TOP HOUSING MARKETS Q2 2009

The best way to determine top housing markets in terms of price increases is to look at last three months' changes and select markets that have exhibited consistently rising prices in each and every of the past three months.

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Note though that due to the seasonality issue that exists with monthly data, this need to be seasonally adjusted for calculating monthly price changes. However, such data are not available at the metropolitan level. Available data on median prices from the National Association of Realtors (NAR) at the metropolitan level are seasonally unadjusted and as such can not be used for calculating price changes from one quarter to the next one. They can only be used for calculating changes from the same quarter in previous year, in order to circumvent the seasonality issue.

The same applies for the Housing Price Index data at the metropolitan level provided by the Federal Housing Finance Agency for the second quarter of 2009. This data are also seasonally unadjusted and as such can not be used to calculate changes in prices from quarter to quarter but only from same quarter of the previous year.

Note, however, that markets that top the list in terms of annual price increases may not necessarily be markets where prices have been rising in the last three months. Prices may have been declining in the last three months but still present strong increases over a 12-month period because prices have been rising rapidly in the other nine months.

We sort out the Q2 2009 top housing markets with faster rising prices on an annual basis, based on the constant-quality indices developed by the FHFA using both single-family housing sales transactions and appraisal data.

These constant-quality indices are more reliable in measuring changes in prices through time than median prices, because the latter do not account for changes in the quality mix of the sales in the transaction sample from one period to the other.

With these reservations in mind and strongly cautioning the readers to examine price trends in the last three months before qualifying any market in terms of price increases or declines, we present in the graphs below the top 40 US metropolitan housing markets in terms of annual price gains as of Q2 2009, based on the FHFA constant-quality housing price indices for 384 metropolitan statistical areas. We also present the 20 worst housing markets in terms of annual price declines.

According to the FHFA data, the five top housing markets that registered the highest annual price gains as of Q2 2009 were Elmira, NY, Texarkana, TX-Texarkana, AR, Lake Charles, LA, Odessa, TX, and Pine Bluff, AR where housing prices posted annual increases of 4.5%, 4.5%, 4.5%, 4.3% and 4.3%, respectively.

In terms of the five worst performing housing markets on an annual basis in the second quarter of 2009, it is interesting to note that three of them are located in California, indicating how hard this state has been hit. More specifically, the five housing markets that registered the worst annual price performance in Q2 2009 were Merced, CA, Las Vegas-Paradise, NV, Vallejo-Fairfield, CA, Miami-Miami Beach-Kendall, FL, and Modesto, CA, which experienced annual house price declines of -27.1%, -26.2%, -23.7%, -23.4% and -22.5%, respectively.

You can see in the graphs below all 40 top housing markets and respective annual price gains as well as the 20 worst housing markets and respective annual house price declines as of Q2 2009.