Too Early to Discuss Housing Appreciation Rates?

US News & world Report published an article by Luke Mullins about housing appreciation rates expected over the next ten years. Moody’sEconomy.com provided the data and research of 364 MSA’s. Population projections, employment data, and industry trends were factors in determining the housing appreciation rates for each location.

They selected the top 10 cities with the greatest average annual housing price appreciation and I have summarized the information in the following chart.


CITY          2nd Qt Median Home Prices    Estimated Annual Appreciation       Primary Reason

Silverdale, WA                 $250,000                                9%                                         Military

Glen Falls, NY                 $178,950                                7%                                         Industry

Corvallis, OR                   $232,000                                5%                                         Government

Santa Fe, NM                  $262,250                                5%                                         Government

Decatur, Ill                       $92,900                                  5%                                         Industry

Duluth, MN                     $129,550                                5%                                         Affordability

Charleston, SC                $210,000                                5%                                         Military

Pittsburgh, PA                 $95,500                                  5%                                         Diverse Industry

Fort Collins, CO             $208,000                                4%                                         Energy

Charlotte,NC                  $150,000                                3%                                    Diverse Economic Base

This crystal ball shows a reasonable annual appreciation rate which seems to represent a more stable economic vision. However, in my opinion, there are several key points to consider as you consider the above information:

1. Most of the top 10-cities probably experienced moderate appreciation during the housing bubble and this may reflect the normal trend.

2. A stark omission of any city from Florida, Nevada, Arizona, Texas or California.

3. Most MSA’s have experienced a decrease in housing prices over the past three years. It varies but from 10-40% decrease in housing prices.

4. First American CoreLogic, Inc. a real estate information company reports that negative equity is concentrated in 5-states:

Nevada 70% of all of its mortgages are underwater

Arizona 51%

Florida 48%

Michigan 39%

California 35%

If this study is close to being accurate, the top 10-cities with the greatest average annual housing appreciation over the next ten years will be excellent places to buy. The remaining cities, especially in NV, AZ, FL, MI, and CA, will not return to 2005 housing prices for decades to come. You should draw your own conclusions.