Learn How To Start Investing In Real Estate
Learn How To Start Investing In Real Estate

10 Cities With The Best Home Appreciation Potential

Written by Than Merrill

Which American cities offer the best potential for home price appreciation?

While educated investors know that the promise of appreciation shouldn’t be the only reason to acquire an investment, it is still a major factor for all to take into consideration. It is also important to note that there is no such thing as a 100% guarantee. However, the prospect of appreciation is always welcomed.

Making an immediate profit is obviously the wisest real estate investing strategy. If you can guarantee a good return upon the purchase of a home, why wouldn’t you? Yet, investing in areas pegged for significant appreciation can make the deal even sweeter.

Property price appreciation tacks on a nice bonus for buy-and-hold rental property owners, it adds value and security for mortgage note holders, and can even make flipping houses a lot easier. Additionally, it can help those buying their own homes build a significant amount of wealth.

So where are the fastest appreciating housing markets? More importantly, which residential markets should see the most home value growth moving forward?

Indicators That Predict Appreciation

It is easy to make broad, unsubstantiated forecasts without anything to back them up. However, several indicators exist that allow for more accurate predictions regarding home price appreciation.

Recent traction and trends can serve as a good starting point. How fast have local home prices been going up, and how long have they been on the rise? Are they gaining in velocity or losing steam? These are things to take into consideration.

Compare these numbers with previous highs and historical housing cycles to determine how much higher they should go.

Other indicators include: local government’s efforts to grow the economy, the presence and migration of corporate head offices, presence of tech startups, job growth and employment.

The Most Important Indicator of Future Real Estate Values

According to a survey, which asked analysts if they could choose one single indicator to judge the potential of future home prices in a given area, “affordability” is the most significant factor.

They chose affordability because it dictates the cushion left for home prices to go up and enables more buyers to afford to live there.

As perhaps one of the best factors to measure affordability, wage increases play a significant role in the potential for appreciation. So which U.S. residential markets are currently experiencing the best pay raises?

10 Housing Markets to Watch for Home Values:

According to CNN Money and PayScale, the U.S. cities which realized the largest pay hikes in the third quarter of 2013 were:

  1. San Francisco, CA
  2. Baltimore, MD
  3. Seattle, WA
  4. Atlanta, GA
  5. Dallas, TX
  6. Washington, DC
  7. St. Louis, MO
  8. Houston, TX
  9. Detroit, MI
  10. Minneapolis, MN

Watch Out for Exceptions…

Of course, there are other factors which could impact these markets as well. For example, in Dallas and Houston, real estate investors may have to deal with substantial competition from new home and home builders. In Detroit, foreclosure homes may be cheap and entrepreneurs eager to revive the city, but 10 block sections of the city are also being bulldozed to restructure neighborhoods. San Francisco’s fate, on the other hand, depends a lot on the tech community.