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4 Cities That Should Be Hot Real Estate Markets in 2022

By Marc Rapport – Dec 7, 2021 at 11:30AM

Key Points

  • Most markets saw double-digit home price gains in 2021, but some stand out going forward.
  • Austin, Texas; Phoenix; San Jose, California; and Boise, Idaho saw some of the sharpest gains.
  • Strong residential growth exists in an ecosystem that also supports retail and other sectors.

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This Fab Four has the right mix of residential and business growth to keep sizzle going into next year.

So the National Association of Realtors (NAR) reports that the median sales price of single-family existing homes rose to $363,700 year over year in the third quarter of 2021, a new record that saw double-digit price gains in 78% of the 183 markets the big trade group tracks.

Some markets were hotter than others, though, and with the year coming to a close, now seems like a good time to look at where the growth might be hottest going forward. We relied heavily here on Zillow data parsed out into a list by National Mortgage News that we'll use to pick out four particularly promising places for real estate investors to consider.

We're focusing on residential growth here, but real estate sectors don't exist in isolation, from each other or the macroeconomy. Booming residential growth is a response to the availability of jobs that pay enough to sustain those kinds of prices, after all. Those employers, even with the prevalence of working from home, also drive office space use, and brick-and-mortar retail, especially among essential services like grocery stores and pharmacies, will be growing right along with the population.

Austin skyline with Texas flag in foreground.

Image source: Getty Images.

1. Austin, Texas

Zillow projects the price of a home in the Texas capital to jump 37.1% year over year in May 2022, the most in the country. State government, the culture and music scene, and a major university have long been draws here, but that's not what's building all those skyscrapers that now dominate the skyline, with more on the way.

It's the booming tech sector, with major newcomers like Oracle (ORCL 2.66%) and Tesla (TSLA 6.24%) joining Dell Technologies (DELL 0.88%) and countless other companies large and small fueling a migration that looks to keep Austin and its sprawling suburbs hot for years to come as the Austin and San Antonio areas just keep getting closer to melding into one.

Artist rendering of Phoenix skyline and desert.

Image source: Getty Images.

2. Phoenix 

Home prices in Phoenix are expected to soar 26.2% year over year by May 2022, placing it fourth on the Zillow list. Bidding wars for homes are raging in the Valley of the Sun. Retirees have long been driving population growth there, but now families moving from more-expensive areas are joining in.

Already home base for eight Fortune 500 companies, state government, and some major universities, tech and logistics are now driving growth there, too. Phoenix also is often on the list of where major providers of industrial space are building out new warehouse and distribution space. One example: Prologis (PLD 2.34%),  the largest among industrial real estate investment trusts (REITs), says it now has 70 industrial properties here itself.

, By the way, Phoenix became the nation's fifth-largest city in the 2020 Census, edging past Philadelphia. Bottom line: There are more people, more demand, and more business for real estate investors to capitalize on in about every segment.

View of San Jose, California, from a high hillside.

Image source: Getty Images.

3. San Jose, California

Zillow projects home prices in San Jose to jump 24.5% year over year by May, seventh on its list. Even with the migration of companies and people to environs more affordable, this is still the citadel of high tech, with the likes of Apple (AAPL 1.56%), Alphabet (GOOGL 2.81%), Meta Platforms (META 1.97%), and more still employing tens of thousands of people each in the area.

There's also still plenty of dough left around. A real estate agent told National Mortgage News that cash buyers -- often flippers -- make up more than 20% of the market, in a market where one out of every 797 people is worth more than $30 million.

All that cash floating around also can sustain a healthy market for local investment in retail and office, too. Plus, it's just a really nice area to live and work in -- barring wildfires and earthquakes -- and it's close to San Francisco and some of the Golden State's most picturesque beach towns.

View of Boise, Idaho, with capitol and mountains.

Image source: Getty Images.

4. Boise, Idaho 

Home prices in Boise are expected to see a 23.3% year-over-year jump by May 2022, the 10th fastest on the Zillow list, and a local lender told National Mortgage News that he's competing in a market that's now 35% cash buyers.

That influx of cash is coming from an influx of people migrating to this state capital and university town that's much smaller than the others on the list. It's also close to the mountains and attractions of the great outdoors that have made it a lifestyle destination for a whole new crowd of people who can work at home or find a good-paying job in the burgeoning tech scene.

A pleasant climate and cultural attractions also are bringing people to roost here, and there are even more than 50 wineries in Treasure Valley, the lowland area between the mountains that includes Boise and surrounding communities.

Cities on the grow, now and going forward

Each of these four metro areas have their own attractions and reasons that make them business and residential destinations primed for continued growth and investment in 2022 and beyond. They're just four examples of many more, of course, but they're a good place for real estate investors who want to expand their own horizons -- and wallets -- to start looking now, whether for their next stock market buy in the sector or a property all their own.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Marc Rapport owns shares of Alphabet (A shares). The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Apple, Meta Platforms, Inc., Prologis, Tesla, Zillow Group (A shares), and Zillow Group (C shares). The Motley Fool recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

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