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Zillow’s most recent Market Health Index has named California for having the healthiest real estate market based on several factors including price appreciation, the number of foreclosures and the financial health of homeowners as compared to other places. The new index is calculated monthly and analysts admit that rapid changes could potential cause big swings in the results. California, for example is at the top of the list now, but its rapid price appreciation may end up driving its score down if the financial health of homeowners does not also improve. For more on this continue reading the following article from Property Wire.

The healthiest housing markets in October in the United States were clustered in California and the rest of the West, according to the newly released Zillow Market Health Index.

The index on a scale from zero to 10 is a new measure designed to illustrate the current health of a region's housing market relative to similar markets nationwide. It incorporates 10 separate measures of housing market health.

Calculated monthly at the ZIP code, neighbourhood, city, county, metro and state levels, it is a key component of Zillow's newly re-designed local information pages, aimed at offering users more data, more easily.

In October, among the country's top 30 largest metro markets covered by Zillow, the five healthiest were San Jose with a Market Health Index of nine, San Francisco at 8.9, Los Angeles at 8.6, San Diego at 8.4 and Denver at 8.1.

‘Rapid home value appreciation in the West, particularly California, is currently having a very positive effect on a number of other factors, including negative equity, foreclosure activity and the overall financial health of local home owners,’ said Zillow chief economist Stan Humphries.

But he pointed out that the same rapid appreciation may cause affordability issues in the future in these markets, leading to potentially unhealthy conditions in the future. ‘The housing market is complex, and while individual statistics can be useful in describing a single aspect of a given market, one number on its own can't tell the full story,’ he explained.

‘As markets continue to evolve and recover, the Market Health Index will reflect these changing trends, offering consumers a valuable tool on which to base their decisions,’ he added.

The Zillow Market Health Index is formed from 10 different metrics, accounting for changes in home values as measured by the Zillow Home Value Index, the time homes stay on the market, foreclosures, delinquencies and negative equity.

If a given area has a value of eight on the Market Health Index, the region is healthier than 80% of all comparable areas covered by Zillow. The Market Health Index scores markets relative to one another. For example, a low Market Health Index score does not necessarily indicate that a market is performing poorly, only that other markets are experiencing factors like higher home value appreciation or lower foreclosure activity.

This article was republished with permission from Property Wire.