The best U.S. cities for watching home price inflation appear to be concentrated along the West Coast, a new report from data services firm Pro Teck says.
Pro Teck released its Valuation Services Home Value Forecast (HVF) November update, which revealed that five of the markets featuring exceptionally high real estate values are located in California. Keeping with the West Coast trend, another four are located in Washington state, while one of the inflationary markets is located in Idaho.
So where are prices at an all-time high? Pro Teck points to Bellingham, Washington; Portland, Oregon; San Jose, California; and Seattle.
Meanwhile, Boise, Idaho, is forecasted to hit a new high by the first quarter of 2017, alongside Mount Vernon, Washington.
Other markets dealing with healthy home prices include Modesto, Stockton, Sacramento, and Vallejo, California. Still, these California markets are not expected to reach the bubble-levels reached during the pre-real estate crash over the course of the next five years, Pro Teck says.
"The first question people ask is whether there is a bubble on the horizon for any of these communities," said Tom O'Grady, CEO of Pro Teck Valuation Services. "While there are many factors that can impact a 'bubble' one of the most important factors at Home Value Forecast is looking at home affordability via an affordability index."
Pro Teck evaluates bubble levels by studying an area’s median income and evaluating what type of mortgage payment is needed to purchase a median-priced home. Based on these findings, an index score is given and any score above 100 suggests the median income will cover the price of an average home in the area. Lower scores suggest a disparity between home prices and earnings, Pro Teck says.
For example, San Jose and Stockton have scores around 70 and 120, respectively. Neither figure is indicative of a market that is too frothy.
"San Jose and Stockton are examples of what we see for all of our top ten CBSAs – while home prices are increasing, affordability is at or above historic norms and nowhere near ‘bubble’ territory of 2004-2007,” O'Grady concluded.