America's 25 Strongest Housing Markets

These are the Country's Real Estate Markets that are Nearest to Recovery

By DEBORAH ORR
Forbes.com
Jan. 19, 2009

Behind the Numbers

To compile this list, we asked Moody's Economy.com to compile a list of the country's real estate markets that are nearest to recovery. Moody's looked at the country's Census-defined metro areas--including metropolitan and micropolitan statistical areas--with populations over 500,000, and prepared forecasts through 2011. They then compared them to prices in the second quarter of 2008, which are the latest figures available, to calculate how far prices will likely fall before reaching bottom.

Not one metro area will see prices increase before the end of this year, according to Zandi's forecasts. The strongest metro areas will be flat at best--but that's better than the 15 percent drop Moody's expects on average in the U.S. Prices won't start to pick up again until late this year or sometime next year even in the strongest markets.

That's because there are countervailing forces at work. The job market is weakening all over. On the other hand, new housing starts are down, which should help reduce supply--eventually. And, at just over 5 percent for a conforming 30-year mortgage, interest rates are lower than they've been in more than 35 years.

Texas markets are most set to benefit. Housing values were rising in many Lone Star State towns until oil futures collapsed and agricultural commodity prices fell. But the bottom doesn't look very deep. Moody's forecasts no change for McAllen and a fall of less than 3 percent for Dallas, Fort Worth, El Paso, San Antonio and Houston.

"Texas has the best large-state economy in the country right now," says Zandi. "Employment is slowing, but its still growing."

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