Are Some Housing Markets Overheating?

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Real Estate Agent with REMAX Advance Realty II 3233262

Nearly 90 percent of U.S. housing markets are expected to see price appreciation in the next year, according to a survey by valuation services firm Veros Real Estate Solutions covering 324 metro areas.

In some housing markets, such as San Francisco, homes reportedly go under contract within days. Housing inventory in San Francisco is down 80 percent from its 2008 peak, and the area’s strong job market has helped push home prices up nearly 25 percent over the last year alone. Prices there are expected to rise another 12.7 percent over the next year, according to Veros. 

Other California markets are also heating up. Home prices in Los Angeles rose 11.6 percent over the last year, and prices in San Jose were up 11.1 percent in the same time period. 

Midland, Texas, will see price appreciation of 11.1 percent over the next year, and Phoenix likely will see prices rise 10.9 percent, Veros economists predict. 

However, prices aren’t making such large gains everywhere. Median existing-home prices in Philadelphia, for example, increased only 2.2 percent year-over-year in the first quarter of 2013, according to the National Association of REALTORS®. Veros projects prices will rise 1.4 percent in Philadelphia in the next year. 

Other less overheated housing markets include Chicago, which Veros predicts will see 3.6 percent appreciation in the next year, and Kansas City, forecasted to appreciate by 0.3 percent, said Eric Fox, vice president of statistical and economic modeling for Veros. 

In general, price appreciation tends to be less drastic in the middle of the country, even when other parts of the U.S. are seeing run-ups in home prices, Fox noted. “The Midwest has unlimited land supply in all directions around the city,” he said. That means builders can add more inventory when needed, whereas coastal cities tend to be more limited. 

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