In several of the country’s largest housing markets, median home prices were up by more than 10% compared to last year, far more than 2.5% for the nation. Some of these housing markets appear to be doing well, as high home home prices move even higher. In others, the increase may just only be a short-term bounce after homes lost more than 50% of their value during the recession. Based on Trulia’s price monitor for September, 24/7 Wall St. identified the 10 housing markets where asking prices have increased the most compared to a year ago.
In an interview, Trulia’s chief economist Jed Kolko explained that many of these markets are “seeing big price rebounds, but there’s still very little new construction,” noting that construction was well below normal levels in some markets. Indeed, in the 10 cities in which home prices have increased the most, construction levels in six were at less than half the pace they were prior to the recession. In Detroit, construction was at just 24% of normal pace, and In Cape Coral-Ft. Myers, it was just 23%.
Foreclosure rates, which remain extremely high in many of these regions, also reflect the health of real estate in these metro areas. In three of the cities with the largest home price gains, more than 30 homes per 1,000 were in foreclosure. Considering that in most large housing markets the foreclosure rate was less than half this, these foreclosure rates indicate that despite the large home price increases, these markets are still struggling.
In these 10 markets, Kolko explained, prices are rising because buyers are bargain-hunting for cheap property, instead of as a result of new construction and people moving to the area. In seven of the 10 metro areas, home prices fell by at least 40% and by as much as 66% during the recession, and are still well below their pre-recession value. The home price increases in these markets are merely a reflection of how much they dropped and long-term growth in many of these markets is still uncertain.
Other markets, Kolko said, have also had big home price increases without having had huge price declines. These markets have almost fully recovered and are now in full growth mode. Three of the hottest markets barely fell during the recession. In Denver, home prices fell just 9.1% between the first quarter of 2006 and the first quarter of this year. National home prices fell by 33.3% during that time. In Denver, construction is at more than 72% of its pre-recession level. In San Jose, construction has actually completely recovered, and is slightly higher than its historical normal level.
Relying Trulia’s 2012 price monitor, 24/7 Wall St. identified the ten cities with the biggest increases in asking prices between Sept. 2011 and Sept. 2012. Trulia also provided month-over-month changes in asking home prices and year-over-year changes in asking rent from September, as well as Construction starts for the first half of the year. Corelogic also provided us with foreclosure rates, which originally came from RealtyTrac. 24/7 Wall St. also reviewed data from Fiserv about home price projections and decline from peak to the first quarter of 2012. All ranks for all data we included in our analysis are out of the 100 largest metropolitan regions as measured by Trulia. In the case that all 100 metros were not included, ranks are out of these metro areas that were available.
10. Tucson, Ariz.
> Year-over-year home price change: 8.6%
> Year-over-year rent price growth: 0%
> Foreclosure rate per 1,000: 14.4 (31st highest)
> Median asking price/ sq. ft.: $91.74 (31st lowest)
Like other cities in Arizona, Tucson was hit hard by the housing downturn. Since peaking in the first quarter of 2006, housing prices in the city sank by 43.9% by the first quarter of 2012. According to the Tucson Association of Realtors, there were 938 home sales in the month of September, the lowest number this year since January’s 915 sales. Nevertheless, the number of homes sold in 2012 through September was up 6% from the same time last year. The average sale price in the month of September was $182,041. Tucson’s market is expected to improve significantly in the coming years. Housing prices are expected to grow at an annual rate of 7.8% between 2012 and 2017, far better than the 3.9% expected average growth across the country.
9. Orlando, Fla.
> Year-over-year home price change: 8.7% (tied-8th)
> Year-over-year rent price growth: 7% (15th largest increase)
> Foreclosure rate per 1,000: 36.1 (2nd highest)
> Median asking price/ sq. ft.: $81.48 (15th lowest)
Between the second quarter of 2006 and the first quarter of this year, the median home price in Orlando fell by more than 50%, one of just a handful of major markets to be hit that much. In the last 12 months home prices have gone up by 8.7% in the past year. However, the market still has a long way to go before it can be considered healthy. The rate of construction on new homes is at just 44% of the normal, pre-recession rate for the area. And the August foreclosure rate of 36.1 of every 1,000 homes is the second highest in the country among large metro areas.
8. Denver, Colo.
> Year-over-year home price change: 8.7% (tied-8th)
> Year-over-year rent price growth: 9% (8th largest increase)
> Foreclosure rate per 1,000: 10.6 (34th lowest)
> Median asking price/ sq. ft.: $119.85 (25th highest)
In 2011, while home prices declined 1.9% nationwide, Denver’s home prices increased 2.4%. The Denver metro area has been listed as one of the country’s top 20 real estate markets, according to a study by PricewaterhouseCoopers. The firm’s study further points out that the housing bust was less severe in Denver compared to many other large markets, and that the market doesn’t have as many homes in foreclosure or in delinquency compared to other metro areas. PwC also cited Denver’s young population — 16% are between ages 25 and 34 — as evidence of an emerging economy. Housing construction starts were at 72% of historical levels, which was one of better levels among large housing markets, indicating a strong rebound from the downturn.
