Fortune and Economy.com just released 5-year real estate appreciation predictions for 54 major metropolitan areas. For the analysis, they looked at the likely price increase or decrease for a luxury home that would ell today for twice the local median price.
Here is a summary of the results:
| 1 |
Cleveland |
9.6% |
| 2 |
Indianapolis |
7.4% |
| 3 |
Detroit |
7.0% |
| 4 |
Cincinnati |
6.0% |
| 5 |
Greater Kansas City |
1.6% |
| 15 |
Austin |
-4.4% |
| Average |
National Average |
-14.7% |
| 50 |
Baltimore |
-27.8% |
| 51 |
Tampa |
-27.9% |
| 52 |
East Bay, Calif. |
-31.0% |
| 53 |
Miami |
-32.3% |
| 54 |
Orlando |
-34.3% |
The good news is that Austin is ranked higher than 72% of metropolitan areas with a projected value decrease of 4.4% over 5 years. This is substantially better than the 14.7% average projected for the average metropolitan area. The bad news is that prices are expected to decrease. Obviously, this data does not really say anything about the condo local market.
While reports like these always sound authoritative, it’s useful to look closely at the methodology. This survey is based on a historical home price-to-typical rent ratio and assumes a return to historical averages. It doesn’t look at any other market fundamentals: growth rates, employment, desirability, etc. In fact, the markets with the highest inbound migration are rated as the weakest markets while those where people are fleeing in droves — detroit –are rated very high. For Austin, the bottom line is that the market was never caught in the boom that was experiences throughout the country, and the fundamentals are strong: for example, people are coming to town and employment growth is strong. That said, no one really know whether the local market will in fact go up or down over the next 5-years.
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