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Patrick Villanova, CEPF® MAR 23, 2023
Gone are the days of a sub-3% mortgage, commonplace during the housing market boom of the COVID-19 pandemic. Mortgage rates have steadily increased since the Federal Reserve started hiking interest rates in March 2022 to combat inflation. As a result, home prices have declined from recent heights.
To help homebuyers navigate the recent turbulence, SmartAsset set out to identify the best and worst housing markets for growth and stability. We compared home value data for 400 metropolitan areas between 1998 and 2022, calculating cumulative increases during that time, as well as the frequency of significant drops in value. For details on our data sources and how we determined rankings, read the Data and Methodology section below.
Key Findings
- Austin takes the title for the best housing market for growth and stability. Austin-Round Rock-Georgetown home prices have risen 354% since 1998 – more than any other metro area in the nation.
- Home prices grew 154% between 1998 and 2022. Across the 400 metro areas we considered for our analysis, home prices increased an average of 154.46% over the 25-year window, compared to an 80% cumulative inflation rate over the same time period.
- The Lone Star State dominates. Austin-Round Rock-Georgetown isn’t the only Texas metro area with a strong housing market. Five other metro areas in the Lone Star State rank among the top 10 markets for growth and stability, and 14 of the top 25. All but one of those metro areas saw above-average growth in home prices between 1998 and 2022.
- Cities in Michigan and Ohio rank poorly. Thirteen out of the 20 worst housing markets for growth and stability are located in Michigan or Ohio. Neither state made an appearance in the top 100.
Best Housing Markets for Growth and Stability
1. Austin-Round Rock-Georgetown, TX
The Austin-Round Rock-Georgetown metro area ranks No. 1 overall, thanks in large part to home values that have skyrocketed in the last 25 years. Between 1998 and 2022, home prices increased by 353.92%, the most cumulative growth in our study, without much downside. But home prices aren’t the only thing growing: The population has nearly doubled in the last 20 years, in part thanks to the presence of large tech companies — including Apple, Amazon and Tesla — supporting the local economy.
2. Midland, TX
Located in West Texas, the Midland metro area saw home prices rise 255.5% between 1998 and 2022, more than 91% of metro areas in our study. Local oil and gas reserves help support the local economy, including the recent discovery of one of the largest U.S. oil reserves.
3. Boulder, CO
Home to the University of Colorado’s flagship campus, Boulder ranks third-best for housing market growth and stability. Between 1998 and 2022, home prices rose 256.48%, 33rd-most out of the 400 metro areas. While Boulder hasn’t experienced quite the same population spike as the top two cities for housing and growth, it hosts offices of Google and IBM and has a reputation as a startup city.
4. Fort Collins, CO
Fort Collins, located about one hour north of Boulder, has a similarly strong housing market. The city saw average home prices go up 224.17% between 1998 and 2022, which puts Fort Collins in the top 20th percentile for growth. Fort Collins draws in many people thanks to local natural features like Horsetooth Face Open Space and the Cache la Poudre River, as well as opportunities with Colorado State University.
5. Kennewick-Richland, WA
A short drive from the Oregon border, the Kennewick-Richland metro area of southeastern Washington benefits from a diverse local economy. Home prices have increased 211.07% between 1998 and 2022, while the population has grown by roughly 40%.
6. Rapid City, SD
Home prices in Rapid City have roughly tripled in the last 25 years. Tourism to Rapid City helps support the local economy, thanks to its close proximity to Mount Rushmore, the Black Hills and Badlands National Park. South Dakota’s income tax policies — including no state income tax for individuals or businesses — also help incentivize economic activity.
7. Odessa, TX
Like Midland, Odessa benefits from its proximity to the oil and gas underneath the Permian Basin. Both cities also enjoy a cost of living about 12% lower than the national average, according to Salary.com. On average, homes in Odessa have increased in value by 226% from 1998 to 2022, though with more volatility than the rest of the top 10.
