Nationwide, home prices are falling, sales are sluggish and the number of foreclosures is mounting. Ask any economist and you’ll hear that things are bad, and likely to get worse. Unless you live in Seattle, where the market is slowing but fundamentals remain strong.Also primed for a stable year are Pittsburgh, Columbus, Ohio, and Dallas. They follow Seattle in our ranking of the country’s 10 most stable markets. All are projected to have median home sale price increases next year, thanks to a combination of factors including lower-than-average inventory levels, little price volatility and high job growth.
We teamed with Moody’s Economy.com to develop three prediction models based on a range of factors that affect how prices move. These include, among other things, the state of local economies, new construction contracts, foreclosure rates, local credit markets, sales rates, affordability and inventory. Each of America’s 40 biggest cities was ranked on all three models, with price appreciation counting one half and sales rates and credit models accounting for the other half. Data were drawn from the U.S. Census Bureau, National Association of Realtors, Equifax and Moody’s Economy.com
The first model looks at projected median existing home price growth from fourth-quarter 2007 to fourthquarter 2008. Factors influencing this data include the market’s inventory of unsold homes and the amount of new construction underway, both of which have obvious effects on supply. Housing affordability and local construction costs also play a role, acting as indicators of the market’s ability to accommodate first-time buyers and new construction. Next is job growth, which attracts people to the area and increases their ability to buy a home. Most of the top performers, however, are affordable, high-job growth markets like Dallas and San Antonio.Moody’s second predictive model examined market activity by calculating sales rate, which measures how quickly unsold inventory is expected to sell, and turnover, which measures how much of the overall housing stock those sales represent.
The last measure took into account delinquency and foreclosure predictions. Regarding this measure, “it’s important to differentiate between how many people are late relative to their most recent due date and how many people are in the process of losing their home,” says Douglas Duncan, chief economist of the Mortgage Bankers Association. “Ninety percent of all 30-day late pays get fixed.”