Markets with Worst Appreciation

[Nick Gerli]

Everyone loves to talk about the markets that seeing crazy appreciation - the Boise's and Spokane's of the world - but what about the markets that are lagging the rest? 

The data below highlights 15 large markets with the worst appreciation over the last year. Data is sourced from Zillow and covers the "metro area" for each market. 

Quite an interesting array of markets on this worst performers list. Highlights:

-How about Texas? Dallas, Houston, and San Antonio dominating the bottom of the list. This comes as Texas just posted by far the highest levels of population growth of any state through mid-2020. Could oversupply be an issue?

-Chicago has been a market that has lagged the rest of the US in almost every relevant metric over the last 10 years: income growth, population growth, home price growth, etc. 

-Over half of this list is comprised of state capitals. Raleigh, Richmond, Harrisburg, Baton Rouge, Columbia, Jackson, Oklahoma City, and Des Moines. Could be coincidence...or maybe not?

-Low appreciation might not be the worst thing in the world. It could mean values in these markets are more stable through a downturn. Some of the cities are the ones that performed the best during the real estate crash from 2007-12. 

What are your thoughts? Are you invested or looking to invest in any of these markets? 

[Chris Martin]

Originally posted by @Nick Gerli:

Originally posted by @Chris Martin:

I had a Blink moment. So, check your data sources. I don't see the Raleigh market as one of the worst in the US, but for any dataset, you can usually munge the query to make whatever narrative you want. Source: St. Louis Fed reserve, home of some the best data... and free.

You will note that San Jose is not in the cellar dweller list, but has underperformed the other three (including Raleigh, a market I am familiar with) according to the Case Schiller datasets. 

Chris - why do you not trust the Zillow data?

Wouldn't the organization with instantaneous data on listings, listing prices, DOM, price cuts, price increases, views, and broker contacts for over 80 million homes have the best value projection models?

? 

Don't take it personally? 

When did I say I didn't "trust" Zillow data? 

I had to investigate this more than for a "blink" moment. My initial post was on the cuff, with 1 minute investigation. Now I've invested more time. The charts you posted come from an article you wrote, at https://reventureconsulting.com/the-best-and-worst-markets-of-2020/, and there isn't a Zillow source linked in your BP post or your article so not sure of your Zillow source. Maybe a "I'm the author" disclosure may be appropriate. 

You don't state your methodology, but in your article your #1 and #2 top appreciation cities are not in the top 100 in size per https://worldpopulationreview.com/us-cities which means you mix and match (IMO) non-comparable cities. 

A quick google search about Zillow related to the subject topic shows that at https://www.zillow.com/research/12-mid-sized-markets-27918/ (By Zillow Research on Sep. 14, 2020) that Boise City, ID is at the top. The only other city in your comingled list is Spokane WA, again meaning you mix and match cities of different sizes. 

The graphic in my prior post shows, from the St. Louis Federal Reserve data, that San Jose has underperformed the Raleigh and San Antonio market over the past few years. Mixing and matching. This is consistent with what I know from both markets, where members and I have SFR and MFR property.

From http://www.homebuyinginstitute.com/news/top-10-markets-for-price-growth/ on December 23, 2020: In late-December, the research team at Zillow wrote: "San Jose home values have gone up 15.2% over the past year and Zillow predicts they will rise 12.1% in the next year." This contradicts the Case Schiller data. 

So, without knowing your methodology, I question your list. Nothing against your post.. .the reality is I question everything. Either Case Schiller is wrong or you and Zillow are. Personally I'll stick with Case Schiller and the St. Louis fed data on the macrolevel, which historically more closely matches appraised values than Zestimates.   

Sidebars:   Note that I, for the most part, really don't care about what other third parties say about appreciation. An appraisal on a particular parcel in any given city will have much more merit than a blanket 'appreciation in the city' view. For those who say I don't care about appreciation because it's all about cash flow most likely haven't considered financing. If your property value is up 20% Y/Y or up 50% over the past 3 years, your ability to leverage is improved substantially. In a low interest world like we are in, I'd rather capitalize on the appreciation with debt. 

[Forrest Faulconer]

-Low appreciation might not be the worst thing in the world. It could mean values in these markets are more stable through a downturn. Some of the cities are the ones that performed the best during the real estate crash from 2007-12.

Hey @Nick Gerli, I think you have said it well here, also what @Doug Spence said about submarkets. Grouping an entire city together does not show the whole picture, there are some rough parts of OKC that might as well be depreciating, and some "hip" neighborhoods that are appreciating rapidly. And many of the suburbs are fairly steady, some seeing continual growth due to better school systems (Edmond, Bethany, Yukon, Mustang, Moore).

Forrest Faulconer