Metro areas on our list of the 20 next-best markets may not be among the very first to feel the lift of a housing recovery, but they will no doubt outperform most of the 100 largest housing markets during 2010. Many of these markets are drawn from the same regions, the South Atlantic and Southwest, that produced our 20 healthiest markets. Several also happen to be centers for state government and/or the military. Others are notable for being steady performers during the housing boom and the subsequent bust. Interestingly, markets from Florida and California are beginning to show up on this list.
Hanley Wood Market Intelligence computes the Builder Market Health Index by comparing 2009 actuals to 2010 projections for key housing drivers--employment, income, home values, and population. The results are weighted to produce an index rating. A score of 50 or above indicates a truly healthy housing market.
None of these next 20 markets are healthy in the classic sense, with rising employment, income, home values, and population, though most have at least something positive going for them. When you get to the bottom of this list, however, Hanley Wood Market Intelligence is in most cases calling for permit declines.
Still, many of the markets on this list had a notable uptick in permits pulled during the fourth quarter of last year, momentum that is expected to carry over into 2010 and produce a housing rebound. In some cases, this will happen even as existing home prices fall due to distressed property sales.
21. El Paso, TX
Market Health Indicator: 29.3
2009 Total Building Permits: 3624
2010 Building Permit Forecast: 3964
Both Hanley Wood Market Intelligence and the University of Texas El Paso expect a 10% increase in El Paso housing activity this year. Why? Some of the forward momentum will come from employment and population growth. Fort Bliss is slated to receive a large influx of soldiers this year and Texas Tech recently decided to convert its medical school in El Paso into a full-on university campus. The University of Texas El Paso released a report last year that projects 4.2% growth in the El Paso economy for this year, compared to a mere 0.5% annual increase in 2009. The West Texas city, with a population of more than 600,000 and very affordable housing, has one of the strongest household growth rates among the top 100 markets. Those factors should conspire to prop up housing values, which are expected to fall by only 2.8%.
Get local market data and more on Builder's El Paso Local Market Page
22. Nashville-Davidson-Murfreesboro-Franklin, TN
Market Health Indicator: 29.1
2009 Total Building Permits: 4810
2010 Building Permit Forecast: 5389
Nashville may witness a welcome increase in housing activity this year. Already, an improving jobs picture and rising household formations have helped stabilize the housing market. Though median existing home prices are expected to fall another 4.8% this year, Hanley Wood Market Intelligence (HWMI) projects a 12% gain in permit activity. HWMI makes this projection despite the fact that permit activity was still falling in the fourth quarter of 2009. The new home market appears ready to rebound after sales of existing homes jumped 30% in the fourth quarter of 2009, strength that continued through February, according to the local Realtors association. Much of that renewed activity was in condominiums. Nashville's biggest employer is Vanderbilt University and Medical Center, which employs roughly 18,000. But many jobs in Nashville are dependent on the auto industry. GM sidelined its Spring Hill plant at the end of last year, costing the region 2,500 jobs, though talk about reopening the plant recently surfaced.
Get local market data and more on Builder's Nashville Local Market Page
23. Lexington-Fayette, KY
Market Health Indicator: 28.9
2009 Total Building Permits: 1941
2010 Building Permit Forecast: 2127
Relatively strong employment growth (1.7%) and household formations (1.4%) should buoy the Lexington market this year. The second largest city in Kentucky, Lexington enacted the country's first urban growth boundary, way back in 1958. The ordinance, which includes greenbelts and strict zoning definitions to protect its horse farms, helped temper the effects of the housing boom. Home prices in the so-called Horse Capital of the World have held pretty steady; they dropped only 1.7% last year, even as median incomes fell. Foreclosures spiked in 2009 but appeared to level off by year's end. HWMI expects starts to race ahead 10% this year as builders seize opportunities in Lexington's vibrant downtown and its beautiful outlying countryside.
Get local market data and more on Builder's Lexington Local Market Page
24. Boise City-Nampa, ID
Market Health Indicator: 28.6
2009 Total Building Permits: 1820
2010 Building Permit Forecast: 2505
Hanley Wood Market Intelligence believes the Boise market hit bottom last year, when a paltry 1,820 building permits were pulled. The state capital may see a 38% surge in permits this year, a trend that began in the fourth quarter of 2009. The metro area enjoys a strong rate of household formation, which should continue at a 1.9% rate this year. Home prices fell 16% in Boise last year, but the declines are expected to moderate to 6% this year as incomes rise. Housing here is very affordable, with 70% of the population able to buy the median-priced home--$153,000 in 2009. High-tech companies, including Micron Technology and Hewlett-Packard Co., rank among the biggest employers. Job losses began to moderate in the fourth quarter of last year, but 2010 growth will be depressed by foreclosures, which rose sharply last year. RealtyTrac ranked Boise 24 out of 203 markets in the percent of households that received a foreclosure filing.
