Hottest Real Estate Markets 2022

March 30, 2022

Sunbelt Cities Top the List

This year’s hottest real estate markets are in medium-sized cities in the Sun Belt, including Tampa, Jacksonville, and Raleigh. Based on historical trends, these Sun Belt markets are likely to continue to thrive even as mortgage rates increase, Zillow said.

The Top Ten

Tampa, FL, tops Zillow’s annual list of the most competitive real estate markets for 2022. Zillow’s analysis incorporates:

  • Expected home value appreciation from November 2021 to November 2022
  • Home value appreciation in 2021
  • Standardized number of days a home was listed for sale
  • Projected change in the number of owners’ households
  • New jobs per new housing unit.

Tampa, which has about 3.1 million people in its metro area, gained the top slot because Zillow predicts home values will increase by 24.6 percent in Tampa. According to Zillow, over the past 12 months, middle-tier home prices in Tampa have increased by 31.5 percent. Also, the number of potential buyers, the relative scarcity of homes, and a thriving job market all combine to create fast-paced home sales, Zillow said. For example, Tampa added 0.63 added jobs per new housing unit. The population of Tampa is also growing. The US Census Bureau shows an 18 percent population increase in the Tampa metropolitan area over the past ten years.

Jacksonville, FL, Raleigh, NC, San Antonio, TX, and Charlotte, NC, fill out the top five slots. These four cities also have many homebuyers, a booming job market, and fast-paced sales. Based on a Zillow survey of midrange homes, Jacksonville home prices have increased about 28 percent in the past 12 months. Though smaller than Greater Tampa at 1.58 million people, Greater Jacksonville also shows a healthy population increase of about 15 percent. Jobs are also increasing at a higher rate than new homes.

Greater Raleigh, San Antonio, and Charlotte show one-year home price increases of about 32 percent, 23 percent, and about 27 percent, respectively, according to Zillow. The metropolitan areas show 10-year population increases of 25 percent, about 22 percent, and 21 percent, respectively. The remaining cities in the top ten are Nashville, TN, Atlanta, GA, Phoenix, AR, Orlando, FL, and Austin, TX. In 2021, Austin and Phoenix were the top two hottest real estate markets in 2021, according to Zillow.

2022 is Hot Throughout the Nation

Zillow sees the hot housing market continuing in 2022 throughout the United States. It is believed that sellers will continue to have the upper hand in most US markets, including the coolest ones which Zillow lists as New York, Milwaukee, San Francisco, and Chicago.

Demographic Influences Driving the Market

The trend toward Sun Belt cities is being driven mainly by two demographic groups that are very active in the housing market. Baby Boomers, who were born between 1946 and 1964, continue to purchase homes as they retire, often in warm climates. The Boomers will continue to be a critical factor in the housing market for the next eight years, Zillow says.

The second major demographic group driving home purchases is the Millennials, who were born between 1981 and 1996. The Millennials are reaching their mid to late 30s, which is a time when Americans traditionally have children, buy their first homes, and settle down. Younger Millennials will be hitting the prime age for buying their first home as the Boomers’ home purchasing years begin to wind down, meaning the rest of the decade could be a peak home-buying period in many markets.

Behavioral Factors Driving the Market

Low inventory occurs when fewer sellers are willing to sell, builders construct fewer homes, and when demand is high. Even when sellers and builders place a significant number of homes on the market, an increased number of buyers can contribute to low inventory and a highly competitive housing market.

Economic Factors Driving the Market

Other aspects of the economy typically affect the housing market. The rise of mortgage interest rates typically slows the market somewhat. However, interest rate increases typically disproportionately affect the most expensive housing markets, such as San Diego, New Orleans, and Washington, DC. None of the top 10 hottest markets are in this category.

The stock market performance also affects the real estate housing market. A slower market generally negatively affects the buyers’ down payment amount. Stock market performance tends to disproportionately affect markets with a lot of first-time homebuyers or those markets where buyers are moving from lower-cost areas. Phoenix is the only city in the Top Ten Highest Markets that will likely experience any significant negative effects if the stock market declines, Zillow says, because growth has had strong positive correlation with stock market returns in this market historically. 

This post is provided for informational and educational purposes. It is not intended to be investment advice and should not form the basis of an investment decision.

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