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Top Turnaround Towns: Tomorrow’s Hot Real Estate Markets

by Steve Cook on May 20, 2012 · 8 comments

  

Want to know where home prices will be rising in the coming months? No longer do you need to toss darts at a dart board or guess. Someone has actually created an index using the very, very freshest listing data combined with economic metrics to scientifically select tomorrow’s hot markets.

Every quarter Move, Inc. operator of Realtor.com, publishes the Top Turnaround Towns (There used to be ten’ we just expanded to 25). As a member of the team that created and updates this list, I’m always excited by the latest findings.

The latest list includes seven housing markets hit hardest by foreclosures – all from Florida – leading the nation towards a general housing recovery, while unexpected new comers in Michigan, Texas, Iowa and California are showing signs of strength and stability.

The list of Top Turnaround Towns, developed using year-over-year comparative data from the first quarters of 2012 and 2011, is led by Phoenix-Mesa, AZ, Miami, FL and Orlando, FL – three top foreclosure markets experiencing list price appreciation, along with reductions in inventories and their median age of inventory, all on a year-over-year quarterly basis. Other call out markets include Boise City, ID (4), which has been on the rise steadily since its debut at No. eight in the third quarter of 2011, and Naples, FL, which rose one spot from sixth to fifth in one quarter.

Noteworthy newcomers include Bay Area frontrunners Oakland, CA (6) and San Jose, CA (24), heating up as the nation watches the local hi-tech industry and upcoming Facebook IPO, and the Lone Star State markets of Dallas, TX (12) and Forth Worth-Arlington, TX (18). While Detroit, MI continues its struggle with high unemployment (10.2%), it landed in the 23rd position on the Realtor.com list with a 5.82% increase in list price appreciation, a -29.59% reduction of for sale inventory, and a market that’s moving 27.27% faster, all on a year-over-year quarterly basis.

“We continue to see signs of stabilization and recovery on the local level throughout the country, basing analysis on the real-time nature and accuracy of the Realtor.com data,” said Steve Berkowitz, CEO of Realtor.com operator, Move, Inc. “By all indications, the 2012 housing market is unfolding as we expected, and we’re encouraged with the progress local markets are making. However, much will depend on the continued health of our economy, specifically job rates, and how lenders will release their foreclosure inventories now that the 49 state AG Agreement has been signed. All of these key factors will determine how quickly our local housing markets recover and remain healthy.”

Rank

Market

Year/Year Median List Price Appreciation

Year/Year Median Age of Inventory

Year/Year Inventory

Unemployment Rate

(Feb 2012)

Search/ Listing Ratio Rank

1.

Phoenix-Mesa, AZ

26.94%

-32.94%

-48.04%

7.8%

10

2.

Miami, FL**

24.32%

-40.98%

-48.03%

9%

8

3.

Orlando, FL

11.54%

-38.46%

-41.58%

9.1%

3

4.

Boise City, ID

17.53%

-23.60%

-36.87%

8.7%

62

5.

Naples, FL

14.34%

-23.49%

-34.16%

8.3%

46

6.

Oakland, CA

7.07%

-46.43%

-48.35%

8.7%

7

7.

Fort Myers-Cape Coral, FL**

18.27%

-24.59%

-27.61%

9.4%

107

8.

Lakeland-Winter Haven, FL*

12.95%

-26.56%

-30.88%

10%

26

9.

Sarasota-Bradenton, FL

12.56%

-29.55%

-27.69%

9.2%

52

10.

Tampa-St. Petersburg-Clearwater, FL

11.92%

-20.34%

-39.79%

9.4%

12

11.

Punta Gorda, FL

13.34%

-21.90%

-26.30%

9.3%

71

12.

Dallas, TX**

8.58%

-22.83%

-29.15%

7.1%

35

13.

Washington, DC-MD-VA-WV(DC)

13.18%

-21.25%

-27.31%

5.8%

14

14.

Jacksonville, FL

6.38%

-25.71%

-32.40%

8.8%

32

15.

