Once-affordable midsize cities are beginning to increase their housing prices. According to USA Today, many midsize metropolitan areas in the U.S. have been growing less affordable since U.S. home prices jumped by 50% since 2011.
The rising prices and shrinking sales have sent many Americans looking for smaller, more affordable markets. As a result, many smaller cities are benefiting from new residents and home sales.
“Even the second-tier markets are getting a little too pricey for a lot of residents,” said Adam Kamins, an economist at Moody’s Analytics.
“Home prices are not rising as rapidly in the [third-tier] markets,” Kamins said, “and if you can get a good job there you may find a better quality of life.”
Second-tier metro areas are those that have have been ranked 26th to 50th by population number. According to Moody’s Analytics, single-family house prices in these areas have risen by 10% over the course of a year. The average price of a home in a second-tier metropolitan area is $343,000.
These high housing prices come at a cost. On average, a homeowner has spent 27.8% of their average monthly income on housing costs over the last 13 years. But recently that number has jumped to 35.1%.
With higher housing prices and mortgage rates, homeowners may not be able to afford as much money on housing repairs.
Screw hose clamps may be able to temporarily fix damaged pipes in an emergency situation, but if homeowners have to deal with major roofing problems and plumbing issues they may not have the funds.
Home prices in Kansas City, another midsized metro area, have jumped by 10.3% since last year. Yet, sales have fallen by 10%.
In comparison, smaller cities with third-tier markets (those ranked 51 to 100 based on population size) have a better balance of supply and demand with lower prices to satisfy homebuyers.
Third-tier market prices have risen by 6.4%, placing the average cost of a home at $246,000. That’s below the national average of $264,000.
In the small city of Winston-Salem, NC, housing prices have been jumping by 9% every year, but the median price of a home is still far lower than its first and second-tier counterparts at $166,000.
Still, even these third-tier metro areas may be seeing a pricey future. Median house prices will continue to grow with more residents drawn to affordable areas. But until housing prices reach those of their second-tier counterparts, third-tier areas can plan to see an influx of sales over the next few years.