"Boy, our housing market really 'cooled' off."

From reading the news over the past few years, there is one recurring theme about the housing market in the United States: Prices are rising. However, this is not necessarily true for all parts of the country. The hottest real estate markets right now tend to be in places that got hit the worst by the mortgage bubble bursting, such as California, Florida, and Nevada.

Markets in some other parts of the country are not doing quite as well, and for a variety of reasons. Some just never declined much to begin with, and are now suffering because buyers can find bargains elsewhere, and some are performing poorly for location-specific reasons.

Let's take a look at five markets that are projected to be the worst performers in 2014, according to real estate website Zillow.

5. Hagerstown, Md. -- Projected average price decline of 1.4% in 2014

This Western Maryland town has a population of just fewer than 40,000 and is part of the Hagerstown-Martinsburg Metropolitan Area, which extends into West Virginia. According to Zillow, the median home price in Hagerstown dropped from a peak of over $190,000 in 2006 to $120,000 today. Hagerstown does have an unemployment rate of 9.3%, well over the national average, which has held pretty steady over the past couple of years, a potential contributor to the struggling housing market.

4. Valdosta, Ga. -- Projected decline of 1.6% in 2014


Source: Ebyabe.

Near the southern border of Georgia, Valdosta is home to about 55,000 people and was named one of the "Best Small Places for Business and Careers" by Forbes in 2010. The city has a large manufacturing economy, and somewhat of a tourist economy thanks to its location on I-75, attracting overnight guests on their way to Disney World. 

Valdosta's market hasn't fallen quite as much from the peak as many other markets, having lost just 23% from its peak median home value. However, unlike most markets, Valdosta's has not stabilized, having continued its decline in recent years.

3. Ocean City, N.J. -- projected decline of 2.1% in 2014


This town on the Jersey Shore has a year-round population of less than 12,000 people, but has well over 100,000 residents during the summer months. In other words, a large portion of Ocean City's real estate market consists of second homes and rental properties. The town's income relies heavily on tourism, and the decline in home prices likely has a lot to do with the devastation caused by Hurricane Sandy in 2012, as the market has already fallen by around 1.6% since the storm hit.

2. Elkhart, Ind. -- projected decline of 2.5% in 2014

This city of about 50,000 has been called the "RV Capital of the World" because of the 10 RV manufacturers that call the city home, and there is also a very strong presence of musical instrument and brass manufacturing. Unlike most of the U.S., Elkhart's real estate market didn't see much of a collapse in the wake of the market collapse, with the average home price now $93,000, down from a peak of $115,000, according to Zillow. 

1. Wichita Falls, Texas -- projected decline of 5.7% in 2014


Downtown Withita Falls. Source: Billy Hathorn.

The largest city on the list, Wichita Falls has a population of around 104,000. A possible explanation for the decline in Wichita Falls' market is the fact that the city's population is not growing, and in fact, many estimates put the current population below where it was during the 2010 census. 

One thing that is unique on this list to Wichita Falls is that its market had been improving during the past few years, but is now falling again. The market hit bottom at an average home value of just $56,000 in 2011 before rebounding to $79,000 earlier in 2013. So, this may be just a case of a market that has been very hot finally cooling off.

Foolish final thought
Regardless of the reasons these markets are declining, real estate investors should be interested in this list. Because of low home prices and historically cheap mortgage rates, returns on investments in rental properties can be very high. In fact, Realty Biz News recently named Wichita Falls the No. 1 place to invest in real estate, stating that the average return on an income property is 13.4% annually. How much is your investment portfolio earning?

Matthew Frankel has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Zillow. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.