Fort Lauderdale, FL

8.04%

-16.46%

-47.36%

9%

15

16.

Bakersfield, CA*

4.57%

-36.36%

-49.86%

15.5%

1

17.

Daytona Beach, FL

10.07%

-17.91%

-30.28%

9.5%

47

18.

Fort Worth-Arlington, TX **/***

8.90%

-20.65%

-26.87%

7.1%

63

19.

Grand Rapids-Muskegon-Holland, MI

8.34%

-21.30%

-23.90%

7.4%

23

20.

Minneapolis-St. Paul, MN-WI(MN)

6.14%

-31.18%

-27.46%

6.2%

33

21.

Iowa City, IA

6.81%

-24.36%

-26.24%

4.2%

95

22.

Portland-Vancouver, OR-WA(OR)

4.25%

-27.78%

-38.05%

8.6%

11

23.

Detroit, MI

5.82%

-27.27%

-29.59%

10.2%

77

24.

San Jose, CA***

6.67%

-18.06%

-34.59%

9.1%

36

25.

Seattle-Bellevue-Everett, WA

3.81%

-27.27%

-39.34%

8.3%

17

 

*Among the 15 Best Housing Markets For the Next Five Years, Business Insider

**Made the Top Ten Best Real Estate Markets in 2012, ActiveRain.com

***Cities Where Real Estate is Ripe for a Rebound, Forbes January 2012

Highlighted Markets Named in the Q1 2012 Realtor.com Top Turnaround Town Report:

#1 – Phoenix-Mesa AZ leads the nation on the Realtor.com Turnaround Town list after advancing from the #2 position in the fourth quarter of 2011. While it was one of the hardest hit areas by foreclosures, median list prices are up 26.94% in the first quarter of 2012 compared to the same time last year, and the area experienced the largest increase in median list prices of all of the 146 MSAs monitored by Realtor.com. Unemployment in Phoenix is at 7.8%[i] and contributes to its improving local economy and growing demand for housing. The market experienced a -32.94% year-over-year quarterly decline in the local median age of inventory thanks to the sale of thousands of foreclosure bargains. While Maricopa County today generates 1 foreclosure filing for every 242 homes[ii], if inventory remains in check, it’s only a matter of time before Phoenix fully stabilizes and has lasting home value appreciation.

#4 – Boise City, ID is showing signs of a rebounding market with encouraging indicators for future stability. With an improved unemployment picture — Boise’s rate was 8.7% in February 2012, better than the state (9%) and national (8.2%)[iii] — positive housing indicators should follow. The City of Trees had fewer houses on the market in Q1 2012 than the same time last year, which may have contributed to higher demand and a housing market that moved 23.60% faster in Q1 2012 compared to the same quarter last year. Median listing prices rose by 17.53% on a year-over-year quarterly basis, and Boise City’s year-over-year inventory declined by -36.87%, which is the 12th best improvement tracked by Realtor.com. Only 1 in every 519 homes fell into foreclosure in Boise City’s Ada County[iv], contributing to the area’s stabilization of inventory.

#6 – Oakland, CA is showing the vital signs of a turnaround based on Realtor.com’s first quarter 2012 data. With an unemployment rate of 8.7%, far below California’s 11.4%, Oakland’s economy is growing. In the first quarter of 2012, median list prices in Oakland are up 7.07% compared to the same time last year, and inventory is moving 46.43% faster during the same time period. These factors were enough to move Oakland into the sixth spot on the Realtor.com list of Top Turnaround Towns. Also, in January 2012 the New York Times ranked Oakland fifth on its list of 45 places to go in 2012[v]. Today, Oakland’s market is a huge contrast to the -41.6% decline in median sale price it saw from first quarter of 2006 to the third quarter of 2010.[vi]

