Veros: California Markets To See Strongest Appreciation In 2013

Posted by Patrick Barnard on July 02, 2013 No Comments
Categories : Residential Mortgage

Nearly 90% of the residential U.S. real estate market is expected to see appreciation over the next 12 months, according to Veros Real Estate Solutions' quarterly VeroFORECAST report.

This is a significant trend, considering that the July 2012 VeroFORECAST predicted that 75% of U.S. markets would see appreciation and 25% would see depreciation.

California will lead the way: The report predicts that the San Francisco-Oakland-Fremont area will experience the highest increase in appreciation, at 12.7%, over the next year, followed by Los Angeles-Long Beach-Santa Ana (11.6%), San Jose-Sunnyvale-Santa Clara (11.1%), Midland, Texas (11.1%), and Phoenix-Mesa-Scottsdale, Ariz. (10.9%).

‘San Francisco is experiencing a serious housing shortage, with supply down nearly 80 percent, from its peak in 2008,’ Veros notes in its forecast. ‘Although prices are still relatively expensive compared with much of the U.S., affordability is back to 2004 levels.’

The combination of low inventory, relative home affordability, low unemployment (currently 6.7%) and continued low interest rates are expected to propel the San Francisco market to double-digit increases over the next year. The Los Angeles and San Jose markets are also expected to see rapid increases due to low inventory and low unemployment.

In the Northeast, however, it's a whole different story. Veros forecasts that the New York, New Jersey and Connecticut markets will continue on a downward trend, driven mainly by relatively high unemployment.

Looking at the five worst markets, the Poughkeepsie-Newburgh-Middletown, N.Y. area is forecast to see 2.9% depreciation, followed by Kingston, N.Y. (-2.1%), Norwich-New London, Conn. (-1.9%), Bridgeport-Stamford-Norwalk, Conn. (-1.8%), and Atlantic City, N.J. (-1.6%).

‘Interestingly, a few of these markets are also being strongly influenced by population trends, where either the area's population has declined or remained flat and, as a result, lack the demand associated with an influx of new residents to motivate housing turnover and, ultimately, the growth that tends to accompany healthier housing markets,’ Veros notes.

Nationwide, Veros forecasts that appreciation will average 3.1% over the next 12 months.

‘It's encouraging to see steadily rising appreciation expectations,’ says Eric P. Fox, vice president of statistical and economic modeling for Veros. ‘What we are seeing now indicates a return to a healthy market with improvements appearing in a conservative yet correcting manner.

‘Overall, the recovery in the housing market is forecast to continue to accelerate and quite significantly over the previous quarter,’ Fox adds. ‘We have been consistent in our position over the past year that the recovery will be lengthy and gradual, which it has been, while many were talking about 'shadow inventory' pulling the housing market back down and creating another recession. Now we are finally over the hump with appreciation being the forecast norm.’

Looking at the long-range forecast, Fox says there will be significant gains in appreciation over the next 12 months. However, the market will moderate in 2015.

‘Although strong appreciation is expected for months 13 to 24 in the forecast, it is not as strong as in months one to 12,’ he says. ‘That is to say, we are seeing the first signs a year or two from now that the rapid increase of prices will slow a bit in many parts of the country. However, we don't foresee drastic slowing – simply some moderation.’

The VeroFORECAST is updated quarterly and covers 969 counties, 324 metro areas and 13,502 ZIP codes.

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