The Best and Worst Housing Markets of 2010

What’s really going on with the real estate market? Does anyone really know?

Last year, I gave you the best and worst housing markets for the 2009 year, with the average percent fall (and very rarely, gain) in selling prices.

This year, real estate prices seem to follow no pattern. In some areas, they are recovering from their 2008 price lows and in other areas, foreclosures keep piling up. Investors have it tough… speculators are everywhere, pointing to positive signs in the economy one day and then predicting doomsday the next.

We like real hard facts at SmarterSpend.com… so let’s go over some of the best and worst housing markets of this coming year, and predict what will happen to them in the long run.

Let’s hear the good news first.

Best Housing Markets of 2010

1) Pittsburgh, Pennsylvania

Growth rate: 2.67%
Foreclosure Rate: Under 1%
Affordability (Median House price vs Median Salary): Very High
Tidbits: Pittsburgh was hit adversely by a manufacturing slump before the current crisis. This helped it avoid the current recession. The city is being revitalized with service jobs and is a great place for investors.
Prediction: Pittsburgh will remain stable, but I don’t see any possibility of double digit growth because of  a low economic base.

2) Louisville, Kentucky
Growth rate: 1.05%
Foreclosure Rate: 1.15%
Affordability (Median House price vs Median Salary): Very High
Tidbits: The city never had any growth in prices to begin with and was not severely affected by a fall in prices.
Prediction: Louisville will slowly become a large urban center, but not until there is some easing of the lending policies and business can thrive. Look for steady growth in the future, around 5%.

3) Houston, Texas
Growth rate: 11%
Foreclosure Rate: Under 4.5%
Affordability (Median House price vs Median Salary): High
Tidbits: Houston had a foreclosure panic in 2008, but quickly recovered due to job creation in the energy sector, which allowed median home prices to remain stable.
Predictions: I believe Houston has the best chance of double digit growth for any city in America. It has a booming metropolitan area, fueled by net population migration from other cities and lots of job creation.

Worst Housing Markets of 2010

1) Las Vegas, Nevada
Growth rate: -33%
Foreclosure Rate: 12% (Five times the national Average)
Affordability (Median House price vs Median Salary): Average
Tidbits: Las Vegas is the prime example of housing bust. In fact, according to Forbes, the average mortgage on a house in Vegas is greater than how much an average house is worth.
Predictions: I feel like  a turnaround will eventually happen for one reason: There is so much investment value and money at stake in Vegas. I just can’t imagine Vegas losing in the long run.

2) Phoenix, Arizona

Growth rate: -25.9%
Foreclosure Rate: 12.5% (Five times the national Average)
Affordability (Median House price vs Median Salary): Average
Tidbits: In Phoenix the fallout from the financial crisis is deflating home prices rapidly due to the overabundance of homes in the city. Phoenix has been suffering through the housing depression in one of the worst crashes in the nation and has one of the highest foreclosure rate in the country.
Predictions: Phoenix will need a lot to recover and it will take almost a decade for home prices to be at their pre-2008 respectable levels. It seems that the worst is over, but there are so many homes for sale, its unbelievable. Again, this can only be achieved by allowing residents of Phoenix access to loans on a wider level.

3) Detroit, Michigan
Growth rate: -21.66% (average house price is $6,500.. yes… SIX thousand)
Foreclosure Rate: 6.6% (Five times the national Average, Delinquencies at 18%)
Affordability (Median House price vs Median Salary): For people that have a job, a home is virtually free.
Tidbits: Detroit’s median house price was close to $100,000 before the recession and the real estate bubble burst. It has been speculated that Detroit was actually what caused the recession. Although investors are buying houses by the dozen, will there be a Detroit as we know it in the future?
Predictions: I feel like Detroit needs government intervention to survive. What does this mean? The Fed’s should put up some companies and jobs there. If there is no job creation in the near future, this could mean an end to the city as an American metropolitan giant.

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How do the rest of you feel about the current real estate market? Will it turn around in 2010? What are the hottest cities to buy a house in? Join the discussion.