Santa Ana, Calif.-based Veros Real Estate Solutions, a provider of collateral valuation technology, says that California's real estate recovery has kicked into high gear.
A company report reveals a dramatic increase in San Francisco's forecast over the previous quarter's update; four of the five strongest markets in the U.S. are now in California. The results are from the company's VeroFORECAST real estate market forecast, updated quarterly, for the 12-month period ending Sept. 1, 2014.
Veros' future home price index (HPI) forecast indicates that most of the country is now looking to appreciate during the next 12 months – with only 5% of the markets expected to decline, compared to the 10% cited in the last update. Additionally, those declines are expected to be minor: -2% at the forecast's lowest level.
On average, Veros expects a 4.8% appreciation for the top 100 metro areas over the next 12 months. This is the fifth consecutive quarter where the HPI has shown forecast appreciation – representing an upswing of over 50% from last quarter's 3.1% national forecast.
The five projected strongest markets include the following: San Francisco-Oakland-Fremont, Calif. (+15.0%); San Diego-Carlsbad-San Marcos, Calif. (+10.8%); San Jose-Sunnyvale-Santa Clara, Calif. (+10.6%); Los Angeles-Long Beach-Santa Ana, Calif. (+10.5%); and Phoenix-Mesa-Scottsdale, Ariz. (+10.4%).
In contrast, the five projected weakest markets are as follows: Gulfport-Biloxi, Miss. (-2.7%); Norwich-New London, Conn. (-1.9%); Rockford, Ill. (-1.1%); Huntsville, Ala. (-0.9%); and McAllen-Edinburg-Mission, Texas (-0.9%).
Though the California markets remain strong, a few are experiencing a bit of a cooldown from last quarter's forecast, which Veros says was partially fueled by the recent interest-rate frenzy.
"Housing supply is a key discriminator between our top and bottom forecast performing markets. Where the housing supply is very low, as it is in our top markets, prices are expected to increase significantly," notes Eric Fox, Veros' vice president of statistical and economic modeling and author of VeroFORECAST.
"Additionally, this is the second consecutive quarter in which population trends are a key variable responsible for the performance of our bottom forecast markets," he continues. "Specifically, either slow population growth or population declines are contributing to low demand in these areas. Many of the markets in the bottom five are in very slow growth areas."
According to Fox, this quarter's update indicates that the recovery in the housing market is forecast to continue to accelerate and do so quite significantly compared to the previous quarter, but the horizon just beyond the next 12 months appears to be cooling, due to "expected higher interest rates and somewhat lower affordability."
Veros notes that the 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.