While California and Texas markets dominate the top tier of the latest Home Value Forecast ranking, the bottom of the list includes Southeastern and New York City retional metros that could miss the housing recovery in the months to come due to high inventories and low employment.
“Home Value Forecast has been pointing out for the past year that most of the fundamental factors for a recovery in home sales activity and prices are falling in place. However, the residential real estate market has always had a strong psychological component driven by consumer confidence,” said Tom O’Grady, CEO of Pro Teck Valuation Services. “In this month’s release it is interesting to see how prices reflecting current consumer confidence and longer term market fundamentals like employment track one another, the later always anchoring consumer perception from straying too far.”
Pro Teck Valuation Services’ December Home Value Forecast (HVF) Update explores the relationship between home prices and market fundamentals such as employment predicting that many of the hardest hit markets still show more upside. As the housing inventory has been gobbled up, pushing prices up, activity has slowed and these CBSA’s have dropped off HVF’s Top 10 rank.
According to the HVF contributing editors, swings in sentiment toward the real estate market result in the tendency for home prices to oscillate above and below what they think is a central value for each market.
“During periods of great exuberance, these swings can carry prices far above sustainable values as we saw during the most recent bubble period,” added O’Grady. “Similarly during times of extreme pessimism, these swings can move prices below intrinsic values as we have seen in the past several years. Such behaviors also may help explain why home sales and prices are not reacting in late 2012 the way history would suggest based on historically low interest rates.”