Another Top-10 List — Best Cities Where to Invest in 2014

While hindsight is 20-20, there are some indicators of which housing markets may perform better than others. I personally focus on jobs since people with gray hair, blue hair or no hair (retirees) are mostly the only people without a job that can purchase a home. Pretty much everyone else needs a job. Then throw in incomes, supply of both new and existing homes and rental rates, and you can get a reasonable expectation of where housing markets are heading.

Forbes, in the final issue of 2013, teamed with Local Market Monitor and analyzed the 100 largest Metropolitan Statistical Areas (MSAs) having a minimum population of 575,000. They focused on population, home prices, and the “local job economy.” Without more detail, this is a “black-box” type of analysis, but that is the business that the Local Market Monitor does.

Each of the top cities features strong population and job growth, and low home prices which the Local Market Monitor considered undervalued. The researchers then developed an “Equilibrium Home Price,” a proprietary measure that reflects what the average home price should be in a market, assuming no market bubbles or recessions. They also forecast the cumulative three-year home price increase.

If you live north of the 37th North Parallel, do not expect to be included in the top 10 MSAs unless you reside in Boise City-Nampa, Idaho (10th on the list).

So where are the top forecast residential markets to invest in 2014?

12-30-13 graph

To read the entire article and view the next 10 MSAs click http://www.forbes.com/sites/erincarlyle/2013/12/26/best-buy-cities-where-to-invest-in-2014/. For more information about the Local Market Monitor click http://www.localmarketmonitor.com/

Do I agree with the forecasts for home price growth in the coming three years? Not necessarily. As an example, I live in Houston, where the average home price in the past three years gained a total of 20 percent – and that period included one of the best job growth rates in a decade. That job growth rate has already cooled, falling from a 4 percent increase from November 2011 to November 2012, to 3.1 percent in the latest 12 months ending November 2013. To reach their forecast, Houston homes would need to grow at 7.5 percent per year, compounded annually, for the next three years. I doubt that will happen. I do agree, however, these should all be growth markets.

There remain places across the country that are still attractive buys in housing, and I expect an upward trend in most.

Remind me to revisit this three years from now and see how they did.

Ted

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