How Secondary Cities Are Shaping the Housing Market

As housing affordability tightens in major metros, a growing wave of buyers and investors are looking beyond traditional hotspots. Secondary cities—once overlooked in favor of coastal giants—are becoming the focal point of real estate strategy, offering a blend of opportunity, stability, and long-term growth potential that’s reshaping the housing landscape.

The Shift from Big Cities to Smaller Metros

For decades, real estate activity in the U.S. was heavily concentrated in cities like New York, San Francisco, and Los Angeles. These hubs offered unmatched job opportunities, cultural amenities, and property appreciation. However, the cost of living in these areas skyrocketed, driven by limited housing inventory, restrictive zoning laws, and surging demand. In response, secondary cities—smaller urban centers with populations typically between 100,000 and 500,000—have stepped into the spotlight. Think Boise, ID; Greenville, SC; and Rochester, NY. These cities offer relative affordability, growing job markets, and improving infrastructure, making them increasingly attractive to buyers priced out of the coastal markets.

Remote work further accelerated this shift. While it didn’t eliminate the need for in-person collaboration, it gave professionals more flexibility in choosing where to live. As a result, areas that were once considered flyover territory are now experiencing record levels of housing demand and investment interest.

Key Market Trends Driving Growth in Secondary Cities

Secondary markets are experiencing faster-than-average appreciation, with some regions seeing year-over-year price increases surpassing national averages. This growth is driven by a combination of factors: population migration, lower barriers to entry, and enhanced quality of life.

Take Huntsville, Alabama, for instance. In 2023, it ranked among the top U.S. housing markets thanks to its strong aerospace and tech industries. Meanwhile, places like Spokane, Washington, and Fayetteville, Arkansas are drawing attention for their blend of affordability, economic resilience, and rising home values. From a data standpoint, many of these cities are experiencing double-digit increases in home prices, with rental markets also tightening due to a surge in new residents. In response, new construction is ramping up, with developers targeting mid-size cities to meet growing demand. This trend is not temporary. As affordability continues to be a defining issue nationwide, cities that can offer high quality of life with manageable housing costs are positioned to benefit long-term.

The Investment Potential and Strategic Advantages

From an investment perspective, secondary cities offer compelling advantages. First, the cost of entry is significantly lower than in major metros, allowing investors to acquire property with less capital or diversify across more units. Second, many of these areas boast higher cap rates. While a rental property in San Jose may yield a cap rate below 4%, comparable properties in cities like Tulsa or Knoxville can deliver 6–8%, depending on the neighborhood and asset class.

Moreover, secondary markets tend to experience less volatile price swings. While they may not skyrocket like San Diego or Austin during boom periods, they’re often more resilient during downturns. This makes them particularly attractive to long-term investors focused on consistent returns and asset preservation. Additionally, local governments in these cities often offer incentives to attract development—such as tax abatements or infrastructure grants—which can enhance profitability for investors and developers willing to take a closer look.

Challenges to Consider Before Making a Move

While the appeal of secondary cities is growing, they’re not without their challenges. Many of these markets are still developing infrastructure and public services to support rapid population growth. This can include insufficient transportation systems, under-resourced schools, or strained utilities. Job diversity is another concern. Unlike larger metros with multiple strong sectors, many smaller cities rely on one or two key industries. If a single employer scales back or relocates, it can send ripple effects through the housing market. Investors also face more variable tenant demand in certain neighborhoods. While downtown areas may thrive, suburban pockets could struggle with vacancies or slower appreciation if not carefully selected. Due diligence is essential. Real estate professionals should study local economic indicators, zoning laws, population growth, and historical performance before making commitments in emerging areas.

Real Estate Strategy in a Decentralized Market

For homebuyers and investors alike, the rise of secondary cities presents an opportunity to rethink traditional real estate strategy. It’s no longer just about chasing the biggest cities—it’s about finding strong fundamentals in overlooked places. Buyers relocating for affordability or lifestyle reasons should consider long-term livability, access to healthcare, education quality, and regional job trends. Investors should evaluate the long-term trajectory of the area, from infrastructure investment to municipal growth plans.

Real estate agents and developers operating in these markets must also adapt. They should embrace hyper-local knowledge, understand demographic shifts, and offer education to clients who may be unfamiliar with these regions. In many cases, working with local partners and city planners can offer key advantages.

Practical Considerations for Buying or Investing in Secondary Cities

• Research local industries: Make sure the city has a diversified and stable job market to support long-term housing demand.
• Check infrastructure plans: Look into upcoming projects like road expansions, public transit, or airport upgrades that could impact property values.
• Analyze supply and demand: Gauge current inventory levels and how quickly homes are selling in your target neighborhoods.
• Partner with local experts: Engage with real estate agents, contractors, and property managers who understand the nuances of the local market.
• Evaluate rental laws: Understand landlord-tenant regulations, especially if you’re considering multi-family or long-term rentals.
• Consider financing options: Smaller markets may offer regional lending programs or special mortgage incentives for first-time buyers or investors.

As the U.S. real estate market continues to evolve, secondary cities are emerging as the smart play for those who value growth potential, affordability, and a less saturated landscape. With careful research and the right approach, these cities offer both buyers and investors a chance to get ahead of the curve—without the premium price tag of major urban centers.