The housing market is past recovery and moving on with genuine strength. The future, in fact, looks bright enough for Veros Real Estate Solutions to call that residential market values will continue their overall upward trend over the next 12 months at the same pace they’ve been going, 3.5 percent.
Moreover, the trend upwards will be even more pronounced in the country’s top markets. The company’s most recent VeroFORECAST found that eight of the top 10 markets will be in Colorado, Washington, Idaho, and Oregon‒‒indeed, 15 of the top 25 forecast markets were confined to these four states, which Veros stated, is almost unprecedented. And these markets are expected to climb in the 10 percent range.
“In markets with this level of national appreciation it is most common to see a broad distribution of markets contributing to the rise,” says Eric Fox, vice president of statistical and economic modeling at Veros. “What is remarkable from where we stand today is the possible concentration risk when home price appreciation and market activity become highly clustered in only a few regional areas.”
Denver and Boulder led the forecast with a projected appreciation of nearly 11 percent.
But all top 10 markets are forecast to be in the 9-to-11 percent range. Fort Collins and Seattle are projected to each see appreciation above 10 percent, and Boise is just shy of 10 percent.
“These sizzling markets are characterized by strong market fundamentals (low unemployment rates, growing populations, and month’s supply of homes around 2.0 months or less),” Veros reported.
Still expected to appreciate, just not as quickly as they have, are markets in the Bay Area and oil-reliant Texas. Houston, for example, showed a forecast appreciation of 4.3 percent during last quarter’s update, but in the latest forecast, that number dropped to 2.4 percent, due to troubles in the oil sector.
The Bay Area, forecast in the 6 percent range, are down more than 1 percent from last quarter, likely due to home prices reaching a pinnacle and pushing buyers at the margins out of the market. South Florida markets (Miami, West Palm Beach, and Naples) are also showing forecasts down more than 1 percent from last quarter’s update. Market indicators pointing to shrinking foreign investors and vast crop of luxury condos in construction.
What’s important to keep in mind is that even the weakest markets, showing depreciation around 1 percent or 2 percent, “won’t perform that poorly,” Fox says. The report’s weakest market is expected to be Atlantic City, with a forecast 2.4 percent depreciation. Similar to the best-performing markets being confined to a small geographic area, this quarter’s report shows 20 of the 25 bottom performing markets are in New Jersey, Connecticut, West Virginia, the Hudson Valley region of New York, and the oil-based economies of Texas and Oklahoma.
“This type of concentration is a highly unique phenomenon,” Fox said. “In the 13 years that VeroFORECAST has been accurately producing forecasts we have never seen such strong geographic polarization.”
Click here to view the complete forecast and the list of the 25 strongest and 25 weakest housing markets.