Get local market data and more on Builder's Boise City Local Market Page
25. San Diego-Carlsbad-San Marcos, CA
Market Health Indicator: 28.5
2009 Total Building Permits: 2684
2010 Building Permit Forecast: 3171
San Diego was one of the first markets to feel the impact of the housing recession, and it may be one of the first California markets to recover. Based on a resurgence in the fourth quarter of last year, led by the single-family market, permit levels are expected to rise 18% in 2010, though they will remain far below the recent peak of 18,000 units in 2003. With firm links to military spending and continuing expansion of its bio-tech industries, San Diego is projected to benefit from a 1% increase in jobs and rising household formations in 2010. The population of San Diego, which is always ranked among the most desirable places to live in this country, has grown steadily since the second quarter of 2007. The opportunity to take advantage of lower home prices may have had something to do with this. Home prices peaked at $604,300 in 2005. If they fall another 11%, as is estimated for this year, they will settle at 43% below their peak.
Get local market data and more on Builder's San Diego Local Market Page
26. Salt Lake City, UT
Market Health Indicator: 28.2
2009 Total Building Permits: 4750
2010 Building Permit Forecast: 4204
The housing recession finally appears to be catching up to Salt Lake City, which managed to outperform most markets during the last three years. The market began to lose steam mid-year and by year-end permit levels were falling. Home values should fall another 10.2% this year, on top of last year's 10.5% decline, even as employment and households grow. Even so, at roughly $200,000, median home prices will remain above 2005 levels, a tribute to the strength displayed by the market during the downturn. Existing home sales fell in January after rising in the fourth quarter of 2009. Distressed homes accounted for 38% of sales in January.
Get local market data and more on Builder's Salt Lake City Local Market Page
26. Seattle-Tacoma-Bellevue, WA
Market Health Indicator: 28.2
2009 Total Building Permits: 7470
2010 Building Permit Forecast: 8698
After dipping 10% last year, home values are expected to rise slightly in Seattle this year as the metro area adds jobs and households. That should lead to a 16.4% increase in permit levels, according to HWMI's forecast. Single-family permit activity rose strongly, 40%, in the fourth quarter of last year, though permit applications for the entire year wound up at half of 2008 levels. A global center for the software industry, Seattle has a highly skilled, well-educated workforce that supports a median home price of $300,000. Seattle's population has grown steadily, at a 1.4% annual pace, through the housing and economic recessions. Boeing employs an astounding 71,000 people in Seattle, with Microsoft the second largest employer at 33,000.
Get local market data and more on Builder's Seattle Local Market Page
28. Columbia, SC
Market Health Indicator: 27.5
2009 Total Building Permits: 3050
2010 Building Permit Forecast: 3406
The secret is out. Builders in Columbia, S.C., pulled 55% more permits in the fourth quarter of last year than the previous year, a trend that continued through January. HWMI expects a 12% increase in 2010 permits as the state capital records another strong population gain and employment prospects improve. Thanks to strong in-migration and affordable housing ($138,000 is the median price of a home here), home prices have barely moved in recent years. They are expected to decline only 1.3% this year. The local economy should receive a strong boost from the construction of the University of South Carolina's new 200-acre research campus.
Get local market data and more on Builder's Columbia Local Market Page
29. McAllen-Edinburg-Mission, TX
Market Health Indicator: 27.4
2009 Total Building Permits: 3182
2010 Building Permit Forecast: 4440
Builders are pretty bullish about the prospects of this military town, located close to the border with Mexico. Based on last year's activity, we may see a 40% increase in building permits pulled in 2010. McAllen is predicted to have one of the largest percentage increases in jobs this year, 3.2%. It began adding jobs in the fourth quarter of last year, one of few markets to do so. Three of its four largest employers are hospitals. The region's health care industry contributed to 30% of its real GDP growth last year, according to a report from the U.S. Bureau of Economic Analysis. Also, it has been adding population at a 3% annual rate since 2005. The market showed some stirring of renewed activity in the fourth quarter of last year, when permit levels rose 25% over the previous year. With a median home price of a mere $71,000, housing here remains very affordable despite low incomes. The local economy, particularly the retail industry, is expected to receive a boost in cross-border trade from a new bridge to Mexico that opened in December.
