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

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.