A new report suggests that Sacramento, California, may follow Phoenix as the next hard-hit metro to rise out of the ashes.[IMAGE]
""Pro Teck Valuation Services"":http://www.proteckservices.com/ released its ""August Home Value Forecast"":http://www.homevalueforecast.com/ Update, putting a focus on which of the hardest hit metros might bounce back and become investment or home purchasing opportunities.
According to the report, market-based indicators suggest that Sacramento might be ""the next Phoenix,"" referring to the hard-hit Arizona metro that has seen dramatic improvement this year.
""Two previously hard-hit metro areas that stand out are Orange County (Santa Ana) and Sacramento, California,"" said Tom O'Grady, CEO of Pro Teck. ""Sacramento is particularly interesting because like in Phoenix, home prices overshot on the downside after the market peak in 2006. All nine of Sacramento's market-based indicators are exhibiting positive changes from a year ago. For example, the number of active listings is down 39.21 percent, months of remaining housing inventory down to 3.65 months and foreclosure sales down 52.79 percent.""
To assist in predicting long-term cyclical turning points of real estate markets, Home Value Forecast partner ""Collateral Analytics"":https://collateralanalytics.com/ previously developed a Leading Real Estate Index (LREI) for all Core Based Statistical Areas (CBSA) in the country. The Leading Index is based on several fundamental factors that drive real estate markets, such as employment growth, home sales activity, the unemployment rate, housing affordability index, and new building permits.
The diffusion index measures how many components of the LREI are moving in a positive direction at any given time, with a value at or above 50 being a good precursor of pending home price increases. According to the LREI, Sacramento is seeing steady growth.
""Sacramento's LREI has been climbing over the past two years and recently shot up to a value of 50, which means that half of its components are moving in a positive direction relative to their historical performances and that further home price appreciation is expected,"" O'Grady said. ""Another important factor supporting home prices in Sacramento is affordability. This month's Home Value Forecast shows that Sacramento's housing affordability index is at its highest level in years. Also, in many areas of the Sacramento market, we are seeing nearly every ZIP code classified as 'good' or 'normal' according to our most recent Market Condition scoring system, which is in contrast to the weakness in the market a year ago.""
August's Home Value Forecast also includes a listing of the 10 best- and 10 worst-performing metros as ranked by Pro Teck's market condition ranking model. The rankings are put together with regard to many leading market indicators, including days on market, sold-to-list price ratio, and foreclosure and REO activity.
Sacramento made the top 10 list with three other California metros, owing partly to declines in active listing counts over the past year. According to report co-author Michael Sklarz, this ""has led to most of these markets currently having balanced or tight markets based on their remaining months of housing inventory.""