Veros Real Estate Solutions released its Q2 2022 VeroFORECAST that anticipates home prices will appreciate on average just 4.5% for the next twelve months. This is a drop by almost half from the 7.1% appreciation forecast just one quarter ago.  VeroFORECAST evaluates home prices in over 300 of the nation’s largest housing markets. Veros is committed to the data science of predicting home value based on rigorous analysis of the fundamentals and interrelationships of numerous economic, housing, and geographic variables pertaining to home value.

The steep decrease in expected average appreciation over the next 12 months is driven primarily by higher mortgage interest rates and lessening demand as some buyers are beginning to hesitate due to recession fears.  However, there is still a very low inventory of homes available for sale in many markets, and this is preventing prices from slowing even more.  A 4.5% average annual appreciation forecast signifies that the process has begun to return the market to historically more normal times from the overheated post-pandemic market of the previous two years.   

Eric Fox, Chief Economist at Veros, commented, “Now that the Fed has finally gotten serious with fighting inflation, interest rates have moved up significantly and that is causing demand in some markets to slow significantly.  To be clear, some markets are still quite strong with limited inventory and a large percentage of active listings which are pending.  But we are finally starting to see the first signs of some major markets which we are forecasting to depreciate during the next 12 months – Most notably Chicago and New York.”

Karen Picarello, a Certified Real Estate with RE/MAX Fine Properties in Scottsdale, AZ, is also seeing signs of a slowing, yet healthy, market.  “With higher interest rates, some buyers are no longer looking, which is lessening overall buyer demand. Buyers with significant cash or equity are being more selective and no longer making offers on houses that are priced significantly above the last comparable sold price. Fear of a recession and crashes in both the real estate and stock markets are also impacting the buyers’ willingness to purchase at this point. Still, houses priced ‘at market’ in good condition are seeing robust activity with healthy offers and minimal days on market.  So the market is actually in the process of returning to a more normal, healthy market.”

The 10 strongest performing markets in the country forecast over the next 12 months are only forecast to appreciate at the 7% to 8% level, which is almost half of what the top performing markets were expected to do just a quarter ago.  Raleigh-Cary is expected to be the  top performing metro area with expected appreciation of 8.1% over the next 12 months and is joined by two other North Carolina cities of Goldsboro and Fayetteville in the 10 Strongest Performing Markets list.  Spokane was in the #2 spot with 8.0%, and Olympia was another Washington city making the list.  Arizona had the smaller cities of Prescott and Flagstaff making the list as did Florida with Vero Beach and The Villages.  Finally, Richmond, Virginia, was the single represented market for this state. 

The 10 Strongest-Performing Markets Over Next 12 Months

Rank	Metropolitan statistical areas (MSA)	Forecast
1	RALEIGH-CARY, NC	8.1%
2	SPOKANE-SPOKANE VALLEY, WA	8.0%
3	GOLDSBORO, NC	7.7%
4	OLYMPIA-LACEY-TUMWATER, WA	7.7%
5	PRESCOTT VALLEY-PRESCOTT, AZ	7.7%
6	SEBASTIAN-VERO BEACH, FL	7.7%
7	THE VILLAGES, FL	7.7%
8	RICHMOND, VA	7.7%
9	FLAGSTAFF, AZ	7.6%
10	FAYETTEVILLE, NC	7.6%

The 10 least performing markets over the next 12 months had the most notable changes.  In last quarter’s forecast, there were no markets forecast to depreciate.  However, now 5 of these 10 markets are forecast to depreciate in the next year and are led by Atlantic City with a forecast -2.5% depreciation.  The two very large metro areas of Chicago and New York are both forecast to depreciate at -1.1% and -0.4%, respectively.  The three Texas cities of Midland, Beaumont, and Odessa are also on the list as are the two Louisiana cities of Lake Charles and Monroe.  Finally, Fargo and Baltimore complete the list of cities with little to no appreciation expected.   

The 10 Least-Performing Markets Over Next 12 Months

Rank	Metropolitan statistical areas (MSA)	Forecast
1	ATLANTIC CITY-HAMMONTON, NJ	-2.5%
2	LAKE CHARLES, LA	-2.4%
3	MIDLAND, TX	-1.7%
4	CHICAGO-NAPERVILLE-ELGIN, IL-IN-WI	-1.1%
5	NEW YORK-NEWARK-JERSEY CITY, NY-NJ-PA	-0.4%
6	BEAUMONT-PORT ARTHUR, TX	0.3%
7	FARGO, ND-MN	0.5%
8	ODESSA, TX	0.8%
9	BALTIMORE-COLUMBIA-TOWSON, MD	1.3%
10	MONROE, LA	1.4%