The best and worst cities for home price appreciation through 2018

Did your market make the list?

Home price appreciation will slow to an average of 2.1% between 2015 and 2018 as supply and demand move into equilibrium, according to a new report by the Demand Institute.

That average naturally means that some communities will see bigger gains and some less.  

By 2018, the national median price for such a home will not quite have reached its nominal 2006 peak, but it will be close, the report says.

Adjusted for expected inflation rates, however, the median home price will stand 25% below its 2006 level.

The main driver of housing demand in the next five years will be the number of people forming new households.

For almost six years following the financial crisis, many young people found it difficult to set out alone financially.

The Demand Institute suggests that in 2014, household formation is likely to snap back to a rate of nearly 1.3 million net new households.

Such a rebound in household formation will fuel a higher pace of housing completions, which collapsed in the Great Recession. Total housing completions will near 1.5 million by 2015.

Despite all this, the research shows home ownership will still not rise above 65.5% of all householders by 2018, compared with 69% near the height of the housing bubble. This is partly due to the high number of foreclosures during the recession, and partly due to the fact that a considerable proportion of those forming new households in the next five years will still need to rent rather than buy due to ongoing financial constraints.

The full report can be read here, and a great interactive map that drills down into over 2,200 metros and all 50 states can be found here.

So what MSAs will see the strongest and weakest median increases in the price of single-family homes between 2012 and 2018?

Click below to find out.

The MSAs likely to see the strongest median increase in the price of a single-family home between 2012 and 2018 will be:

5) St. Louis

St. Louis is expected to see home price appreciation of 30% over the course of the period studied – 2012-2018.

4) Milwaukee

The Brewer City will edge out St. Louis very slightly, just a hair over 30%.

3) Jacksonville

The Florida city will gain about 32% in home prices by 2018.

2) Tampa

Another Florida gainer in the post-recession recovery, Tampa should see 33% gains.

And the winner is:

1) Memphis

This is a difficult one, and a reminder that the metric in this list is based on percentage gains, not absolute values. Memphis remains a bifurcated market, with most of the city itself and its northern and southern suburbs facing harsh economic conditions, high crime and high unemployment, while many of its eastern suburbs hold high concentrations of wealth and prosperity.

For the metros expected to see the worst gains from 2012-2018, click below.

The median price of a single-family home will surpass its prior peak by 2018 in about half of the MSAs analyzed, by the Demand Institute.

In Buffalo, Austin, and Pittsburgh, for example, prices will be approximately 60%, 40% and 30% respectively above their mid-2000 levels.

At the other end of the scale, prices in Detroit will be 49% below the peak. Sun-belt MSAs such as Riverside, Orlando, Sacramento, Miami, Phoenix, and Atlanta, where prices were particularly high, will also fare poorly.

Those with the lowest projected price appreciation for 2012-2018 are:

5) Phoenix

This sand city has already seen strong gains since the bottom of the market, but the Demand Institute researchers think home prices here will slow to just 13% factored over the course of 2012-2018.

4) Minneapolis

This half of the Twin Cities should see 12% gains over the six years covered.

3) Denver

Prices here never bottomed out like some other places, so price appreciation here should be a more organic 11% by 2018.

2) Oklahoma City

A somewhat similar situation to Denver, prices here will gain just 12% over the course of the six years 2012 to 2018.

1) Washington D.C.

The only reason this might seem surprising is that prices here likewise never bottomed out for the better housing stock, as Washington was able to keep itself afloat on the strength of federal employees and the mega-herd of high-paid lobbyists, lawyers, and others who populate the area in and around the nation’s capital.

The Institute’s forecasts of existing single-family home sales show a similarly wide range, with Detroit, Phoenix, and Atlanta among those with least sales activity. Those with the strongest projected rise in sales of existing homes include Sacramento and Riverside.

In these metropolitan areas, price levels will remain below their peaks—evidence of the fact that there is not always a correlation between price levels and sales volume — and we project home completions will remain muted in most areas.

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3d rendering of a row of luxury townhouses along a street

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