Realtor.com recently released its 2015 housing forecast, including a prediction that millennials would return to home buying. "If access to credit improves, we could see substantially larger numbers of young buyers in the market," said Jonathan Smoke, chief economist for Realtor.com. "However, given a high dependency on financial qualifications, this activity will be skewed to geographic areas with higher affordability, such as the Midwest and South."
Among the report's other predictions is a list of 10 emerging markets that are likely to accelerate in the new year. Here are those top 10 markets for 2015.
—By Colleen Kane, Special to CNBC.com.
Posted 8 December, 2014
Atlanta-Sandy Springs, Georgia
Home priced at the approximate median: The 2,522 square-foot condo pictured here is $201,289, with four bedrooms, two full and one half bathrooms.
Metrics to watch: Atlanta ranks seventh in forecasted household growth over the next five years. Also, home sales are forecasted to rise by 11 percent.
Why it's going to grow: Atlanta may soon reclaim its title of leading the country in population and household growth. "The market is affordable and despite an above average forecast for home price appreciation (5 percent) will remain affordable especially relative to other major markets," Realtor.com's Smoke said.
Dallas-Fort Worth-Arlington, Texas
Home priced at the approximate median: This 1,299 square-foot ranch house is $246,000, with three bedrooms and two bathrooms.
Metrics to watch: Dallas comes in first in forecasted household growth over the next five years. In addition, the volume of home sales is expected to rise by 7 percent.
Why it's going to grow: Dallas' employment rate may set records for 2014 and is expected to rise by 3 percent for 2015. The market is also strong in new construction, which helps to contain supply pressures. "We are forecasting 3 percent growth in home prices in 2015 and 7 percent growth in home sales," Smoke said.
Denver-Aurora-Broomfield, Colorado
Home priced at the approximate median: This 906 square-foot apartment is $374,950, with one bedroom and two full bathrooms.
Metrics to watch: Home sales are expected to increase by 14 percent, and add to that a tight supply of properties on the market.
Why it's going to grow: As the 20th-largest market by number of households, Denver has also had a strong economy since the recovery began. As jobs increase, unemployment will continue to decrease in 2015. "The market is an opportunity magnet and has 8 percent growth in households forecasted over the next five years," said Smoke. However, "the market's biggest concern is declining affordability," he said, adding that Realtor.com is forecasting 3 percent growth in home prices and 14 percent growth in home sales, which is the largest growth of any major market.
Des Moines-West Des Moines, Iowa
Home priced at the approximate median: This 1,605 square-foot brick house is $186,900, with three bedrooms plus two full bathrooms and one half bathroom.
Metrics to watch: The rate of young home buyers and households will rise.
Why it's going to grow: This is not even close to being a top 10 market in terms of population (ranking 91st) or households (88th), but it drew the attention of Realtor's forecasters due to its affordability. A median household can afford a home priced at 2.2 times the median home price. The employment rate is also setting records. "While Des Moines, Iowa, may seem like an odd addition [to this list], its incredibly high affordability and high levels of home ownership among millennials set the stage for strong housing performance next year," said Smoke.
Houston-The Woodlands, Texas
Home priced at the approximate median: This 2,822 square foot house is $259,985 and has four bedrooms plus two full bathrooms and one half bathroom.
Metrics to watch: The Houston market is third in forecasted household growth over the next five years. In addition, employment is expected to increase by 4 percent, or twice the national rate, and the volume of home sales should go up by 5 percent as well.
Why it's going to grow: Houston has been a strong market and all signs point to its continuing to be at the top of every category. Compared to other Texas markets, however, it's becoming less affordable. "We are forecasting a 2 percent increase in home prices in 2015 along with a 5 percent increase in home sales," Smoke said, "which should keep Houston on top as the largest market for total home sales."
Los Angeles-Long Beach, California
Home priced at the approximate median: This 924 square foot renovated bungalow is $499,000, with two bedrooms and one bath.
Metrics to watch: Los Angeles-Long Beach market is in fourth place for the amount of household growth in the next five years, and the volume of home sales is forecasted to rise by 6 percent.
Why it's going to grow: As the market with the second highest population, Los Angeles might have finally recovered all jobs lost in the recession by next year. However, the market is also one of the country's least affordable. Nonetheless, the market should see a 4 percent increase in total households and home-owning households in the next five years.
Minneapolis-St.Paul-Bloomington, Minnesota
Home priced at the approximate median: This 1,706 square-foot home is $244,900 and has three bedrooms and two bathrooms.
Metrics to watch: Where there's affordability and a rise in new construction, look for continued millennial homeowner growth.
Why it's going to grow: Minneapolis has a diverse economy and an affordable housing supply. In fact, Smoke notes, "the market's affordability and strong economy are attractive to millennials and that market is the second-largest in the country for home-owning millennial households."
Phoenix-Mesa-Glendale, Arizona
Home priced at the approximate median: This 2,684 square-foot house is $259,900 and has four bedrooms and three bathrooms.
Metrics to watch: Income is rising while new construction is expected to go up by a dramatic 22 percent, and home sales are forecasted to increase by 11 percent.
Why it's going to grow: Phoenix is typically in the top five markets for new construction, and it's relatively affordable. While unemployment is not down by as much as some of the other markets on this list, local job growth is on par with the U.S. average.
San Jose-Sunnyvale-Santa Clara, California
Home priced at the approximate median: This 2,327 square-foot house is $725,000 and has five bedrooms, plus two full bedrooms and one half bath.
Metrics to watch: The San Jose market will have a tight supply plus income growth. Home prices are expected to rise by 2 percent.
Why it's going to grow: "San Jose is not a top 20 market, but its economy and housing market have been performing in the big leagues, and economically the market even outperforms its Bay Area sibling," Smoke said. Employment growth and household growth have allowed this market to outperform others. Local income growth also somewhat offsets the rise in prices.
Washington, D.C.
Home priced at the approximate median: This 1,540 square foot colonial house is $510,000 and has three bedrooms and two full baths, as well as two half bathrooms.
Metrics to watch: Washington, D.C., ranks fifth in forecasted household growth over the next five years. While there will be a tight supply, home sales are forecasted to rise by 10 percent.
Why it's going to grow: The Washington market is major — it ranks 7th by population and 6th by households — but its housing market faltered in 2013 and early 2014 because of the sequester. However, things are now back on track, although new construction is somewhat limited. "We are forecasting home prices to increase 3 percent in 2015 while home sales rebound, up 10 percent after a decline of 2 percent in 2014," Smoke said.