In this article, I plan to divulge those markets that are likely to see slowing price growth in 2016 and possibly, a downward correction. The primary data sources that I used for my analysis were the Case-Shiller Index and the Federal Housing Finance Agency (FHFA). I chose these two providers as they both prepare indexes on home values using the repeat sales method. That is to say, they use data on properties that have sold at least twice to capture the true appreciated value of each home.
- For the past few years, home values have been rising at rates above incomes, but thanks to low interest rates, this hasn't become a barrier for buyers.
- Mortgage rates are set to rise, and this could leave some markets with homes that are too rich for buyers earning the median income in their area -- especially San Francisco, San Diego and San Jose.
- A few select markets -- San Francisco, Denver and Dallas -- should prepare for an almost certain slowdown in price growth; however, an inventory increase could offset the slowdown.
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