Get local market data and more on Builder's McAllen Local Market Page
30. Baltimore-Towson, MD
Market Health Indicator: 27.3
2009 Total Building Permits: 4271
2010 Building Permit Forecast: 5832
A comparatively low unemployment rate, only 8.15% in December, will help propel the Baltimore market this year. Even as median home values continue to decline (a decrease of 8.6% is the forecast for 2010), building permit activity is expected to surge 37%. It doubled in the fourth quarter of last year on the strength of some large multifamily projects. Baltimore receives a boost from its close proximity to Washington, D.C., and federal government jobs. But with a median home price of $232,000, it is a much more affordable place to live than the nation's capital. Even so, Charm City, whose three largest employers are Fort Meade, Johns Hopkins, and MedStar Health, hasn't been adding much population in recent years. Local employment prospects were buoyed by the recent announcement of $5.6 million in stimulus funding for road improvements at Fort Meade and Aberdeen Proving Ground and a $180 million, state-funded public health lab in Hopkins Park.
Get local market data and more on Builder's Baltimore Local Market Page
31. Fayetteville-Springdale-Rogers, AR-MO
Market Health Indicator: 27.2
2009 Total Building Permits: 2133
2010 Building Permit Forecast: 2186
Fayetteville, home to Walmart and several major companies that sell products to the retailing behemoth, has a much lower unemployment rate (6%) than the rest of the country. Job and population growth may combine to put new home construction back on a positive track in 2010. Permits are expected to increase this year even as home prices continue to fall, though only 4.4%. Income gains in 2010 are forecast to make up for last year's decline in earnings. Home to the University of Arkansas, Fayetteville had only single-digit increases in home prices during the housing boom years. Now it's encountering only single-digit declines. Fayetteville's above-average foreclosure rate last year, though, will temper a housing recovery in the short term.
Get local market data and more on Builder's Fayettville Market Page
31. Virginia Beach-Norfolk-Newport News, VA-NC
Market Health Indicator: 27.2
2009 Total Building Permits: 4842
2010 Building Permit Forecast: 3748
Weakness in apartment construction will lead to a decline this year in overall housing activity in the Virginia Beach area. HWMI forecasts that total permits will fall even though the military town, home to the Norfolk Naval Station and Langley Air Force Base, enjoyed a below-average unemployment rate of 7.28% in December. Jobs and households are expected to grow again this year, though income levels will remain below average for the state and the nation. The region has experienced moderate, 3-5% housing price declines for the last two years, a trend that should continue into 2010.
Get local market data and more on Builder's Virginia Beach Local Market Page
33. Gulfport-Biloxi, MS
Market Health Indicator: 26.5
2009 Total Building Permits: 2598
2010 Building Permit Forecast: 1604
Permit activity in the Gulfport-Biloxi area took a big tumble in the fourth quarter of last year, plummeting 60% as the apartment market came to a virtual standstill. Permits are expected to continue their decline in 2010, even though the job picture here is brighter than it is in the country at large, thanks to casino expansion, federal aid for hurricane recovery, and a strong military presence. A growing population and rising income levels should continue to prop up the single-family side of the market (Single-family permits were flat last year.) This is one of the few major markets in the country where home prices rose last year (1%), though they may fall by an equal amount this year.
Get local market data and more on Builder's Gulfport Local Market Page
34. Asheville, NC
Market Health Indicator: 26.2
2009 Total Building Permits: 1422
2010 Building Permit Forecast: 1317
Asheville's housing decline will moderate this year. Already, housing starts, which fell 41% last year, rallied in the fourth quarter of 2009. HWMI projects only a 7% decline in 2010, thanks to strong household formations, which increased 1.4% in 2009 and should continue at a similar rate this year. Routinely named as one of the best places to live and work in the country, home prices have held steady here, falling only 5.8% last year. The median income in Asheville, nestled in the mountains of Western North Carolina, is low, though, only $38,000 in 2009.
Get local market data and more on Builder's Asheville Local Market Page
35. Omaha-Council Bluffs, NE-IA
Market Health Indicator: 25.8
2009 Total Building Permits: 3240
2010 Building Permit Forecast: 2437
During the housing boom and bust, median home prices in Omaha remained in the $130s, a trend expected to continue in 2010, with prices expected to decline only 2.7%. Unemployment here, 5.4% at the end of last year, is exceptionally low, a tribute to the region's diverse economy, which includes several Fortune 500 companies and Offutt Air Force Base. Households and incomes are projected to continue rising in Omaha this year. Though permit activity fell 23% last year, the single-family side of the market picked up late in the year. Weakness on the multifamily side is expected to lead to a further decline in starts this year.
