The Difference Between ‘Hot’ and ‘Not’
This is a tale of two cities: Rockford, Ill., and Colorado Springs, Colo.
By one measure, Rockford is the “hottest” city in the U.S.–in terms of sold price percent change, But Tom O’Grady, CEO of Pro Tech Valuation Services, Waltham, Mass., said the true meaning of a “hot housing market” is commonly misunderstood and chronically misused.
Too often, O’Grady said, people look to one data point to explain a trend, particularly in coverage of the real estate industry. He said simply looking at this single factor isn’t enough.
“Every day there’s a new news story with a list of top performing cities–but do these cities really reflect what is going on in the real estate market?,” O’Grady said. “We believe that a housing market’s health is made up of many factors. Much like how a doctor must look at multiple vital signs to make a diagnosis, we analyze multiple data points, track trends and use consistent methodology in our rankings.”
So while by sold price percent change, Rockford (16.56 percent year over year) is indeed the “hottest” market in the country, the reasons can vary greatly. Rockford and other cities with high sold price percent changes can actually be “soft” markets, in drastically different stages of recovery, O’Grady said.
When taking multiple data points into account–such as number of sales, sold price, foreclosure ratio and days on market–O’Grady said a more accurate market picture can be assessed. According to the Pro Tech May Home Value Forecast, the “actual” top 10 housing markets are led by Colorado Springs, which features low housing inventories, quick turnaround times on market and corresponding price increases.
Besides Colorado Springs, western markets dominate the top 10: Boise City, Idaho; Grand Rapids, Mich.; Modesto, Calif.; Oakland; Ogden, Utah; Portland, Ore.; Sacramento, Calif.; Salt Lake City; and Stockton, Calif.
Pro Teck reported of the top 10, only Grand Rapids had a sales price/list price ration under 100 percent (99.35 percent).
On the bottom side, worst markets were Killeen, Texas; Peoria, Ill.; Clarksville, Tenn. Midland, Texas; Madison, Wis.; Jackson, Miss.; Atlantic City, N.J.; Gary, Ind.; Jacksonville, N.C.; and Flint, Mich.
“Atlantic City is experiencing city management issues, which when combined with a decline in gaming revenue, is beginning to take a toll on real estate prices,” O’Grady said. “An uptick in REO sales to numbers not seen since the financial crisis leaves us pessimistic to the health of Atlantic City’s real estate market for the foreseeable future.”
