The nation’s housing market continues to show a promising turnaround. Home prices rose by more than 5% between the second quarter of 2012 and the second quarter of 2013. Homes also are selling faster, and the number of homes on the market is down by more than 10%.
This week, Realtor.com, operated by Move.com, released its Turnaround Towns Report report on the nation’s housing markets that are leading this recovery. According to the data, places like Oakland, San Jose and even Detroit have had home price increases of well more than 25%. 24/7 Wall St. reviewed Realtor.com’s list of the 10 housing markets that had the biggest increases in home prices, accompanied by the largest declines in the median inventory age and total inventory between the second quarters of 2012 and 2013. These are America's hottest housing markets.
That home prices have grown so much is even more impressive considering several were among the hardest hit during the housing crisis. According to Realtor.com vice president Alison Schwartz, home prices in Santa Barbara, Oakland, Reno and Detroit -- all now among the hottest markets -- declined by more than 40% during the housing crisis. In Detroit, they declined by nearly 49%.
Detroit’s presence on this list may be surprising to many considering the city has recently filed the largest municipal bankruptcy in U.S. history. Home prices in the city, however, soared by nearly 40% in the past year. The city also had one of the shortest median inventory age in the country. The area’s economy still has a long way to go, and home prices are still very low. However, Move.com president Steve Berkowitz noted, Detroit has made impressive gains in the past year. "We’ll be watching the inventory levels in the months ahead, but if this past quarter is any indication, Detroit won’t be giving up without a fight,” he said.
There is some evidence that growth in markets like Detroit may be inflated by outside investment, rather than by people interested in moving to the area and living there. “While investors certainly have played a role, these healthy price increases can’t be attributed to any one factor,” Schwartz said. She added that some markets that have seen a great deal of
Investor activity is likely a factor, particularly in some of the harder-hit cities like Detroit and Reno. But, as Schwartz explained, places like San Diego, Oakland and San Jose are experiencing robust economic growth, particularly in the tech industry, which is increasing demand in these markets.
Indeed, these areas are experiencing faster job growth than most of the country. Between June 2012 and June 2013, the U.S. unemployment rate fell by 0.6 percentage points. In San Diego and San Jose, the rate fell by 2 percentage points. In fact, most of these cities had unemployment rates decline faster than the national average.
24/7 wall St. reviewed the 10 cities Realtor.com identified as leading the nation’s housing recovery. These housing markets were compared as part of a group of the 145 largest housing markets in the country. To make the list, the markets needed to have among the fastest change in median list price and the largest declines in median age of inventory and total inventory between the second quarters of 2012 and 2013. In addition to data provided by Realtor.com, 24/7 Wall St. reviewed unemployment rates in the metropolitan areas where these markets are located, as well as one-year unemployment rate changes. Unemployment data came from the U.S. Bureau of Labor Statistics, and was as of June 2013.
These are America's hottest housing markets.
10. Reno, Nev.
> 1-yr. change in inventory: -29.11%
> 1-yr. home price change: 25.95%
> 1-yr. change in median inventory age: -32.29%
> Median list price: $233,000.00
Nevada’s economic health, and the health of its labor market, suffers from a poor image, but the housing market in Northwestern Reno has improved significantly this year. One sign of the recovery is the area’s 29.1% decline in the number of homes on the market over the 12 months ending in the second quarter of 2013, the seventh biggest decline in the country among large housing markets. Over that time, home prices also increased by 26%. Despite the improving housing market, however, Reno's economy still has a lot of room for growth. The unemployment rate in the Reno-Sparks metropolitan region was 11.3% in June, the 24th highest out of the country’s 372 metropolitan statistical areas.
9. San Diego, Calif.
> 1-yr. change in inventory: -28.53%
> 1-yr. home price change: 21.10%
> 1-yr. change in median inventory age: -26.39
> Median list price: $429,900.00
Two important indicators point to housing market recovery in the San Diego metro area: increasing home prices coupled with increased demand. According to U-T San Diego, although the market in the region is approaching equilibrium, further jumps in prices and increasing mortgage rates could stifle the market. Nevertheless, the houses in the city are selling fast. The inventory in the region declined more than the inventories of 136 other housing markets between the second quarters of 2012 and 2013. The area’s median listed home price was $429,900, more than double the national median of $196,000.
8. Portland-Vancouver, Ore.
> 1-yr. change in inventory: -23.46%
> 1-yr. home price change: 12.00%
> 1-yr. change in median inventory age: -45.83%
> Median list price: $280,000.00
In the second quarter of 2013, the median home in the Portland-Vancouver area had been on the market just 39 days, 45.83% less time than the same period of last year. This was one of the biggest decreases among large housing markets. According to Realtor.com Vice President Alison Schwartz, the increase can in part be attributed to the increased popularity of the region’s condos, as well as a decline in foreclosures.
