See the Full Rankings for WSJ/Realtor.com’s Summer Emerging Housing Markets Index

Affordable cities dominated the WSJ/Realtor.com Emerging Housing Markets Index once again as elevated mortgage rates have pushed many buyers away from purchases. Homes are still sitting on the market longer, and more sellers are cutting prices.

To help home buyers decide on the best place to make housing investments, The Wall Street Journal collaborated with Realtor.com to rank which housing markets are expected to provide a strong return on investment and offer a nice place to live.

The housing-market index looks at real-estate and nonhousing indicators. This ninth release includes the same set of indicators from previous installments. The index is updated quarterly.

Methodology

To identify the top emerging housing markets, the Journal and Realtor.com reviewed data for the 300 most populous core-based statistical areas, as measured by the U.S. Census Bureau. (Note: The Journal and Realtor.com are both owned by News Corp.)

The overall methodology explores two main areas: real-estate markets (50%) and economic health (50%). Those two areas comprise the following key indicators:

Real-estate supply (16.6%)

Measures the relative scarcity of real estate for sale in a market compared with others based on real-estate listings’ median number of days on the market. Markets with a high supply score have relatively few days on the market compared with other areas. That relatively limited supply is likely to lead to home-price growth. In contrast, markets with a low supply score have more days on the market compared with other areas, indicating that relatively abundant supply will help alleviate pressure on home prices. (Source: Realtor.com)

Real-estate demand (16.6%)

Measures the relative abundance of real-estate demand in a market compared with other markets based on the average number of unique viewers per real-estate listing on Realtor.com. Markets with a high demand score have a relatively large number of unique viewers per home. That abundant buyer demand is likely to lead to home-price growth. In contrast, markets with a low demand score have a smaller number of unique viewers per real-estate listing, indicating that more-limited buyer demand will help curb upward pressure on home prices. (Source: Realtor.com)

Median home listing price trend (16.6%)

Measures recent home-price performance compared with other markets based on typical asking prices for real-estate listings that are active on Realtor.com.

Unemployment (6.25%)

Measures the relative health of the local job market. Data consists of the estimated percentage of the civilian noninstitutional population 16 years of age and older who weren’t employed during the reference period. The seasonally adjusted series is used in the index. (Source: U.S. Bureau of Labor Statistics)

Wages (6.25%)

Measures the relative quality of employment in the area in terms of total wages. Data consists of the median usual weekly earnings of full-time wage and salary workers, before taxes and other deductions, including any overtime pay, commissions or tips. Doesn’t include self-employed workers. (Source: U.S. Bureau of Labor Statistics)

Regional price parities (6.25%)

Measures how expensive it is to live and work in a metro area. RPP consists of differences in price levels across metropolitan areas for a given year, expressed as a percentage of the overall national price level. RPP covers all consumer goods and services, including housing rents. (Source: U.S. Bureau of Economic Analysis)

Amenities (6.25%)

Measures livability of an area in terms of available amenities, as represented by chain stores known for “everyday splurge” purchases, a signal of discretionary consumer income. Data measured as the average number of stores per specific “everyday splurge” category (coffee, upscale/specialty grocery, home improvement, fitness) per capita in an area (Source: WSJ analysis of publicly available store locations)

Commute (6.25%)

Measures quality of life in terms of how long residents have to spend every day getting to and from work. Data consists of average one-way travel time among workers ages 16 years and older who didn’t work from home. (Source: U.S. Census Bureau)

Foreign-born residents (6.25%)

Measures the economic health and diversity of an area as represented by the portion of the populace that was born outside the U.S. Studies indicate a strong correlation between the economic vitality of a region and the number of foreign-born residents. (Source: U.S. Census Bureau)

Small businesses (6.25%)

Measures the economic health and diversity of an area as represented by small-business activity. Data consists of the number of granted SBA 7(a) loans per capita. (Source: U.S. Small Business Administration)

Property taxes (6.25%)

Measures real-estate taxes based on median home price. Areas with higher effective real-estate taxes are ranked lower, while areas with lower effective real-estate taxes are ranked higher. (Source: U.S. Census Bureau)

Final score

Each indicator is indexed to normalize the data, and a composite score is produced by adding those values for each geography. The sums are sorted to produce the final ranking. If two or more U.S. metropolitan areas tie in their final score, the Real-Estate Demand indicator is used to break the tie.

Write to Inti Pacheco at [email protected]