Home Values Expected to Rise Over the Next Year

Residential market values are projected to continue to increases over the next 12 months, with overall annual appreciation reaching 3.6 percent, up from its second quarter forecast of 3.1 percent.

A recent report from Veros Real Estate Solutions not only showed that home values would rise, but the number of markets expected to rise in value is 94 percent compared to last quarter's 90 percent.

The company also noted that this is the strongest forecast in two years.

“Our Q3 VeroFORECAST continues to show strength for the next year increasing from last quarter’s update,” says Eric Fox, VP of Statistical and Economic Modeling at Veros.

The projected top metro markets include San Francisco, California (10.7 percent); San Jose, California (10.5 percent); Denver, Colorado (10.3 percent); Port St. Lucie, Florida (10.0 percent); and Seattle, Washington (9.5 percent).

"Low housing supply, an influx of population, and low unemployment rates continue to be common characteristics of the top forecast performing market," the report said.

The projected bottom markets include Wichita Falls, Texas (-1.9 percent); Lebanon, Pennsylvania (-1.7 percent); Gadsden, Alabama (-1.7 percent); Marion, Indiana (-1.3 percent); and Binghamton, New York (-1.1 percent).

“The bottom forecast markets are still by and large in relatively small cities within the Eastern U.S. with poor economic conditions and general population declines often spanning decades," Fox noted. "The good news for these markets is that all are characterized by slight depreciation of no more than one- to two-percent.”

Fox also warns against a softening of home values to 2.1 percent following the hot streak in the coming year with the strong 3.6 percent appreciation forecast.

He suspects that the main cause of this weakening is the "tightening that the Fed will be doing which will likely cause mortgage interest rates to begin ticking upward."

Although he does not predict a dramatic increase in rates, even a slight 25- or 50-basis point increase wold push consumers out of the housing market, which will cause some softening in values.

"While we do see softening in the long-term, the overall market is still expected to appreciate," Fox concluded. "We don’t see a repeat of the last downturn in 2007."

Click here to view the full report.