%5.9%$385K
El Paso, TX18%6.4%$248.5K
Stockton, CA17.9%7.2%$375K
Knoxville, TN17.8%5.9%$269.9K
Grand Rapids-Kentwood, MI17.2%6.0%$214.9K
Bridgeport-Stamford-Norwalk, CT17.1%5.5%$310K
*According to Realtor.com

What does the top ten tell us?

This top ten list paints a pretty clear picture of where demand is increasing home prices. The top 7 metro areas are all west of the Mississippi, but only two — Stockton and Tacoma-Lakewood — can be considered coastal. It seems homebuyers are drawn to the sweet spot between the expensive West Coast and the rural Midwest.

There’s also a complete lack of major metro areas in the top ten. In fact, traditionally hot housing markets don’t come into play until much further down the list.

  • Seattle-Bellevue-Kent, WA ranks 31 with a year-over-year HPI increase of 14.6%
  • Denver-Aurora-Lakewood, CO ranks 42 with an increase of 13.4%
  • Los Angeles-Long Beach-Glendale, CA — the poster-child for expensive housing markets — ranks 54 with a 12.9% year-over-year HPI increase

That suggests a few things:

1. Home prices are increasing from a much lower point in mid-size metro areas compared to major metro areas. A $90,000 increase in list price is 20% in a metro like Salt Lake City where the median list price is around $450,000, but only an 8.4% increase in a market like Seattle where the median list price is $760,000.

For the same dollar amount, the HPI increase is significantly different based on the starting point.

2. Migration to mid-size metros is a relatively recent phenomenon, therefore the HPI increases are more drastic than major metros where growth has been prolonged.

3. Demand is cooling in major metro areas as more homebuyers are being priced out of the market. Perhaps relocating to a smaller, more affordable metro area has become the easier — or only — option for some homebuyers.

About the HPI Index

The FHFA HPI measures house price fluctuations for more than 400 American cities dating back to the 1970’s. The index measures price changes on the same homes as repeat sales and refinances happen. As such, it’s a great indicator of how much the same house would cost over time.

This index tracks year-over-year and quarter-over-quarter changes, and provides a snapshot of which metro areas are experiencing the fastest increase in home prices. The first quarter stats from 2021 signal a shift in demand away from major metros on the coast mid-sized metros further inland.

What HPI doesn’t tell us about increasing home prices

While HPI is a good indicator of changes in home prices, it doesn’t mention actual prices, and is therefore a little misleading. For example, the Grand Rapids-Kentwood metro area HPI grew the ninth most from 2020-2021, which makes it seem like a hot, expensive area. However, the median list price is still under $220,000 — well below the national median of $347,500.

So, HPI can inform homebuyers where prices are rising, but shouldn’t necessarily deter them from looking in those areas. In fact, it may be a good way to find up-and-coming areas with opportunities for long-term appreciation and equity.

Further Reading