This MSA is leading in real estate appreciation

This week, the second quarter 2018 VeroFORECAST report is being released. The report, which analyzes data from 354 Metropolitan Statistical Areas, covers the single-family residences, condominiums and townhouses occupied for 82% of the U.S. population. That is a 3% increase in MSAs over the first quarter report released in late March. The 1,005 counties and 13,877 ZIP codes covered by the report represent increases of 1.7% and 2.0%, respectively.

This is the 24th straight quarter that the index has predicted overall appreciation and the second straight VeroFORECAST release with the Seattle-Tacoma-Bellevue, Washington MSA in the No. 1 spot. However, while the national average has ticked up a tenth of a percent to projected appreciation of 4.4%, and the MSA at the low end of the survey will depreciate at only -1.6% compared with -2.9% last quarter, Seattle's predicted rate of appreciation remains unchanged at 11.1%.

That slight compression of trending values is a good sign for those worried about out of hand real estate values.

Several factors may be at play. Nationally, the economy is improving enough that Atlantic City MSA, that low market last quarter, has improved nearly full percentage points to -1.0%, moving it out of the lowest rankings. While that is a projected rate of depreciation, it is clearly a sign of improvement.

The other factor is that top-appreciating Seattle – and other Northwestern cities – are experiencing vocal demands for government action to address sky-high real estate prices and rents that are being fueled by tech business.

THE SECOND QUARTER RANKINGS

For the year beginning June 1, 2018, the 10 markets with the highest projected property appreciation are all in the in the five contiguous states closest to the Pacific – Washington, Oregon, California, Nevada, Idaho. Add the mountain states of Utah and Colorado and you cover 21 of the report's top 25 markets.

In addition to location, population is a second major factor. The most populated metro areas are forecast to perform the best during the next 12 months and the least populated metro areas are forecast to perform the poorest.

Here are the MSAs with real estate values forecast to appreciate the most:

1. Seattle-Tacoma-Bellevue, Washington (11.1%)
2. Olympia, Washington (9.8%)
3. Bremerton-Silverdale, Washington (9.8%)
4. San Jose-Sunnyvale-Santa Clara, CA (9.5%)
5. Carson City, NV (9.5%)
6. Reno-Sparks, Nevada (9.5%)
7. Mount Vernon-Anacortes, Washington (9.4%)
8. Pocatello, Idaho (9.4%)
9. San Francisco-Oakland-Fremont, California (9.2%)
10. Eugene-Springfield, Oregon (9.1%)

On the flip side of the appreciation-depreciation picture, which again shifts to the Northeast and South, nearly half of the bottom 25 markets are in states of New Jersey, Connecticut, New York, Maine, Pennsylvania and Maryland, with eight others in the Deep South: Louisiana, Alabama, Arkansas and Mississippi.

Among the 10 MSAs projected to have the highest depreciation over the next 12 months, only three were in the previous VeroFORECAST bottom 10, and the rate of depreciation is significantly less for the entire top 10 list. Cumberland, Maryland-West Virginia MSA, which was not among the ten highest depreciating MSAs last quarter, is now highest, but at only -1.6%:

1. Cumberland, MD-WV (-1.6%)
2. Farmington, NM (-1.1%)
3. Gettysburg, PA (-1.0%)
4. Atlantic City-Hammonton, NJ (-1.0%)
5. Peoria, IL (-0.7%)
6. Fort Smith, AR-OK (-0.7%)
7. Jackson, MS (-0.5%)
8. Hartford-West Hartford-East Hartford, CT (-0.4%)
9. Joplin, MO (-0.3%)
10. Bridgeport-Stamford-Norwalk, CT (0.0%)

Cumberland, MD-WV, which showed appreciation of +2% last quarter, has fallen into negative territory due to declining population, a rising unemployment rate, increased interest rates and seasonality.