San Francisco and other California metros are poised for the country’s strongest levels of appreciation in the coming year, according to a forecast from Veros Real Estate Solutions. 

Veros also predicted that select markets in the Northeast will continue depreciation trends, though these trends look to be easing. 

The future home price index conducted by Veros continues to report significant strengthening and improvement throughout the nation, particularly in the west, including Texas. 

On average for the top 100 metro areas, Veros anticipates 3.1% appreciation over the next 12 months. This marks the fourth consecutive quarter where the index has shown forecast appreciation. 

Most areas of the country are now predicted to see appreciation with far fewer areas showing a decline. At the time the forecast was released, nearly 90% of U.S. markets are expected to see appreciation, while the remaining 10% are expected to experience a drop in home prices. 

Last quarter only saw 75% of markets appreciating, with 25% of markets depreciating.


All markets in the top 5 positions now have double-digit forecast appreciation, with California markets dominating the list. 

The San Francisco market is dealing with a serious shortage of housing inventory, with supply down nearly 80% from what it was at the 2008 peak. Affordability is inching its way back into the San Francisco market, although prices are still relatively expensive compared with the rest of the country. 

The market’s low supply, historically good affordability, relatively low unemployment and continued low interest rates have pushed this market to the No.1 position, with 12.7% appreciation forecast. 

The Los Angeles and San Jose markets are seeing significantly reduced housing supply, down more than 70% and 75% from their peaks, respectively. Los Angeles’ affordability is back at levels not experienced in more than 10 years, and the low unemployment rate in San Jose has helped position these two markets in the second and third spots, respectively.

"Overall, the recovery in the housing market is forecast to continue to accelerate and quite significantly over the previous quarter," said Eric Fox, vice president of statistical and economic modeling at Veros. 

"We have been consistent in our position over the past year that the recovery will be lengthy and gradual, which it has been, while many were talking about 'shadow inventory' pulling the housing market back down and creating another recession. Now we are finally over the hump with appreciation being the forecast norm," he said.

Fox said strong appreciation is expected for months 13 to 24 in the forecast, although it will not be as strong as in the first 12-month period. 

He added, "That is to say, we are seeing the first signs a year or two from now that the rapid increase of prices will slow a bit in many parts of the country. However, we don't foresee drastic slowing - simply some moderation."