7. Detroit, Mich.
> 1-yr. change in inventory: -26.49%
> 1-yr. home price change: 37.78%
> 1-yr. change in median inventory age: -25.00%
> Median list price: $124,000.00
In a move that demonstrates the city's long-term decline and poor economic health, Detroit recently filed the largest municipal bankruptcy in American history. However, the housing market has shown signs of improvement. Home prices, as well as property purchases by both institutions and individuals, have been rising. Detroit's extremely low property costs may be attracting high-risk investors from outside the city, a recent article in Forbes suggested. These investments seem to be paying off, with median list prices growing at a rate of 37.8% last year, second among the nation’s largest housing markets. However, property in Detroit is still extremely cheap. The median list price in the second quarter of this year was just $124,000, nearly the least expensive price out of all large housing markets. Detroit has a long way to go, and it remains to be seen how the city’s declining population and bankruptcy will affect the improvements in the real estate market.
6. Los Angeles-Long Beach, Calif.
> 1-yr. change in inventory: -28.92%
> 1-yr. home price change: 30.30%
> 1-yr. change in median inventory age: -27.16%
> Median list price: $430,000.00
Realtors in Southern California have been encouraged by recent trends in the Los Angeles housing market. Home values have increased, according to recent data, while mortgage rates remain low and consumer interest in home ownership is rising. One member of the National and State Associations of Realtors expressed concern recently that there may not be enough houses on the market to meet the demand of home buyers. The average home in the Los Angeles metro area is on the market for just 59 days -- the 29th shortest median age of inventory among the largest housing markets.
5. Seattle-Bellevue-Everett, Wash.
> 1-yr. change in inventory: -29.93%
> 1-yr. home price change: 17.19%
> 1-yr. change in median inventory age: -55.77%
> Median list price: $375,000.00
As of the second quarter of 2013, the average home for sale in Seattle had been on the market for just 23 days, the fourth shortest age of inventory in the nation. This was 55.77% shorter than in the same period last year, the second largest decline in the country. Market prices in Seattle were not rising as quickly as others, but seller confidence is causing a resurgence, according to Realtor.com. The success of the real estate market in the Seattle-Bellevue-Everett area is due in part to large corporate involvement in the area. Last year, for example, Amazon.com started and completed several buildings in the area. The Seattle-based real estate company that worked with Amazon.com, Vulcan Real Estate, was named last month the 2013 developer of the year, according to the Seattle Daily Journal of Commerce.
4. San Jose, Calif.
> 1-yr. change in inventory: -35.36%
> 1-yr. home price change: 25.00%
> 1-yr. change in median inventory age: -64.00%
> Median list price: $675,000.00
Home prices are going up in San Jose, and those homes are selling faster, indicated by a 64% decline in the amount of time homes spent on the market, the largest change in the nation. As of the second quarter of 2013, the average home in San Jose, which cost nearly $700,000, had been on market for just 18 days, the second shortest median inventory age in the country. According to a recent article in the San Jose Mercury News, mortgage rates have become more manageable for residents, and homeowners in the area have done a better job making timely payments on their mortgages. Rising prices and low rates are opening more opportunities for refinancing and slowing the occurrence of foreclosure.
3. Santa Barbara-Santa Maria-Lompoc, Calif.
> 1-yr. change in inventory: -27.82%
> 1-yr. home price change: 34.34%
> 1-yr. change in median inventory age:-30.86%
> Median list price: $685,000.00
Until recently, home prices in the city of Santa Barbara have been declining or stagnant. The median price of the 114 houses sold in Santa Barbara proper exceeded $1 million this past June, a significant increase compared with the same time last year, according to the Santa Barbara Association of Realtors. In the greater Santa Barbara area, which includes Santa Maria and Lompoc, the median home price is a still-high $685,000, making it the second-most expensive large housing market in the country. Prices in the area rose by 34.3% in the past year, the third largest increase in the country. As evidence of the region’s healthy economic growth, unemployment rates fell by 1.7 percentage points over the year through june, compared to the national decline of 0.6 percentage points.
2. Orange County, Calif.
> 1-yr. change in inventory: -36.58%
> 1-yr. home price change: 29.41%
> 1-yr. change in median inventory age: -43.33%
> Median list price: $550,000.00
One aspect of Southern California’s fast-paced recovery is increased investment in the housing market. House flipping, the buying and selling of a home within six months to make a profit and not live there, has increased in the region. A recent article in the Los Angeles Times noted that nearly 1,400 homes were bought and resold in this fashion this past May, “a level not seen since the height of the housing boom.” Orange County had the fastest declining inventory in the nation in the second quarter of this year. Realtor.com notes that Orange County has come a long way from having record numbers of foreclosures only four years ago.
1. Oakland, Calif.
> 1-yr. change in inventory: -34.41%
> 1-yr. home price change: 41.30%
> 1-yr. change in median inventory age: -53.13%
> Median list price: $479,000.00
The median list price of a house in Oakland increased by 41.30% in the 12 months ending midway through this year, the biggest increase in the country and more than 3 percentage points larger than second place Detroit. The excitement in Oakland’s real estate market can be seen in the recent purchase of the iconic I. Magnin building in the downtown area. The sale is expected to bring about 500 jobs to the region, according to the San Jose Mercury News.