Local economic factors are finally beginning to play a bigger role in housing again, as they had historically. Technology growth is driving housing not just in Silicon Valley, but in other markets where these companies are moving in and bringing jobs with them.
“Local unemployment rates, an increase in employers, and local investment initiatives play a huge part. Across the country, the national employment rate is 7.7 percent. Santa Barbara had an unemployment rate of 6.3 percent in August,” noted Berkowitz.
(Read more: Homes are still affordable, says Shiller)
Santa Barbara moved up to second place, despite competition from other hot California markets. Its inventory is young and limited, and values are gaining. The Top 10 has been dominated by California markets in previous quarters, but Santa Barbara is the only one left, as the rest of the state sees a slowdown in sales due to steeper price hikes.
A huge drop in the number of foreclosed homes is clearly playing into many of the turnaround markets. Nationwide, completed foreclosures fell 39 percent from a year ago, according to a new report from CoreLogic. While they are still more than twice the historical norm, they are having far less of an impact on local recoveries than they have in the past few years, during the height of the crisis.
“We’re not out of the woods yet, but these are encouraging signs for a return to a healthier housing market in the U.S.,” noted Mark Fleming, chief economist for CoreLogic.
Looming changes in economic factors, however, could still impact these strengthening markets. Reduced affordability levels, rising mortgage rates and uncertainty involving the federal debt crisis could limit sales and ease price gains.
—By CNBC’s Diana Olick. Follow her on Twitter @Diana_Olick.
Article source: http://www.cnbc.com/id/101159103