» more from Slideshows

Housing Markets On The Way Up

The housing market has been at the center of U.S. woes for years, but it is also key to the nation’s economic recovery. Although April’s Case-Shiller home price index offered a cloudy outlookon home prices, real estate website Zillowis forecasting that the end may be near, expecting home values nationwide to bottom during the final three months of 2012.

Applying a statistical approach that uses inputs from individual local markets including unemployment, vacancies, foreclosure rates and more, Zillow provides an estimate of when home values will hit a turning point. According to its model, some cities have already reached the bottom for prices and are on the way up. The following list represents markets that Zillow predicts have bottomed between Q3 2011 and Q1 2012.

While Case-Shiller directly takes into account foreclosure resales, Zillow’s model looks primarily at the seasonally adjusted market for nonforeclosure sales and includes all homes in the area, not just ones for sale or that have been sold. This provides broader insight into how consumers are buying and selling homes in conventional transactions, says Stan Humphries, Zillow’s chief economist. “If you look over a year-over-year basis, both new and existing home sales are showing trends anywhere from 5 to 10 percent above where they were last year,” Humphries told CNBC. “If this continues for the balance of the year, it is likely to offset the imbalance of supply and demand. Overall, the excess of supply has been what has been pushing prices down.”

But what would a true bottom in home prices look like? Humphries expects that a true turn would see prices gradually increase for three to six months following the national bottom, which would include an end to sustained declines on the local level. However, instead of home price appreciation of between 2.5 percent and 5 percent per year experienced before the bust, he expects growth rates to be below this historical norm, settling between 1 percent and 3 percent annually. The big cause for this slower pace of price growth is the high rate of negative equity, which stood at 28.5 percent in in the third quarter of 2011, says Humphries.

Based on the Zillow analysis, 19 of the 30 largest U.S. real estate markets will reach a bottom in 2012 or have already reached a bottom. In the markets that are predicted to have already made the turn, prices are expected to appreciate by 0.3 percent to 6.5 percent by March 2013, depending on the city. However, the biggest threats to a sustained recovery are systemic concerns, which are most strongly tied to domestic employment growth and the state of the global economy.

So, which metro areas have already reached a bottom in home prices, according to Zillow? Click ahead to find out.

By Paul Toscano
Posted 9 May 2012

Photo: Getty Images