18 June 2013
The housing market is on the road to recovery and you know what that means: There is more good news to be shared and celebrated in the industry. According to reports from Kiplinger, 12 metropolitan areas fared the best in 2012, thanks to below-average unemployment rates, an improving economy and increased buyer confidence. All of these factors and more are helping transform these cities into seller’s markets:
• Phoenix, Ariz.
• Provo, Utah
• Cape Coral-Ft. Myers, Fla.
• Minneapolis, Minn.
• Akron, Ohio
• Youngstown, Ohio
• Seattle, Wash.
• Salt Lake City, Utah
• Boise, Idaho
• San Jose, Calif.
• Washington, D.C.
• Tucson, Ariz.
This upturn is without question positive news. According to Pat Esswein, associate editor for Kiplinger’s Personal Finance magazine, there are many positive and healthy drivers aiding in these cities’ turnaround.
“I was really surprised to see some of the cities that ended up on the list. Provo, Utah and Salt Lake City surprised me, but these are cities that had very little boom or bust,” she says. “They plugged along, their economies are growing and their populations are rising. They also have relatively low rates of unemployment.”
These 12 cities are either approaching a seller’s market or are in transition. Falling rates of home inventory, and in some cases exceptionally low inventory, is also a large factor in this, helping drive home prices in the right direction.
Just how much inventory does a city need to have to be considered a “low inventory” area? Generally speaking, four-to-six month’s supply is considered balanced between sellers and buyers, says Esswein. Seattle, for example, only has 2.2 month’s supply, while Phoenix, Ariz. sports a 2.7 month’s supply. These cities along with Salt Lake City are an extreme case scenario, however, home prices are benefitting as a result.
Investors are also getting their feet wet. When the market initially dropped, prices had fallen so much that it attracted heaps of investor attention. Investors scooped up most of the available inventory for sale, notably distressed properties, foreclosures and other properties that they could buy cheaply and hold for the long term, says Esswein. This led to and aided in the aforementioned low inventory numbers that are indeed driving prices up again.
And there’s that pesky “F” word again. Although Esswein points out that Phoenix and Cape Coral were known for having high rates of foreclosures, she doesn’t think they are the make-or-break factor here. “I don’t necessarily think it’s the current rate of foreclosure that distinguishes the cities that are doing best, it’s more so the rate at which foreclosed properties are coming to the market and sold off,” she says. “The quicker you sell off those foreclosures, the quicker the market takes its hit. You suffer for awhile and then you recover.”
The cities in question saw a 28.4 percent boost in prices throughout last year, but the likelihood of sustaining that number is slim. “Once this bouncing from the bottom ends, we’ll see a much more modest rate of appreciation going forward. The intense price increases will level out for the national market as a whole,” says Esswein.
For 2013, Kiplinger predicts a modest year-over-year raise gain of about one-to-two percent, nationally. However, once the rebounding economy builds itself back and strengthens, that will also have a large impact both a local and national scale.