7. Oakland, Calif.
> Year-over-year home price change: 9.0%
> Year-over-year rent price growth: 9.2% (7th largest increase)
> Foreclosure rate per 1,000: 18.3 (19th highest)
> Median asking price/ sq. ft.: $227.27 (7th highest)
Over the past year, prices for both home sales and rentals were up 9% in Oakland. Much of the gains in the housing market has come in the most recent quarter, during which prices rose 8.2%, the highest in the nation during that time. The growth may be partly due to the expensive San Francisco real estate market driving renters and prospective homebuyers across the bay. Trulia data show that the already expensive San Francisco home prices were up 7.5% year-over-year, while rental prices were up 7.2%. Construction starts in the Oakland region were at 59.9% of pre-recession levels, higher than many major metro areas.
6. Detroit, Mich.
> Year-over-year home price change: 9.1%
> Year-over-year-rent price growth: -1.3% (tied-4th largest decline)
> Foreclosure rate per 1,000: 19.2 (17th highest)
> Median asking price/ sq. ft.: $46.81 (the lowest)
With the near collapse of the American automobile industry, Detroit had a particularly difficult time dealing with the housing crash. After peaking in the first quarter of 2006 housing prices in the area fell by 55.8% by the first quarter of 2012. And Detroit’s housing market is still struggling. Housing construction was just 23.5% of the historical level for the area, indicating it will take awhile for Detroit to reach its previous growth before the downturn. Fiserv projects home prices will rise by just 1.6% in the Detroit metro area between the first quarter of 2013 and the first quarter of 2014, compared to an expected national increase of 5%.
5. San Jose, Calif.
> Year-over-year home price change: 10.4%
> Year-over-year rent price growth: -0.3% (10th largest decline)
> Foreclosure rate per 1,000: 10.6 (35th lowest)
> Median asking price/ sq. ft.: $332.52 (3rd highest)
San Jose’s median home price fell by 31.8% from their peak in the first quarter 2007 through the first quarter of 2012. But between Sept. 2011 and Sept. 2012, the market has been great for homeowners, with home values rising by 10.4%. The city’s real estate market is not just recovering from the recession but has actually grown beyond its pre-recession level. Through August, home construction was at 103.8% of its pre-recession pace, making San Jose one of the fastest-growing cities nationwide. However, despite higher home values, asking rents remained effectively unchanged versus the year before.
4. West Palm Beach, Fla.
> Year-over-year home price change: 11.6%
> Year-over-year rent price growth: 3.6% (43rd largest increase)
> Foreclosure rate per 1,000: 33.0 (4th highest)
> Median asking price/ sq. ft.: $107.92 (33rd highest)
Home prices in West Palm Beach have risen 11.6% year-over-year through September, more than 95% of metro areas for which Trulia data were available. Despite rising prices, West Palm Beach’s real estate market seems to still be rebounding, rather than actually expanding. New homes are being constructed, but at just 54.4% of the area’s pre-recession rate. Still, even this low rate may be high for an area with such a large inventory of homes for sale due to foreclosure. According to Trulia, 33 of every 1,000 housing units were in foreclosure, one of the highest rates in the country. Between the first quarter of 2012 and the first quarter of 2017, home prices in the West Palm Beach’s metropolitan division are projected to rise 6.2% annually, among the higher rates in the U.S.
3. Warren-Troy-Farmington Hills, Mich.
> Year-over-year home price change: 12.0%
> Year-over-year rent price growth: 5.6% (22nd largest increase)
> Foreclosure rate per 1,000: 16.7 (21st highest)
> Median asking price/ sq. ft.: $79.09 (11th lowest)
The Warren area’s housing faced similar struggles to that of nearby Detroit during the housing bust. After peaking in the second quarter of 2005, housing prices fell 40.9% by the first quarter of 2012, well more than the national drop of 33.3%. Housing starts were less than 32% of their normal, historical rate for the area, meaning that the area has a long way to go before experiencing true growth. Between the first quarter of 2012 and the first quarter of 2017, prices in the Warren area are expected to rise 4.6% annually, better than the 3.9% across the U.S.
2. Cape Coral-Fort Myers, Fla.
> Year-over-year home price change: 16.7%
> Year-over-year rent price growth: 5.2% (27th largest increase)
> Foreclosure rate per 1,000: 31.4 (5th highest)
> Median asking price/ sq. ft.: $106.41 (37th highest)
Home prices in the Cape Coral-Fort Myers area rose at the second-fastest rate of all metropolitan areas. Although housing price growth suggests the area is recovering, for the year through August home construction was at just 23% of its pre-recession pace. Additionally, the area’s foreclosure rate was the fifth-highest in the nation, at 31.4 homes per 1,000. A few years ago, any recovery seemed unlikely as home prices fell by 58.9% over six years through the first quarter of 2012, the seventh-largest decline from peak in the nation.
1. Phoenix, Ariz.
> Year-over-year home price change: 23.8%
> Year-over-year-rent price growth: 2.1% (53rd largest increase)
> Foreclosure rate per 1,000: 23.1 (12th highest)
> Median asking price/ sq. ft.: $88.07 (26th lowest)
Through September, home prices in Phoenix have risen by more than 23% year-over-year, faster than in any other city in the nation. Price gains in the area, though, have not coincided with a dramatic growth in the number of available homes for sale, as home construction was still at just 41.9% of its pre-recession pace. A portion of these gains may be due to heavy buying by Wall Street, as companies look to buy properties in Phoenix at a discount, rather than people looking to move to the area. A Bloomberg Businessweek report noted that investors were buyers in nearly 40% of August transactions in Maricopa County, in which Phoenix is located. But despite all the activity by large investors in the Phoenix housing market, rental prices have only risen 2.1% year-over-year.