Nation's Healthiest Housing Markets Found in the West, According to New Zillow Market Health Index
New Measure Allows Users to Compare Markets at a Glance
SEATTLE, Dec. 13, 2013 /PRNewswire/ -- The nation's healthiest housing markets in October are clustered in California and the rest of the West, according to the newly released Zillow® Market Health Index[i].
Zillow's Market Health Index, measured on a scale from 0 to 10, is a new measure designed to illustrate the current health of a region's housing market relative to similar markets nationwide. It incorporates 10 separate measures of housing market health. Calculated monthly at the ZIP code, neighborhood, city, county, metro and state levels, it is a key component of Zillow's newly re-designed local information pages, aimed at offering users more data, more easily.
In October, among the country's top 30 largest metro markets covered by Zillow, the five healthiest were San Jose (Market Health Index of 9), San Francisco (8.9), Los Angeles (8.6), San Diego (8.4) and Denver (8.1).
"Rapid home value appreciation in the West, particularly California, is currently having a very positive effect on a number of other factors, including negative equity, foreclosure activity and the overall financial health of local homeowners. But that same rapid appreciation may cause affordability issues in the future in these markets, leading to potentially unhealthy conditions in the future," said Zillow Chief Economist Dr. Stan Humphries. "The housing market is complex, and while individual statistics can be useful in describing a single aspect of a given market, one number on its own can't tell the full story. As markets continue to evolve and recover, the Market Health Index will reflect these changing trends, offering consumers a valuable tool on which to base their decisions."
The Zillow Market Health Index is formed from 10 different metrics, accounting for changes in home values (as measured by the Zillow Home Value Index[ii]), the time homes stay on the market, foreclosures, delinquencies and negative equity. If a given area has a value of 8 on the Market Health Index, the region is healthier than 80 percent of all comparable areas covered by Zillow. The Market Health Index scores markets relative to one another; a low Market Health Index score does not necessarily indicate that a market is performing poorly, only that other markets are experiencing factors like higher home value appreciation or lower foreclosure activity.
10 Healthiest Markets, Among Large Metros
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[i] The Market Health Index is formed from ten different metrics: month-over-month change in the Zillow Home Value Index (ZHVI); year-over-year change in ZHVI; percent change in 1-year ZHVI forecast; percentage of homes selling for a gain; days listings spend on Zillow, adjusted for seasonality and for deviations from historic norms; the percentage of mortgage holders with negative equity; the percentage of mortgage holders delinquent on their loans; the number of foreclosures out of 10,000 homes; the percentage of sales composed of previously foreclosed homes; and the number of foreclosures out of 10,000 still held by banks, i.e. unsold REOs. For each of the ten metrics used in the Market Health Index, we assign each region a score along a continuous scale from 0 to 10, where 10 corresponds to the healthiest value and 0 to the least healthy among all regions in the US with available data. We take the average of these scores and then re-scale the average to range from 0 to 10. This becomes the Market Health Index. To ensure sufficient data availability, we only score regions with data from at least 5 of the 10 metrics we measure. In October, the Market Health Index is available in more than 450 metro areas, 900 counties and 10,900 ZIP codes nationwide.
[ii] The Zillow Home Value Index is the median estimated home value for a given geographic area on a given day and includes the value of all single-family residences, condominiums and cooperatives, regardless of whether they sold within a given period. It is expressed in dollars, and seasonally adjusted.