Detroit, Santa Barbara, Calif. and Reno, Nev. markets are currently leading the nation in recovery according to realtor.com’s third quarter ranking of America’s top turnaround markets.
The median age of inventory dropped 17.7 percent over the same period in 2012, with typical homes selling in 84 days between July and September of this year. Median list prices rose 7.6 percent year-over-year to $199,128 in the third quarter. The number of homes available on the market dropped across the country by 3.3 percent year-over-year, with an average of 1.96 million homes on the market on any given day in the period.
Most noteworthy in the third quarter of 2013 is the acceleration in markets that have been less impacted by the highs and lows of the past several years, such as Ann Arbor, Mich., Dallas, Boston and Boulder, Colo. These markets have demonstrated more consistent, incremental improvement, and their appearance on the list may be a bellwether of stronger improvements in similar markets to come, as the national marketplace moves further into balance. All four placed within the top 25 accelerating markets in the previous quarter’s report.
“We’re noticing a clear split between markets that have experienced major highs and lows in recent years, and those that have proved more resilient,” said Errol Samuelson, president of realtor.com®. “With the recent moderation in some of the more volatile markets, the subtler acceleration activity becomes more visible.”
|MSA||Inv. Rank||List Price Rank||Inv. Age Rank||Search Rank||S/L Ratio Rank||Weighted Value||Final Rank|
|Santa Barbara-Santa Maria-Lompoc, CA||13||10||6||132||64||335||2|
|Fort Lauderdale, FL||19||25||8||56||78||406||4|
|Ann Arbor, MI||20||28||21||56||32||449||5|
|West Palm Beach-Boca Raton, FL||5||18||46||69||41||481||7|
“The Turnaround Towns report algorithm was a game-changer in next-gen real estate analytics - a holistic perspective on real-time market statistics like price and inventory in the context of consumer search metrics, weighted proportionally across the country to effectively measure apples-to-apples market acceleration,” said Samuelson.
“It has offered tremendous insight into market dynamics during one of the most dramatic periods of economic volatility in a century, and enabled us to be the first to surface acceleration trends in many cases. In 2014 we will further evolve this trend watch tool and continue to focus on revealing standout markets as we identify, track and measure emerging developments in the marketplace at the national, regional and local levels.”
Significant changes in economic factors in coming months could still impact the strengthening market, including reduced affordability levels, rising mortgage rates, and federal fiscal uncertainty - both recent and ongoing. The National Association of REALTORS® (NAR) reported in October that affordability has fallen to a five-year low as home-price increases easily outpaced income growth, and projected mortgage rates to rise to 5 percent by mid-summer of next year. NAR also warned that complications with the mortgage loan process resulting from the government shutdown are just one factor that may impact fourth quarter sales closings.
Top Turnaround Towns
#1 - Detroit, MI Once the poster child for America’s ailing auto industry, Detroit has turned around its housing markets. Instead of sinking when the city of Detroit had just filed for bankruptcy, its housing markets took on a quiet resurgence. Last quarter it ranked 7th in the report, and this rapid jump to number one speaks volumes about its pace of acceleration.
With the end of the buying season, prices in Detroit slowed in the third quarter, falling 4.8 percent from the previous quarter but 44.3 percent above the third quarter of 2012. Equally important is Detroit’s success at trimming its for-sale inventory and the age of its inventory, down 24.5 percent and 33.9 percent respectively, year over year.
#2 - Santa Barbara-Santa Maria-Lompoc, CA Despite some tough competition by other hot markets, Santa Barbara moved up to second place due to the young age of its inventory and the noticeable decline in its inventory counts. This market is the only one on the top 10 list that appeared in Turnaround Town Reports for the previous quarter as well as the same period last year. This appearance, at number two, is its highest ranking to date and most likely due to its strong performance in categories such as median age of inventory improvement, as well as median list price improvement. It also is noteworthy that Santa Barbara is now the only remaining California market on this list, compared to reports from last quarter and the year-ago quarter, which were populated by six and seven California markets, respectively.
