The phrase “hot housing market” gets thrown around frequently, but a jump in sale price alone doesn’t necessarily indicate a lively market, according to Pro Teck Services’ May Home Value Forecast report.
Determining a truly hot housing market takes deeper evaluation, such as sold price percent change, list-to-sale price ratio and percentage of foreclosure sales, among others.
“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?,” Tom O’Grady, CEO of Pro Teck Valuation Services, said in a statement. “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.”
Sold percent price change, alone
By solely analyzing year-over-year sold percentage price change, the following markets came out on top:
In reality, only two of these markets — Stockton-Lodi and Portland-Vancouver-Hillsboro — are considered hot with all factors weighed.
While each showed strong sold price increases, Punta Gorda and Port St. Lucie both came in as “soft” due to a high percentage of foreclosure sales at 17.16 and 11.84 percent, respectively.
Foreclosure sales can slow appreciation of a market, which is why most of the hot metros hold 6 percent or less foreclosure sales as a percentage of total sales.
Plus, both Florida markets posted weaknesses in sale-to-list price ratios. Punta Gorda sellers only received 96.66 percent of asking price in May, while Port St. Lucie sellers received 97.23 percent.
Looking at price change alone over the past few years in Punta Gorda shows appreciation, but not anywhere near its pre-recession high.
Rockford in the Greater Chicagoland area had a high sales price jump at 16.56 percent, but it also had 21.12 percent foreclosure sales and a mere 96.7 sale-to-list price ratio, rendering it a “soft” market.
True hot housing market list
Market conditions are analyzed and given a score to show whether the market is moving in a positive, neutral or negative direction. Adding together all of the indicator scores, a composite score is given to each core-based statistical area (CBSA). Looking at the top 200 CBSAs, Pro Teck found the following markets to be the hottest based on directional trend.
The western U.S., including markets in or near the Bay Area such as Oakland and Sacramento, predominately made the cut. Most cities in the top 10 CBSAs featured 100 percent sale-to-list price ratio, aside from Grand Rapids, which came in 99.35 percent.
Kileen-Temple, Texas, located 70 miles north of Austin, posted a 13.63 percent year-over-year drop in sales price. The area also had a foreclosure ratio of 12.2 percent, which is actually a 25 percent year-over-year drop, but still too much to qualify as “hot.”