#18 Fort Worth-Arlington, TX hit the Realtor.com Turnaround Town list for the first tim in Q1 2012 thanks to the alignment of several key factors. As the 16th largest city in the U.S., this Gateway to The American West didn’t experience the housing boom like other U.S. cities and enters 2012 on solid ground. With unemployment in Fort Worth at -7.1% below the national rate of 8.2%, and the median household income above the national level, it’s no wonder demand for housing is growing. In the first quarter of 2012, median list prices in the area are up 8.9%, inventory is down -26.87%, and the median age of its inventory fall by -20.65% to 73 days – all compared to the same time last year. With stable list prices, reduced inventory counts, and a faster-moving market, smart buyers just might find the home of their dreams at the right price if they’re prepared to act quickly. Fort Worth made the ActiveRain.com Top Ten 2012 Best Performing Real Estate Markets[vii] and Forbes’ list of cities Where Real Estate is Ripe for a Rebound.[viii]

#23 – Detroit, MI was one of the country’s hardest hit areas in the recession thanks to the 2007 and 2008 layoffs in the Motor City’s auto industry. Unfortunately, this put Detroit at the top of foreclosure lists for years. Now, however, improving auto sales are helping to turn Detroit around. At 10.2%, its unemployment rate[ix] is still above the state and national rates, and foreclosure rates in the four counties that constitute the Detroit area are approximately 50% to 100% higher than the national rate[x]. However, there are encouraging signs for the local housing market. The largest over-the-year unemployment rate decreases in the U.S. this past March were registered in the Detroit area[xi]. List prices are starting to rise, up 5.82% on a year-over-year quarterly basis, while inventories are shrinking, down -29.59% in the first quarter of 2012 compared to Q1 2011. The median age of inventory has also declined -27.27% on a year-over-year quarterly basis down to a median of 56 days. he largest

Methodology:

Market rankings are based on their year-over-year median price appreciation, reduction in year-over-year median age of inventory, and inventory reduction levels as observed on Realtor.com, as well as unemployment rates on a year-over-year basis. The Realtor.com Top Turnaround Town Report is based on an algorithm that combines those four key measures with searches for properties on Realtor.com and the ratio of searches to listings in order to equalize markets by size. The resulting report reflects price changes that have taken place and gives weight to supply and demand dynamics that create continued progress towards growth and stability in future months.

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{ 7 comments… read them below or add one }

Thomas Brewer May 20, 2012 at 6:18 am

Really informative. Surprising to see some of these cities on the list. I am in Arlington and we started to see the comeback last year. This year has been really solid so far.

Reply

Ziv Magen May 20, 2012 at 7:20 pm

Really interesting data there, thank you. Noted Detroit up trend with interest- it has a very bad name for investors in Australia and nz, kind of “dying town- only the brave and foolish may venture forth” kinda theme…

Reply

Jeff Brown May 20, 2012 at 9:56 pm

Though I’ve yet to see an American region for real estate investing better than Texas, all things considered, I’ve never stopped loving Boise’s market. They’re my consistent #2.

Good stuff, Steve, as usual.

Reply

Jon May 22, 2012 at 3:20 am

The employment and population growth in TX make it very compelling.

Reply

Jeff Brown May 22, 2012 at 9:42 am

And it’s only gettin’ better, Jon.

Reply

Randall December 10, 2012 at 7:16 am

Hi Jeff,

Im new to the biz.. just do I am understanding this right. Are these all good towns to look to invest in even though home prices seem to be rising in these areas. Or is it the opposite in that because they are rising it makes sense to invest in as many properties as possible in these areas. It may sound like a no brainer I just want to make sure I am thinking about this correctly.

thanks

Reply

Jeff Brown December 10, 2012 at 9:34 am

Not sure I quite understand the question, Randall. In my experience, and opinion, the mere fact of rising prices isn’t the pivotal reason to invest — ever. The macro analysis showing diversity of job base, the state’s attitude towards taxes of all kinds, mostly income/business, regulation, and the sanctity of contract, especially as it relates to the landlord tenant relationship.

Prices are goin’ crazy in Las Vegas, but you couldn’t bribe me to invest there, or advise others to. I look long term/big picture. Prices rise and fall. The factors mentioned above, generally speaking, remain static for more reliably longer periods. Make sense?

Reply

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