Veros Real Estate Solutions said an analysis of its data shows compelling evidence that the national real estate market has hit bottom and is now in a full recovery. This is the conclusion of the company’s VeroFORECAST real estate market forecast for the 12-month period ending Dec. 1, 2013, updated quarterly and covering 975 counties, 335 metro areas, and 13,586 zip codes.
The forecast update shows significant improvement on a national basis, indicating that on average the top 100 metro areas can expect 1.2 percent appreciation over the next 12 months. This is the second quarter in a row where this index has shown forecast appreciation. Highly notable is the re-emergence of several very strong market forecasts, with Phoenix appearing again as the top market with more than 10 percent annual appreciation predicted. This is the first time since 2006 that Veros has forecast double-digit annual appreciation in any market. In addition, the depreciating markets are becoming less severe, with the worst markets in the 2 to 3 percent range, which is a typical level of depreciation of the poorest performing markets even during healthy market periods. For the first time since the recession began, on a national level, two-thirds of all markets are expected to either be flat or appreciating during the coming 12 months.
Phoenix, one of the markets hit hardest during the downturn, continues to show strength in this quarter's forecast, building on its top ranking from the past two quarters to be the market leading the recovery. This revival is a result of its drastically reduced housing supply, which has plummeted by 70 percent from its peak.
“Great affordability and low interest rates are also causing significant demand,” stated Eric Fox, Veros’ vice president of statistical and economic modeling. “The low supply and high demand, in conjunction with the Phoenix area’s lower unemployment rate of 6.8 percent, compared to the national unemployment rate of 7.9 percent, sets the stage for it to be 2013’s top performing market.”
Following Phoenix, the second strongest forecast market is Midland, Texas, where a forecast appreciation of 9 percent is expected during 2013. The Midland unemployment rate is a very low 3.4 percent, indicating a booming economy primarily due to the oil sector and record low interest rates are also contributing to the market’s price increases. Third is Miami at nearly 8 percent appreciation, where the housing supply has also dropped nearly 70 percent from its peak, making affordability better than it has been in nearly a decade and ushering in demand from international buyers and from population growth. Rounding out the top five are Tampa and Denver, both expected to appreciate between 6 and 7 percent during the next year.
“The Tampa housing inventory has dropped more than 60 percent from its peak in 2007, while the Denver housing supply has dropped 70 percent from its peak in 2006, accelerating demand,” Fox said. He noted that the activity in Denver is enhanced by an economy that is attracting growth in the energy and technology startup sectors, although unemployment is only slightly better than the national average.
Florida and Texas are looking particularly strong for appreciation with Midland, Miami, Tampa, and Cape Coral in the top 10. California is again showing improvement, with San Jose, San Francisco and Los Angeles also appearing in the top 10 once more.
Projected five strongest markets*
1. Phoenix-Mesa-Scottsdale, AZ +10.5 percent
2. Midland, TX +9.1 percent
3. Miami-Fort Lauderdale-Miami Beach, FL +7.8 percent
4. Tampa-St. Petersburg-Clearwater, FL +6.5 percent
5. Denver-Aurora, CO +6.2 percent
Projected five weakest markets*
1. Poughkeepsie-Newburgh-Middletown, NY -3.1 percent
2. Allentown-Bethlehem-Easton, PA-NJ -2.6 percent
3. Norwich-New London, CT -2.5 percent
4. York-Hanover, PA -2.5 percent
5. Trenton-Ewing, NJ -2 percent
*Markets demonstrated are for residential real estate in major metro areas (typically greater than 300,000 residents) among single-family homes in the median price tier.
The majority of the markets expected to perform poorly are in the Northeast portion of the U.S., with much of New Jersey, eastern Pennsylvania, Connecticut, Delaware and downstate New York among the weakest areas. Unemployment remains a key discriminator between the top 10 and bottom 10 markets, as illustrated by the jobless rate in Poughkeepsie, above the national average at 8.3 percent. With unemployment, increases in the foreclosure inventory generally follow. The unemployment rate in Allentown, Pa., is above the national average at 8.7 percent and has been rising recently, while the supply of homes remains relatively high. The unemployment rate in Norwich, Conn., is above the national average at 9.2 percent and has risen to record high levels in the last decade. The foreclosure and mortgage delinquency rates have increased during the previous one-year period, although they have recently flattened.
“Overall, the recovery in the housing market is forecast to continue to accelerate,” Fox said. “We have been consistent in saying that the recovery will be lengthy and gradual, and market-by-market. Now we are finally ‘over the hump’ at a national level with appreciation being the forecast norm instead of depreciation, although some markets are still forecast to show signs of weakness.”