Can Local Markets Predict Changes in U.S. Home Prices?

By
Education & Training with Market Leader

Is it possible to predict how U.S. home prices will rise and fall by tracking the performance of one or more key local markets? Would having a “crystal ball” local market allow real estate professionals to predict future housing market booms and busts?

To get an answer to this important question, Trulia’s Chief Economist Jed Kolko dove into home price data from 1980 to 2014 for the 100 largest U.S. metros and the U.S. as a whole. He assigned each metro a “crystal-ball score” between 1 and -1 to indicate the strength of their correlation with national housing market trends. 

Which metro’s home prices are most and least correlated with national home prices?

See below to find out.

Highest Correlations – Local vs. National Home Price Changes

Here are the top three metros in terms of the strength of their correlations with national home price trends. 

  1. Minneapolis-St. Paul, MN  –  0.79
  2. San Diego, CA  –  0.76
  3. West Palm Beach, FL  –  0.76

Lowest Correlations – Local vs. National Home Price Changes

These three metros are least correlated with U.S. home price trends.

  1. Baton Rouge, LA  –  -0.02
  2. Houston, TX  –  0.02
  3. San Antonio, TX  –  0.03

To learn if a crystal-ball metro actually exists, what the other most and least correlated markets are, and get some key takeaways from Jed’s research for both real estate professionals and consumers, read our in-depth summary of local vs. national home price trends on the Trulia Pro blog.

 

Can Local Markets Predict Changes in U.S. Home Prices?

Posted by

Andy Fulton

Marketing Manager, Market Leader

110 110th Ave NE, Suite 700  Bellevue, WA 98004

p: 425-952-6531

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Rainmaker
3,614,063
Nina Hollander
Coldwell Banker Realty - Charlotte, NC
Your Charlotte/Ballantyne/Waxhaw/Fort Mill Realtor

Having been in this business for 22 years and having lived through lots of market and economic cycles for over 40 years, I could argue both sides of this question equally well.

Aug 05, 2014 12:00 AM #1
Rainer
292,121
Ron Aguilar
Continental Mortgage - Saint George, UT
Mortgage & Real Estate Advisor since 1995

Its very tempting to consider the past as an indicator of the future regarding Real Estate. The dynamics today is completely different from any other past history. Without naming those variables I will say that we are entering a new normal whatever that is. Key Point: understand the current to adjust to the market propensities of the future.

Aug 05, 2014 12:22 AM #2
Rainer
511,863
Kimo Jarrett
WikiWiki Realty - Huntington Beach, CA
Pro Lifestyle Solutions

I don't agree with data of sold homes back as being relevant from 1980 to 2014. There were many desirable neighborhoods that changed demographically and thus the appreciation factor was either flat lined for many years or barely increased, so the data IMO is unreliable.

Aug 05, 2014 06:08 PM #3
Rainmaker
591,167
Mary Hutchison, SRES, ABR
Better Homes and Gardens Real Estate-Kansas City Homes - Kansas City, MO
Experienced Agent in Kansas City Metro area

Data--one can spin it so many ways!  I just focus on trends in my own market that are relevant--but the customers often focus on what they hear in media re: national trends

Aug 06, 2014 05:09 AM #4
Rainmaker
1,431,864
Gene Riemenschneider
Home Point Real Estate - Brentwood, CA
Turning Houses into Homes

Interesting.  I know there are communities in this country that are considered Bell Weather communities for other issues.  I had not thought about Real Estate in regards to this.

Aug 12, 2014 04:07 AM #5
Rainmaker
1,676,510
Winston Heverly
Winston Realty, Inc. - Atlantis, FL
GRI, ABR, SFR, CDPE, CIAS, PA

I think we have some of the best reads out there on Active Rain. Thanks for sharing

Mar 18, 2015 01:24 PM #6
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