Following today's housing recovery is like watching a bunch of sixth grade girls decide which boys are cool and which aren't. Boy to boy, housing market to housing market, the winners and losers are constantly changing. Had one predicted just a year ago that five of the 10 healthiest housing markets would be in California, one might have been summarily dismissed.
"Rapid home value appreciation in the West, particularly California, is currently having a very positive effect on a number of other factors, including negative equity, foreclosure activity and the overall financial health of local homeowners. But that same rapid appreciation may cause affordability issues in the future in these markets, leading to potentially unhealthy conditions," Zillow Chief Economist Stan Humphries said.
Phoenix and Las Vegas could make the top of another list—the unhealthiest. Both saw rapid price appreciation due to high investor demand. For the past three years, single and institutional investors swooped into these highly distressed markets and began inhaling properties. The intention was to put most of them up for rent. Prices had fallen by well over half in both areas peak to trough, so the bargains were plentiful. Until they weren't.
In Phoenix, the median single-family home price shot up 71 percent between October 2011 and October 2013, up 27 percent in just the last year, according to Mike Orr, director of the Center for Real Estate Theory at Arizona State University. Investors pushed prices up so far, so fast, that they priced themselves out of the market.
"I anticipate sales will be way down in November and through the holidays, when some people even take their homes off the market until late January," said Orr. "We also anticipate a much slower rate of price appreciation in 2014 than the furious pace we have witnessed over the last two years."