The new VeroFORECAST report for the fourth quarter of 2018 shows there are now 18 housing markets predicted to see average property values depreciate over the year ending December 1, 2019.
18 markets? This represents the largest number of housing markets riding the bottom of the forecast since June 2017, and twice as many as our report last quarter.
That is 5% of all MSAs studied, including 13,870 ZIP codes and 1,004 counties, and accounting for the residences of 82% of the U.S. population.
This expanded list of markets predicted to drop in value is part of the overall market softening reflected in this quarter's forecast. The data suggests a half-percent drop in average appreciation for residential property in the nation's largest 100 markets, down from a 4.6% average appreciation predicted in third quarter 2018 to the 3.9% predicted in the fourth quarter 2018 analysis.
This is a significant change from one quarter to the next, but we do not believe it signals that a crash is coming. Instead, the report's data suggests that the market fundamentals are expected to remain solid and the overall housing market will remain healthy.
Although there are twice as many depreciating markets in this report than there have been in the past year of forecast reports, the lowest projected rate of depreciation for any market has remained in the same general range – between -2.0 and -3.0% per year. In this report, the market predicted to fare the poorest is Farmington, New Mexico.
Farmington has maintained a consistent spot in the report's bottom 10. What makes it unique, however, is that among the depreciating markets it is the only one in the Western U.S. The others are all in Eastern and Southeastern markets. In this report Farmington is forecasted to lose property value on average of -2.6% over the remainder of 2019. Its showing in the five previous VeroFORECASTS were -0.2% in fourth quarter 2017, not listed in first quarter 2018, -1.1% in second quarter 2018 (second lowest), -2.2% in third quarter 2018 (first place), and now first place again at -2.6%.
The next-highest depreciation rate predicted in this report is -1.4% in Danville, Illinois; about half that of Farmington's, Danville is one of four Illinois MSAs among the 18 depreciating markets identified in the current report.
As with the Top 10 markets in this quarter's forecast, housing supply plays a key role in impacting conditions in the bottom performing markets. For the Bottom 10, the housing supply is higher and prices are not expected to increase significantly.
Population trends are another important characteristic in the performance of our bottom forecast markets, where either slow population growth or population declines are contributing to low demand. The bottom of the list is now dominated by small to modest sized cities, with an average population of 260,000.
For the next 12 months, according to the VeroFORECAST, the predicted Bottom 10 appreciating markets will be in Illinois, Louisiana, New Mexico, North Dakota, Maryland and Connecticut.
- Farmington, New Mexico -2.6%
- Danville, Illinois -1.4%
- Decatur, Illinois -1.0%
- Peoria, Illinois -1.0%
- Grand Forks, ND-MN -0.8%
- Springfield, Illinois -0.6%
- Cumberland, MD-WV -0.5%
- Shreveport-Bossier City, LA -0.5%
- Lafayette, LA -0.4%
- Bridgeport-Stamford-Norwalk, CT -0.4%