Veros Real Estate Solutions reports that residential market values will continue in a positive trajectory over the next 12 months, with overall annual appreciation rising 3.6 percent from its second quarter forecast of 3.1 percent. The number of markets expected to increase in value is up to 94 percent from last quarter’s 90 percent.
These numbers stem from the company’s most recent VeroFORECAST, a quarterly national real estate market forecast that combines multiple complex modeling strategies along with aggregated housing price index (HPI) data. The forecast modeling is used to project market price changes for the next two years, and discloses its findings for the 12-month period ending Sept. 1, 2016.
“Our Q3 VeroFORECAST continues to show strength for the next year increasing from last quarter’s update,” Veros Statistical and Economic Modeling Vice President Eric Fox said in a press release. “The top forecast markets continue to show double-digit appreciation. Top performing markets continue to confine themselves to California, Colorado, Florida, Washington and Oregon.”
Fox also indicated that Florida, buoyed by international buyers in many markets, is making a comeback, while several Texas markets (Dallas and Austin) still are predicted to do well despite some weakening in markets impacted by the oil and gas industry.
Low housing supply, an influx of population, and low unemployment rates continue to be common characteristics of the top forecast performing markets. Amongst the projected top 25 markets, four show double-digit appreciation: San Francisco-Oakland-Fremont, Calif. (10.7 percent); San Jose-Sunnyvale-Santa Clara, Calif. (10.5 percent); Denver-Aurora-Broomfield, Colo. (10.3 percent); and Port St. Lucie, Fla. (10.0 percent).
Over the next year, it looks to be a strong and improving market regarding residential house prices. However, the longer time horizon is showing some weakness.
“Although the overall forecast is a strong 3.6 percent for the next 12 months, it softens significantly to 2.1 percent for months 13 to 24 in our forecast,” Fox said. “The primary driver for this weakening is suspected tightening that the Federal government will be doing causing mortgage interest rates to begin ticking upward. We don’t see dramatic increases in interest rates.
“However, even a 25- or 50-basis point increase would be enough to cause consumers at the margin to drop out of the market to purchase a home,” Fox added. “This will cause some softening, while we do see softening in the long-term where the overall market is still expected to appreciate. We don’t see a repeat of the last downturn in 2007.”
The weakest markets are primarily in the eastern part of the U.S., which has 23 of the bottom 25 markets. The five weakest markets include Wichita Falls, Texas (-1.9 percent); Lebanon, Pa. (-1.7 percent); Gadsden, Ala. (-1.7 percent); Marion, Ind. (-1.3 percent); and Binghamton, N.Y. (-1.1 percent).
“The bottom forecast markets are still by and large relatively small cities with poor economic conditions and a general declining population spanning over decades,” Fox said. “The good news for these markets is that all are characterized by slight depreciation of no more than 1 (percent) to 2 percent.”