Home price appreciation will continue to slow over the next year; however, as is to be expected, some areas will see greater slowing than others.
In fact, Veros Real Estate Solutions recently published a report forecasting that up to 20% of U.S. real estate markets will see home prices decline over the next year.
While some might see that as a troubling trend, it should be noted that, according to the report, the rate of appreciation in the stronger markets would offset the rate of depreciation in the weaker markets, thus resulting in an overall rate of appreciation of about 2.5%.
For example, Veros' report forecasts that home price appreciation in the top five strongest metropolitan markets will average around +10% over the next year – while the decline in home values in the top five weakest metropolitan markets will average around -3%.
More specifically, Veros is forecasting that the top five markets for home price appreciation over the next 12 months are San Jose-Sunnyvale-Santa Clara, Calif. (+10.6%); San Francisco-Oakland-Fremont, Calif. (+10.5%); Austin-Round Rock, Texas (+10.0%); San Diego-Carlsbad-San Marcos, Calif. (+9.0%); and Houston-Sugar Land-Baytown, Texas (+8.9%).
The top five weakest markets include Rockford, Ill. (-3.4%); Trenton-Ewing, N.J. (-2.9%); Scranton-Wilkes-Barre, Pa. (-2.6%); Poughkeepsie-Newburgh-Middletown, N.Y. (-2.5%); and Atlantic City, N.J. (-2.2%).
Veros predicts that the top 100 metro areas will see an average of 2.5% appreciation over the next 12 months, down from the 3.4% forecast in the first quarter.
This is the eighth consecutive quarter where the index has shown forecast appreciation, but the pace continues to slow.
‘San Jose housing supplies are down, and San Francisco is seeing a serious housing shortage,’ says Eric Fox, Veros' vice president of statistical and economic modeling and developer of VeroFORECAST. ‘Inventories in both [markets] are down 70 percent from their peak in 2008, and demand is outstripping supply, leading to price run-ups and decreased affordability despite low interest rates. There just aren't enough houses available that people can afford to buy, so those that remain are hotly contested.’
The five weakest performing markets have seen a slight softening, according to the report. In the previous quarter's update, the weakest market, Atlantic City, tracked at -2.5%, faring better than this quarter's weakest, Rockford, at -3.4%.
‘Rockford real estate is experiencing hard times, going from -2.6 percent to -3.4 percent in a single quarter,’ Fox says. ‘The culprit is its 10.4 percent unemployment rate coupled with a flat population growth trend. These are familiar and persistent themes among the weakest markets.’
‘In summary, we are still seeing good appreciation in the top markets, but there is definite slowing overall,’ Fox adds.
For more, check out this chart.