Get local market data and more on Builder's Omaha Local Market Page
36. Naples-Marco Island, FL
Market Health Indicator: 25.6
2009 Total Building Permits: 944
2010 Building Permit Forecast: 1974
The first Florida market to show up on our list, Naples appeared to pick itself up off the ground in the fourth quarter of last year, when builders increased permit activity 55% from very low levels. For that reason and others, HWMI projects that builders will pull twice as many permits in Naples this year, even as home prices continue to decline. Housing values here have fallen steadily during the housing recession. They are forecast to give back another 22% this year, dropping below $250,000, after peaking at $513,000 in 2006. Even as people continue to relocate to this tourist town, they are increasingly unable to find employment. The unemployment rate is expected to climb half a percent to 13% next year.
Get local market data and more on Builder's Naples Local Market Page
37. Madison, WI
Market Health Indicator: 25.3
2009 Total Building Permits: 1086
2010 Building Permit Forecast: 1472
A housing recovery began in Madison late last year. Builders doubled the number of permits they took out in the fourth quarter, compared to the same quarter the previous year, with much of the strength in multifamily. HWMI expects the tide to continue rising this year, with permits growing 36%. The state capital of Wisconsin, and one of the fastest-growing cities in the state, Madison has a comparatively low unemployment rate, 6.73%. It continues to benefit from steady household growth, and stable home values and incomes. And its economy has evolved to include consumer services and high-tech companies, particularly in health and bio-technology.
Get local market data and more on Builder's Madison Local Market Page
38. Atlantic City, NJ
Market Health Indicator: 25.2
2009 Total Building Permits: 528
2010 Building Permit Forecast: 754
Atlantic City builders are gambling on a housing rebound this year. They began filing more building permits in the fourth quarter of last year. HWMI expects permit activity to rise 43% in 2010, though from a very low base. The resort community suffers from a very high unemployment rate of 13.3%, which contributed to a 16% decline in median home prices last year. Home values are forecast to fall another 11% this year, returning to 2004 levels. Much of the optimism about the local economy stems from recent increases in employment. The area's leisure/hospitality industry appears to be on the rebound, though its long-term prospects are uncertain due to heightened competition for gaming dollars from around the country. Development of a planned 58-acre aviation research park at FAA's William J. Hughes Technical Center should help diversify the local economy.
Get local market data and more on Builder's Atlantic City Local Market Page
39. San Francisco-Oakland-Fremont, CA
Market Health Indicator: 24.8
2009 Total Building Permits: 3514
2010 Building Permit Forecast: 4170
After falling 25% last year, home prices in the City by the Bay are expected to gain ground (4%) this year on the strength of jumps in household formations (1.0%) and jobs (0.7%). Builders have already started to increase the rate at which they pull building permits, which are projected to rise 19% next year. Median home prices here are falling back to earth, after eclipsing $800,000 in 2007. They are now below $500,000 and expected to decline further this year. With unemployment running above 11% at the end of last year, the job picture may not be good, but it is better than elsewhere in the state. Cisco Systems, San Francisco's largest employer, added to its payrolls last year and expects to do so again this year. Lennar Urban is starting construction at the former Hunters Point Shipyard and Naval Base, with plans to create 10,500 homes, along with retail and commercial space, with an anticipated move-in date of 2011.
Get local market data and more on Builder's San Francisco Local Market Page
40. Visalia-Porterville, CA
Market Health Indicator: 23.9
2009 Total Building Permits: 885
2010 Building Permit Forecast: 815
Visalia enjoys above-average population growth, but it also suffers from a very high unemployment rate, 17.69% in December. Things are expected to get worse before they get better. Three years ago, Visalia, situated in the heart of the state's San Joaquin Valley, was ranked among the fastest-growing cities in California. But much of its growth, in housing at least, was fueled by subprime mortgages. Last year, home prices in this metro area of 436,000 people fell 21%. They are projected to decline another 3% in 2010, reaching $137,000, very affordable for California. The market showed some signs of renewed activity in the fourth quarter of last year, when single-family permit activity increased over the previous year. But the forecast is for a decline in total permits this year.
Get local market data and more on Builder's Visalia Local Market Page
40. Mobile, AL
Market Health Indicator: 23.9
2009 Total Building Permits: 1986
2010 Building Permit Forecast: 981
The housing market in Mobile will be searching for a bottom in 2010. The region benefits from one of the strongest rates of household growth among the top 100 markets for housing permits, with an increase of 3.6% projected for 2010. Unfortunately, the unemployment levels here (11.66%) are also above the national average and may continue to rise this year. Permit levels in 2010 are projected to come in at half of 2009 levels.
Get local market data and more on Builder's Mobile Local Market Page
Learn more about markets featured in this article: San Francisco, CA, San Diego, CA, Los Angeles, CA, McAllen, TX, Virginia Beach, VA, Seattle, WA, Naples, FL, Salt Lake City, UT, Atlantic City, NJ.
