From an article published by BusinessInsider.com, and based upon data from the Case-Shiller Index, here’s a ranking of the Top 10 Housing Markets for the Next 5 Years:
(Note: this ranking is based on projected annual price changes between Q2 2012 and Q2 2017.)
10. Tucson, AZ (estimated 5-year growth: 7.9%)
9. Gulfport-Biloxi, MS (8.0%)
8. Napa, CA (8.0%)
7. Ocala, FL (8.0%)
6. Santa Barbara-Santa Maria-Goleta, CA (8.4%)
5. Sebastian-Vero Beach, FL (8.7%)
4. Madera-Chowchilla, CA (8.8%)
3. Santa Fe, NM (8.9%)
2. Panama City-Lynn Haven-Panama City Beach, FL (9.5%)
1. Medford, Oregon (11.2%)
This ranking can be a bit misleading. If you’re wondering why areas like Malibu and Greenwich aren’t on the list, it’s because the above markets are chosen according to their projected price growth, rather than their projected five-year value. Even if homes in America’s ritziest neighborhoods continue to sell for many millions of dollars, none are expected to see such growth in the next five years.
Many of the above towns were among the worst hit by by the housing crisis of 2008-09, having experienced average price drops as severe as 39%. The growth predicted by the Case-Shiller data isn’t really an improvement from good to great so much as an improvement from terrible to less terrible.
Still, such rebounding markets have been the reason for high-stakes bets by some very big private equity firms and REITs, which spent a great deal of last year buying up many of such towns’ distressed single-family homes. This is why Phoenix–badly hit after the housing bubble burst–is nonetheless on this other list of the best housing markets in 2013, joining markets with far more economic strength. It’s not that the Phoenix housing market has returned to market-peak pricing, but that REITs and institutional investors are buying up its stock of distressed homes to convert to rentals (and sell, when the time is right).
I’m willing to bet only those who were first to assemble portfolios of distressed single-family assets will see any impressive returns for their effort. As housing prices rebound (however slowly), the opportunity to turn a profit begins to disappear. From a commercial real estate standpoint, we can see these revived home prices (if the predictions prove accurate) as signs of economic and even population growth–a sure sign of opportunity for investment in many other asset types.