Real estate has been performing very well over the past couple of years, with the average U.S. home's value growing by 5.6% over the past year, according to Zillow. In particular, five cities have seen home prices grow tremendously, outpacing the national average more than three times. But what's really intriguing is the diversity of drivers behind this growth. Whether it's investor activity, low housing inventory, or international buyers, each housing turnaround is as different as the cities themselves.
Las Vegas, NV (up 24.9% year-over-year)
Sin City was one of the hardest-hit by the financial crisis, so it makes sense that housing would rebound quicker than most markets. Even so, the average home gaining a quarter of its value in just one year is a pretty impressive climb. The rapid gains can be attributed to investors who saw opportunity in the mass foreclosures in Vegas and have been buying homes in bulk to turn into rentals.
Despite the gains, Las Vegas is still a pretty affordable housing market, with a median home price of $168,000. Residents are hoping that the gains continue, as Las Vegas has the highest rate (35.1%) of homeowners who are underwater on their mortgages, although this has improved drastically since peaking at 71% of homeowners in 2012.
Sacramento, CA (up 19.5%)
Over the past year, Sacramento's median home price jumped from about $256,000 to almost $306,000. The gain is mainly due to investors, just like in Vegas, but where Vegas' inventory of homes on the market has soared over the past year, Sacramento's has diminished. In fact, there is about two months' worth of inventory in Sacramento County, according to the Sacramento Bee newspaper. Anything less than three months creates a seller's market, hence the higher home prices.
Gainesville (up 19.7%)
Despite the rise in prices, Gainesville remains one of the cheapest real-estate markets in Florida with a median home price of just $139,000, about 18% below the national average. Florida was one of the hardest-hit places in the country by the mortgage crisis, and Gainesville is no exception.
Essentially, what happened is most of the lower-priced homes in the market sold off over the past year, which has resulted in higher sales prices and less inventory. Unlike some of the other places on this list, however, Gainesville has a very healthy six months' worth of inventory, down from eight a year ago, creating perhaps the most balanced market on this list.
Miami-Fort Lauderdale (up 17.7%)
In South Florida, the height of the real estate selling season runs from around January through April, so it's no surprise inventory is up lately. However, the amount of condos on the market represents over seven months of inventory, meaning Miami is slightly in buyer's market territory. Even so, it seems there is no shortage of buyers to take advantage of the great selection, as 13% more condos and 10% more single-family homes closed in the Miami area in January than during the same time last year.
Unlike most of the metro areas on this list, Miami doesn't owe its rebound to U.S. investors, but rather to foreign buyers. Miami is one of America's most international real estate markets, which can be seen by the number of all-cash buyers (over 90% of foreign buyers pay cash). In Miami, 62% of sales were all cash, as compared with just 30% of sales nationwide.
Detroit's home prices may have posted impressive gains, but the number of real estate sales in the metro area declined by 18% in the past year, one of the worst decreases in the country. Home prices in the Detroit area have fallen dramatically over the past decade or so, and even after the recent gains the median home price in the area sits at less than $107,000.
Job growth in Detroit has been good over the past couple of years, and even though the unemployment rate is still well above the national average, over a quarter-million jobs have been created in Michigan since 2010 and the market should continue to improve as more jobs continue to be added.