#3 - Reno, NV With declining inventory and a drop in sales, this market is now moving into a far healthier balance than it experienced this time last year. Achieving both this balance and healthy growth is a remarkable achievement for a market that lost significant amount of its value in years past. Through the third quarter of 2013, Reno has continued to reduce inventory at a rate of 19.8 percent and prices are up 28.2 percent compared to the third quarter of 2012.
#4 - Fort Lauderdale, FL Still down 13.8 percent this quarter compared to year-ago levels, Fort Lauderdale’s inventory shortfall has lit a fire this year under once-lagging prices. As inventories remained flat in recent months, prices in Fort Lauderdale have risen in the third quarter of 2013. The region is entering a more buyer-leaning marketplace, with reports of sellers in Fort Lauderdale offering incentives to purchase, such as seller contributions to buyers’ closing costs and allowances for upgrades and renovations.
#5 - Ann Arbor, MI Known primarily as the home of the University of Michigan, this smaller market just missed the top 10 ranking last quarter. Ann Arbor scored in the top 20th percentile among 146 markets in three of the most critical areas: size of inventory, price gains and age of inventory. Together, these metrics almost entirely define a market’s turnaround potential. While an improving economy is part of the reason, a shrinking inventory of homes has put upward pressure on price.
#6 - Dallas, TX Another newcomer to the top 10 list, Dallas is one of those markets that did not rise much during the housing boom and did not fall very far either. Its path to recovery has not been very steep at all, and as a result Dallas has rebounded more easily than some markets.
Inventories rose in the third quarter of 2013 by 3.1 percent compared to the previous quarter, and down 15.72 percent year-over-year, as prices have risen, 10.6 percent over the third quarter of 2012. The seasonal inventory rise as the buying season ends could indeed have a dampening effect on prices.
#7 - West Palm Beach-Boca Raton, FL Even though they are two of the wealthiest resort areas in the country, West Palm Beach and Boca Raton have had their share of challenges during the housing crash, not to mention Florida’s struggles with foreclosures. However, the West Palm-Boca market has taken the critical first step toward recovery.
While year-on-year inventory fell 20.7 percent in the third quarter of 2013, inventory counts fell 13.3 percent from the previous quarter, a sign that sellers are responding to higher prices and soon inventories will register positive gains. More houses lagging on the market in the slower fall and winter seasons could bring prices quickly under control and see this MSA find its own equilibrium in pace with the rest of the country.
#8 - Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH (MA) The greater Boston marketplace is a mainstay of the nation’s healthiest real estate economies. Like Dallas and Ann Arbor, it was less seriously hampered by the housing crash of recent years. With the median list price at $344,900 in the third quarter of 2013, Boston is also one of the wealthier markets in the nation. However, like many markets that suffered greatly at the hands of foreclosures, Boston has cut its inventory deeply in recent years, earning fourth place in terms of inventory reduction during the third quarter of 2013.
Affordability was a serious issue in many Boston-area communities before the housing crash and now tight inventories have helped push median sales prices up 9.5 percent year over year in the third quarter.
#9 - Boulder-Longmont, CO Tight inventory is also Boulder’s secret to landing on this quarter’s top turnaround towns list. It trimmed its inventory of homes for sale by 18.1 percent compared to the third quarter of last year and ranked 7th in the nation for declining age of inventory.
Boulder’s already-thin housing supply was stretched further when heavy rains fell on the eastern slope of the Rockies in September, causing massive flooding in Boulder and El Paso Counties. However, Boulder’s relative health is worth remembering, and its likely quick return to its equalized buyer-seller home buying marketplace is anticipated for later this year.
#10 - Las Vegas, NV-AZ (NV) Las Vegas was often cited as ground zero for the housing boom and bust. Despite progress over the past several years, nearly half of Las Vegas homeowners are said to still be underwater on their mortgages.
As of the third quarter of 2013, the median list price at $169,900 was up 11.0 percent from $153,000 in the second quarter, and up 30.8 percent from $129,900 one year ago. In Las Vegas, the pendulum has been swinging in a positive direction long enough to qualify it for the list of top turnaround towns, ranking 7th in price increases and 12th in inventory decline. Further, the pace of decline in age of inventory - down 23.5 percent compared to year-ago levels - places it within the top 25 percent of markets in the country - a clear sign of favorable momentum.