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March 12, 2022, 10:14 a.m. EST

The No. 1 emerging real-estate market in America also has some of the nation’s best beaches

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By Jacob Passy

Vacation is all many of today’s home buyers have ever wanted — at least following two years of COVID-19. That strong demand is starting to turn popular getaway destinations into some of the most competitive housing markets in the country.

The  Emerging Housing Markets Index  from The Wall Street Journal and Realtor.com analyzes the 300 largest metropolitan areas across the country in an effort to highlight which housing markets nationwide are poised to benefit homeowners and investors alike.

Each housing market is evaluated based on a range of factors related to real estate, economic vitality and quality of life. The top emerging markets represent places where home-price growth is expected to be stellar, while also having other attractive amenities.

In the latest installment of the quarterly index released Tuesday, the region in and around Naples, Fla., came out on top. Located on Florida’s Gulf Coast, the region is considered to have some of the best beaches in the country.

Four other Florida metropolitan areas ranked among the Top 20 emerging markets in the index: North Port-Sarasota-Bradenton, Cape Coral-Fort Myers, Punta Gorda and Sebastian-Vero Beach.

Here is the full list of the Top 20 emerging housing markets, according to the index:

Ranking Metropolitan area
1 Naples-Immokalee-Marco Island, Fla.
2 North Port-Sarasota-Bradenton, Fla.
3 Kahului-Wailuku-Lahaina, Hawaii
4 San Luis Obispo-Paso Robles-Arroyo Grande, Calif.
5 San Jose-Sunnyvale-Santa Clara, Calif.
6 Cape Coral-Fort Myers, Fla.
7 Fort Wayne, Ind.
8 Huntsville, Ala.
9 Raleigh, N.C.
10 Burlington, N.C.
11 Yuma, Ariz.
12 Elkhart-Goshen, Ind.
13 Santa Cruz-Watsonville, Calif.
14 Vallejo-Fairfield, Calif.
15 Punta Gorda, Fla.
16 Waco, Texas
17 Rapid City, S.D.
18 Colorado Springs, Colo.
19 Sebastian-Vero Beach, Fla.
20 Oxnard-Thousand Oaks-Ventura, Calif.

International travel demand is set to surge

The list’s make-up reflects heightened expectations for travel demand as COVID-19 lessens as a concern with more people getting their vaccines globally. “They’re not just domestic destinations, but international buyers are interested in them too,” said Danielle Hale, chief economist at Realtor.com.

“The idea that people are traveling more and borders are a little bit more open than they have been is giving international buyers the confidence to get out” Hale said. “We do see an increase in international shopping within a lot of these areas.”

Many of these markets have a larger share of the population that is foreign-born, making them more potentially more attractive to foreign buyers. And most are within spitting distance of international airports, adding to their accessibility.

The vacation-rental market is booming

The future is looking far brighter for vacation-rental owners today than it did at the start of the pandemic. When COVID-19 first emerged, some real-estate experts argued that it could be the death of markets with a high proportion of vacation rentals, since travel had screeched to a halt.

But when Americans began traveling again in the summer of 2020, many families flocked to these properties, said Louis Olds, director of real estate services at Evolve, a vacation rental management company.

“People were visiting vacation rentals because they were further away from large groups — you weren’t running into a bunch of people in a hotel lobby,” Olds said. “So you saw a lot of folks do their first trip ever in an Airbnb /zigman2/quotes/222990650/composite ABNB +5.42% or VRBO.”

That has grown the popularity of vacation rentals — especially when the ease of remote working is also factored in. More traditional investors sought to take advantage of the opportunity, but so did families who wanted a second home.

“We’ve seen a shift as more and more people are looking at second homes as investment opportunities rather than a way to simply finance a dream vacation home for personal use,” said Shaun Greer, vice president of real estate and strategic growth at international rental-home management company Vacasa.

A recent report from Vacasa found that 46% of prospective second-home buyers were looking to generate income through the property they purchase, up from 32% of these buyers in 2019.

Of course, this surge in interest is also making these markets competitive. Overall, across the top emerging markets the Realtor.com and The Wall Street Journal index identified, homes sell faster by 13 days than the nationwide average.

This has also pushed these buyers into more secondary and tertiary vacation markets, Olds said, much like the rest of the real-estate market.

Outside of vacation destinations, the South and the Midwest remain attractive

As the index’s fluctuations over the past four quarters has shown, the competitive real-estate market we see nationwide isn’t static. Some markets that previously ranked at the top of this index — including cities in Idaho and Montana — have attracted so many buyers that they aren’t really “emerging” any longer.

“These areas have surged in popularity,” Hale said. “And so a lot of the things that drew people there — the affordability, the quiet, the availability of homes for sale relatively speaking — might have changed as a result of all the attention and interest they’ve been getting.”

But there’s a flip side to the latest index, which shows that some parts of the country continue to have staying power for home buyers Southern and Midwestern markets like Raleigh and Fort Wayne have remained on the list for a while now.

The dichotomy between these markets and the vacation markets, which tend to be pricier, could be indicative of a turning point, Hale said.

“Maybe we’re going to see more of these vacation destinations persist, or it could be a one-quarter outlier,” Hale said.

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May 27, 2022 4:00p
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