Property Value Appreciation Nearing Peak, Stabilizing

Posted by Patrick Barnard on January 17, 2014 No Comments
Categories : Residential Mortgage

While residential real estate appreciation trends continue to steadily rise, the previously rapid acceleration of values is starting to slow down, according to Veros Real Estate Solution's VeroFORECAST for the 12-month period ending Dec. 31, 2014, updated quarterly.

The future home price index (HPI) forecast indicates that, on average, for the top 100 metro areas, Veros expects 5.1% appreciation over the next 12 months – up from last quarter's 4.8% forecast. This is the sixth consecutive quarter where the index has shown forecast appreciation, says the company.Â

"The future HPI forecast continues to show good appreciation, but the markets appear to be topping out for now," says Eric Fox, Veros' vice president of statistical and economic modeling, and author of VeroFORECAST.Â

"The continued appreciation demonstrates the overall health of the real estate market, but it is important to note that this is just a slight increase from last quarter's national forecast, indicating much slowing in the forecasted rate of increase," he continues. "Currently, most areas in the country are expected to see price appreciation, with few areas forecast to show declines."

Fox adds that the split is slightly over 90% for markets with appreciation, compared to a bit under 10% in depreciation.

"All markets in the top five now have strong appreciation forecasts, although they are weaker overall than last quarter's top markets, which topped at 15 percent. Moreover, although depreciating markets are still present, they are all exhibiting small depreciation trends such as -1 percent or -2 percent," he reports.

Projected five strongest markets

1.   San Francisco-Oakland-Fremont, Calif. (+13.4%)
2.   San Jose-Sunnyvale-Santa Clara, Calif. (+10.7%)
3.   Seattle-Tacoma-Bellevue, Wash. (+10.2%)
4.   Los Angeles-Long Beach-Santa Ana, Calif. (+9.6%)
5.   Midland, Texas, (+9.5%)  Â

Projected five weakest markets

1. Atlantic City, N.J. (-1.7%)
2. Kingston, N.Y. (-1.7%)
3. Fayetteville, N.C. (-1.3%)
4. Norwich-New London, Conn. (-1.2%)
5. Rockford, Ill. (-1.1%)

Veros notes that these markets demonstrated are for residential real estate in major metro areas (typically greater than 250,000 residents) among single-family homes in the median price tier.

VeroFORECAST finds that local population trends and unemployment rates remain the key drivers. The most populated metro areas are expected to perform the best in the next 12 months on average, and the least populated metro areas are forecast to perform the worst.

For example, the average population of the top 50 metros is 2.4 million, and the average population of the bottom 50 metros is 527,000, according to the findings.

All of the top five markets are showing high demand and low inventories, according to Veros. Phoenix dropped out of double-digit appreciation for the first time in more than nearly two years but is expected to maintain healthy, single-digit appreciation.

The majority of the underperforming markets are primarily in the Northeast, with parts of Connecticut and some sections of New York, New Jersey and Maryland expected to fare poorly, relative to the remainder of the U.S. – due to persistent unemployment and demand factors, says the company.

Veros also forecasts pockets of the South to be weak, notably Mississippi and Alabama.

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