America's Fastest-Growing Housing Markets

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.

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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.

9. Danville, VA
> Expected price increase: 3.3%
> Unemployment rate: 8.5%
> Change in home prices (2010Q4-2011Q4): 0.0%

Home prices in Danville fell 6.1% from their peak in the first quarter of 2009. Compare to most cities, this decline is relatively small. The Danville metropolitan area is home to just over 100,000 people, making it among the least populated regions in the country. After a year in which home prices did not increase or decrease — between the fourth quarter of 2010 and the fourth quarter of 2011 — home prices in the city are now expected to rise by 3.3% by the end of this year — one of the largest increases in the country.

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8. Kennewick-Pasco-Richland, WA
> Expected price increase: 3.6%
> Unemployment rate: 8.7%
> Change in home prices (2010Q4-2011Q4): -0.3%

Home prices in the Kennewick-Pasco-Richland, Washington metro area were barely touched by the recession. Real estate values didn’t peak until the third quarter of 2010 and are only down 1.8% since that period. Fiserv projects home prices will increase 3.6% in the region through the end of this year. By the end of 2013, values are expected to increase an additional 3.8%.

7. Lewiston, ID-WA
> Expected price increase: 3.6%
> Unemployment rate: 6.6%
> Change in home prices (2010Q4-2011Q4): -1.8%

The Lewiston metropolitan area, which has the second-smallest population in the country, is projected to undergo its first improvement in housing prices since 2009 in the coming year — an increase of 3.6%. In the following year, home prices are expected to increase 6.2%. This is within the top eighth of largest increases for next year. Between the fourth quarter of 2011 and the fourth quarter of 2016, home prices in the Lewiston housing market are expected to increase an average of 3.7% each year.

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6. Eugene-Springfield, OR
> Expected price increase: 3.8%
> Unemployment rate: 8.3%
> Change in home prices (2010Q4-2011Q4): -6.1%

From their peak in the second quarter of 2007, home prices in the Eugene-Springfield region fell 21.2% during the recession, putting it in the top third for the biggest declines in the country. In the last year alone, prices fell nearly 6%, the 40th worst decline in the country. However, Fiserv projects the region has hit its trough. Through the fourth quarter of this year, home prices are expected to increase 3.8%. Between the end of this year and the end of 2013, they will go up an additional 8.3%.

5. Hagerstown-Martinsburg, MD-WV
> Expected price increase: 3.8%
> Unemployment rate: 7.8%
> Change in home prices (2010Q4-2011Q4): -6.7%

Between the fourth quarters of 2010 and 2011, home prices in the Hagerstown-Martinsburg metropolitan area dropped 6.7% — among the largest decreases in the nation for that period. From their peak in the first quarter of 2007, prices have dropped a total 32.1% — more than most markets. However, in the coming year, home prices are expected to increase 3.8%. In the year after that, they are projected to grow an additional 3.9%.

4. Coeur d’Alene, ID
> Expected price increase: 3.8%
> Unemployment rate: 8.9%
> Change in home prices (2010Q4-2011Q4): -4.5%

Coeur d’Alene, located in northern Idaho, is one of the smallest and most remote metropolitan area in the country, with a population of just over 140,000 residents. It is, however, located next to the much larger Spokane, Washington, across the state border. Home prices in the region fell 27.1% during the recession from their peak in the third quarter of 2007. In the past three years alone, prices fell more than 8% each year. The area is projected to experience a substantial housing recovery over the next half-decade. Between the end of 2011 and the end of 2016, Fiserv estimates home prices will increase 4.5% each year.

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3. Medford, OR
> Expected price increase: 4.2%
> Unemployment rate: 10.8%
> Change in home prices (2010Q4-2011Q4): -6.6%

Medford, OR, is a relatively poor metropolitan area, with a median family income of $49,700 — compared to the national median income of $63,000. The drop in home prices — a decrease of 37.1% since 2006 — has therefore been all the more painful on residents. Fortunately, home prices are projected to increase 4.2% in the next year. In the year after that prices are expected to increase another 15.3% — the third-largest increase in the country.

2. Glens Falls, NY
> Expected price increase: 4.2%
> Unemployment rate: 7.5%
> Change in home prices (2010Q4-2011Q4): -2.4%

Home prices in Glens Falls, NY, declined only moderately during the housing crisis. Homes lost 7% of their value from their peak, much lower compared to a 34.2% average decline nationwide. Still, the 2.4% drop per year between the end of 2008 and 2011 was apparently enough for investors to identify the region as a potential investment. The regional economy remains stable, with an unemployment rate of 7.5%, well below the national average. Fiserv projects home prices in the area to increase 4.2% by the end of this year and increase an average of 7.2% per year by the end of 2016.

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1. Madera-Chowchilla, CA
> Expected price increase: 4.3%
> Unemployment rate: 14.4%
> Change in home prices (2010Q4-2011Q4): -10.0%

Home prices in the Madera-Chowchilla metropolitan area are projected to increase 4.3% from the fourth quarter of 2011 to the fourth quarter of 2012. The following year, prices are expected to increase another 16.5% — the highest rate in the U.S. However, these improvements come after the region experienced among the worst effects of the housing crash. From the time Madera’s home prices peaked in the third quarter of 2006 to the fourth quarter of 2011, they dropped 53.1%. This is one of the largest drops in the country.

-By Charles B. Stockdale, Michael B. Sauter