Maybe you are right, but I have listened to a full lecture on this and other hadiths a few weeks back, and the chain of events will be like this:
"The flourishing of Jerusalem will mark the desertion of Yathrib (Madinah). The desertion of Yathrib will mark the start of al-malhamah (the great war that will start between Ar-Rum and the Muslim forces before Muslims conquer Constantinople for the second time). The start of al-malhamah will mark the conquering of Constantinople. The conquering of Constantionple will mark the appearance of Dajjal."Sahih Al-Jami' as-Saghir, no. 4096
So:
Jerusalem is flourishing, and when it will reach its peak (maybe at the time of completion of Greater Israel), Madina will be deserted.
Al Mulhamah will start after the desertion of Madina (so of course there will be plenty of Muslims), and Constantinople will be conquered for the second time, which means we are going to lose it in the near future.
Also, there is another tradition that Madinah will be the last city destroyed before Al Mulhamah.