8. Dallas-Plano-Irving, TX
As the third largest city in Texas by population, Dallas is home to large companies like AT&T and Southwest Airlines, while nearby Irving hosts the ExxonMobil headquarters. These large employers help attract workers and stabilize the local economy, partly contributing to the 213% increase in home values over the last 25 years.
9. San Antonio-New Braunfels, TX
San Antonio home prices have also tripled since 1998. Among many other local attractions, Seaworld San Antonio and Six Flags Fiesta Texas bring plenty of tourists to the area, while large companies like Valero, USAA and iHeartMedia employ thousands. The population has steadily grown over the last two decades, though not at the same accelerated rate as housing prices.
10. Houston-The Woodlands-Sugar Land, TX
Houston home prices have shot up just over 200% without much historical chance of losing value in the last 25 years. This growth and stability is in part supported by the presence of Sysco, Halliburton and Texas Medical Center — the largest medical campus in the world. Houston is also home to a handful of universities, further rounding out the local economy.
Worst Housing Markets for Growth and Stability
The four worst housing markets for growth and stability centered around Detroit, Michigan. In these cases, home prices in Flint, Monroe, Detroit and Saginaw didn't even keep up with inflation over the last 25 years. Much of the decline in this area of Michigan can be attributed to the auto industry's exit in the 1990s, though other factors have also contributed to the lack of growth.
Of the top 10 worst housing markets for growth and stability, only three broke the 80% inflation threshold over the 1998 to 2022 time period. For all 10, it's been a rocky decline, with frequent quarterly drops of at least 5% in value.
Data and Methodology
To rank the best and worst housing markets for growth and stability, we looked at data for 400 metro areas and specifically compared them across these two metrics:
- Stability. This is the incidence of homeowners experiencing a significant price decline (5% or more) at any point in the 10 years after they purchased a home. We looked at data for every quarter between 1998 and 2022.
- Overall home price growth. The total growth in home prices during the time period we analyzed. We looked at data for every quarter between 1998 and 2022.
All data comes from the Federal Housing Administration (FHA) and covers the 25-year period from the first quarter of 1998 through the fourth quarter of 2022.
We used these two metrics to create our final rankings. Areas received a score of 100 on the stability metric if there were no quarters in which home prices fell 5% or more within 10 years. The metro area with the highest frequency a significant price declines (46%) received a score of 0. Similarly, the metro area with the highest overall home price growth received a growth index score of 100 and the metro area with the lowest growth received a 0. We then averaged each metro area’s scores over the two metrics, ranking from the highest average score to the lowest.
Limitations
This study is based on historical data. Continued growth and stability is not guaranteed in any metro area, and many factors influence individual housing markets.
Home Buying Tips
- Don’t forget to budget for PMI. When putting less than 20% down on a home purchase, you may be charged private mortgage insurance (PMI). This surcharge, which is rolled into your mortgage payment, typically ranges from 0.22% to 2.25% of your mortgage, according to Chase Bank. How much you end up paying depends on the size of your down payment and your credit score. However, PMI generally goes away once you reach the 20% equity threshold on your home.
- Run the numbers. SmartAsset has a tool designed specifically to help you decide how much house you can afford to buy. The calculator takes into account your annual income, down payment size and any other debt you may have before giving you an estimate.
- Create a financial plan. Having a financial plan and seeing if your home potential purchase will derail other goals, like retirement, is critical. A financial advisor can help you create a holistic financial plan that takes your home purchase into account. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Questions about our study? Contact us at press@smartasset.com
Photo credit: ©iStock.com/Jonathan Ross
PATRICK VILLANOVA, CEPF®Patrick Villanova is a writer for SmartAsset, covering a variety of personal finance topics, including retirement and investing. Before joining SmartAsset, Patrick worked as an editor at The Jersey Journal. His work has also appeared on NJ.com and in The Star-Ledger. Patrick is a graduate of the University of New Hampshire, where he studied English and developed his love of writing. In his free time, he enjoys hiking, trying out new recipes in the kitchen and watching his beloved New York sports teams. A New Jersey native, he currently lives in Jersey City.