VeroFORECAST Finds Property Appreciation Nearing Peak
Jan 16, 2014
Western states dominate top spots; Northeast expects depreciation; Phoenix drops out of the Top Ten appreciating markets after a 7-quarter run
Santa Ana, Calif. – January 16, 2014 – Veros Real Estate Solutions (Veros), an industry leader in enterprise risk management, collateral valuation services and predictive analytics, has found that while residential real estate appreciation trends continue to march up steadily, the previously rapid acceleration of values is starting to slow down. This insight is from the company’s VeroFORECAST real estate market forecast for the 12-month period ending December 31, 2014, updated quarterly and covering more than 1,000 counties, 345 metro areas, and 13,770 zip codes.
Veros’ future home price index (HPI) forecast indicates that, on average for the top 100 metro areas, Veros expects 5.1 percent appreciation over the next 12 months, up from last quarter’s 4.8 percent forecast. This is the sixth consecutive quarter where the index has shown forecast appreciation.
“The future HPI forecast continues to show good appreciation, but the markets appear to be topping out for now,” said Eric Fox, Veros’ vice president of statistical and economic modeling and author of VeroFORECAST. “The continued appreciation demonstrates the overall health of the real estate market, but it is important to note that this is just a slight increase from last quarter's national forecast, indicating much slowing in the forecasted rate of increase. Currently, most areas in the country are expected to see price appreciation with few areas forecast to show declines.” Fox added that the split is slightly over 90% for markets with appreciation compared to a bit under 10% in depreciation.
“All markets in the Top 5 now have strong appreciation forecasts, although they are weaker overall than last quarter's top markets, which topped at 15 percent. Moreover, although depreciating markets are still present, they are all exhibiting small depreciation trends such as -1% or -2%,” Fox noted.
Projected Five Strongest Markets*
- San Francisco-Oakland-Fremont, CA +13.4%
- San Jose-Sunnyvale-Santa Clara, CA +10.7%
- Seattle-Tacoma-Bellevue, WA +10.2%
- Los Angeles-Long Beach-Santa Ana, CA +9.6%
- Midland, TX +9.5%
Projected Five Weakest Markets*
- Atlantic City, NJ -1.7%
- Kingston, NY -1.7%
- Fayetteville, NC -1.3%
- Norwich-New London, CT -1.2%
- Rockford, IL -1.1%
*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.
As in recent updates, VeroFORECAST finds that local population trends and unemployment rates remain the key drivers. The most populated metro areas are expected to perform the best in the next 12 months on average, and the least populated metro areas are forecast to perform the worst. For example, the average population of the top 50 metros is 2.4 million and the average population of the bottom 50 metros is 527,000, according to Fox’s VeroFORECAST findings.
San Francisco’s unemployment rate is 6.3% and Seattle’s is 6.0%, compared to 7.3% nationally. Midland, Texas’ sturdy appreciation is fueled by its oil sector growth-influenced 3.2% unemployment rate and scant supply. All of the Top Five markets are showing high demand and low inventories. Phoenix dropped out of double-digit appreciation for the first time in more than nearly two years, but is expected to maintain healthy, single-digit appreciation.
The majority of the underperforming markets are primarily in the Northeast, with parts of Connecticut and some sections of New York, New Jersey and Maryland expected to fare poorly relative to the remainder of the U.S. due to persistent unemployment and demand factors. Pockets of the South are also forecast to be weak, notably Mississippi and Alabama.
About Veros Real Estate Solutions
Veros Real Estate Solutions, a proven leader in enterprise risk management and collateral valuation services, uniquely combines the power of predictive technology, data analytics and industry expertise to deliver advanced automated decisioning solutions. Veros products and services are optimizing millions of profitable decisions throughout the mortgage industry, from loan origination through servicing and securitization. Veros provides solutions to control risk and increase profits including automated valuations, fraud and risk detection, portfolio analysis, forecasting, and next-generation collateral risk management platforms. Veros is headquartered in Santa Ana, Calif. For more information, please visit www.veros.com or call (866) 458-3767.
About Eric Fox, VP of Statistical and Economic Modeling:
Eric Fox received his M.S. in Statistics and B.S. in Mathematics and Economics from Purdue University, and has more than 22 years of industrial experience in statistical and econometric modeling, probabilistic life methodology development, statistical training, probabilistic design software development, and probabilistic financial/competitive analysis. Fox has published more than 20 technical papers on probabilistic and statistical methods.
Additional forecasts for other U.S. markets available to the press upon request.