Nationally, home prices are projected to decline 4% by the end of this year, according to Fiserv Case-Shiller’s latest projections. The country’s largest population centers will not escape this fate. In fact, in all but 50 of the 384 largest metropolitan areas examined, home prices are projected to decline at least through the end of the year before they start improving.
Among the 50 fortunate regions where housing prices are expected to increase, the gains will likely be modest. Only in nine cities home values are projected to grow by more than 3%, and the largest increase is estimated at just 4.3%. 24/7 Wall St. reviewed these nine fastest-growing housing markets in the country to try to identify the reasons behind their success.
Our analysis reveals several factors driving the growth in these few markets that are bucking the national trend. In most cases, housing prices are projected to increase because the areas are considered to be ripe for investment. This could be either because home values are perceived to be at their low point, because their economies are relatively healthy, or a combination of the two.
Many of the housing markets where home prices are projected to increase the most in the next year are ones in which home prices have already dropped significantly. In five of the metropolitan areas housing prices decreased more than 20% since they peaked. Home prices in the Madera-Chowchilla metro area have plummeted more than 53% since the third quarter of 2006.
These nine metropolitan areas, with only a few exceptions, are also projected to have the largest increases in home prices in 2013. David Stiff, chief economist at Fiserv Case-Shiller, told 24/7 Wall St. that the nation’s housing recovery is not expected to reach full swing until the end of next year — even in the areas that are currently leading the country in recovery. home prices are expected to increase much more in 2013 than they are projected to in 2012. Many of the cities on this list also have among the greatest projected increases in home prices through 2016.
While many of the nine cities on our list experienced large declines in home prices during the recession, most have an average unemployment — generally floating around 8.0%. In other metropolitan areas — not on our list — that also experienced dramatic drops in housing prices the unemployment rates are much higher. In fact, most of these metropolitan areas have unemployment rates above 10%.
Finally, foreclosure processing is another factor that appears to be affecting the recovery in these nine metros. “Markets that have been able to liquidate more of this inventory are farther along in their correction than markets that have not been able to do so,” Stiff explained. “In California, foreclosures are non-judicial. They don’t go through the courts, so california is farther along in liquidating their foreclosure inventory, whereas foreclosures in Florida are judicial.” Florida is therefore farther behind in liquidating its foreclosure inventory.
The effect of non-judicial foreclosure processing was clear in our analysis. California is home to the housing market that is expected to grow the most in the next year, Madera. Florida, on the hand, doesn’t have a single city among the 50 housing markets that are expected to increase in value. All but one of the regions expected to grow more than 3% in value have non-judicial processing.
24/7 Wall St.’s Fastest-Growing Housing Markets is based on Fiserv Case-Shiller’s forecast of changes in home prices from the fourth quarter of 2011 to the fourth quarter of 2012. 24/7 Wall St. also included each metropolitan area’s February 2012 unemployment rate and change in home prices from the fourth quarter of 2010 to the fourth quarter of 2011 — both of which were provided by Fiserv Case-Shiller.