Small cities in the Midwest topped The Wall Street Journal/ Emerging Housing Markets Index in the first quarter, a sign that buyer demand for affordable homes remains robust even as activity in the broader market slows.

Lafayette, Ind., led the index for the second consecutive quarter, followed by Bloomington, Ill.; Elkhart, Ind.; Lebanon, Pa., and Fort Wayne, Ind. 

The index identifies the top metro areas for home buyers seeking an appreciating housing market, a strong local economy and appealing lifestyle amenities.
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A rapid increase in mortgage rates in 2022 pushed many home buyers out of the market. Home sales in March dropped 22% from a year earlier, according to the National Association of Realtors. 

While home prices have dropped in some parts of the country, they continue to rise in many markets in the eastern half of the U.S. On a national basis, the median home-sale price in March slid 0.9% from a year earlier, according to the NAR.

Eighteen of the top 20 markets in this quarter’s index had median home-listing prices in March below the national median of $424,000, said

Danielle Hale,
chief economist at The top 20 markets on average had stronger price growth, faster home sales and lower unemployment than the market as a whole, she said.

The Lafayette metro area is home to Purdue University.

Photo: Kaiti Sullivan for The Wall Street Journal

The top 20 markets have an average population below 400,000. 

The Lafayette metro area, which has about 225,000 residents, is home to Purdue University and a variety of manufacturing companies. The area has a strong job market and has underbuilt homes in recent years relative to population growth, which is helping push home prices higher, said

Michael Hicks,
an economics professor at Ball State University in Muncie, Ind. 

The median home-sale price in Indiana’s Tippecanoe County, which includes Lafayette, was $283,000 in March, up 13.2% from a year earlier, according to the Indiana Association of Realtors. The national median existing-home sales price in March was $375,700.

“While it has become more expensive, it is still more affordable than a lot of other areas of the country,” said

Brett Lueken,
managing broker at Century 21 The Lueken Group in Lafayette.

Higher interest rates have reduced buyer demand, but they have also weighed on supply by discouraging homeowners with low mortgage rates from selling their homes. Nationally, the number of new listings in March fell 20% from a year earlier, according to

“There’s just not a lot of houses on the market as of today,” said

Sally Curwick,
broker associate at Re/Max at the Crossing in Lafayette. “I call it the one-to-two-day market.”


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The Wall Street Journal/ Emerging Housing Markets Index ranks the 300 biggest metro areas in the U.S. In addition to housing-market indicators, the index incorporates economic and lifestyle data, including real-estate taxes, unemployment, wages, commute time and small-business loans.

Thirteen of this quarter’s top 20 markets were also ranked in the top 20 in the fourth quarter. Some Midwestern markets that entered the top 20 in the first quarter were Bloomington, Omaha, Neb., and Janesville, Wis.

Write to Nicole Friedman at [email protected]