U.S. median home values rebounded 6.4% last year as Americans put the long-running housing bust behind them -- and here's a look at five cities where market tracker Zillow expects the good times to roll on in 2014.
"These are all hot areas [for homebuyers] to look at, and we think they have the potential to keep burning into the future," says economist Krishna Rao of Zillow, which recently named 2014's Hottest Housing Markets.
Zillow compiled its list by predicting home-price gains for all U.S. metro areas with 1 million or more residents and combining that with two factors long associated with housing strength: local jobless rates and recent population changes.
Rao says a rising local population creates the need for additional housing, while a good job market gives residents enough money and confidence to buy homes.
"The hottest markets are all characterized by relatively low unemployment and population growth of greater than 3% during the past two years, which will lead to continued heightened demand in these areas," he says.
The economist adds that while the cities atop Zillow's list all enjoyed solid home-price gains last year, he doesn't think buyers have "missed the boat" on getting into housing there.
"I wouldn't say it's too late to buy homes in these areas," Rao says. "I don't think the party's over."
Read on to check out the cities at the top of Zillow's Hottest Housing Markets list. Population-growth figures refer to U.S. Census estimates for 2010-12, the latest period with figures available. Local jobless rates refer to unemployment levels as of September, while projected home-price gains refer to Zillow's prediction of changes to the median value of all residences in a metro area (even those not up for sale).
2014's fifth-hottest housing market: Miami
Miami home values shot up an estimated 17.5%, to $183,400, last year as the metro area continued to rebound from the U.S. housing bust, and Rao expects the market to stay as hot as the Florida sun this year.
After all, the Miami area's population rose 3.6% between 2010 and 2012 -- more than twice the 1.5% U.S. average. The local economy also appears to have turned a corner despite Miami's mediocre 7.3% jobless rate as of September vs. the 7.2% national average that month.
"Miami's relatively high unemployment rate ... hasn't dulled the allure of the beaches and beauties this city has to offer," Rao says. "Population growth is very healthy in the area, which will continue to boost demand for homes that are, in many cases, still priced well below their prior peaks."
All told, Zillow predicts Miami-area home values will rise another 6.3% this year -- well above the 4.8% gain the firm predicts for U.S. housing as a whole.
2014's fourth-hottest housing market: San Jose, Calif.
Silicon Valley's unofficial capital saw home values rise 15.6% last year to a $741,500 median -- the highest for any U.S. metro area over 1 million population -- but Zillow thinks the rally still has a way to go.
The firm expects median local prices to add another 5.3% this year, due partly to a better-than-average 6.8% jobless rate and a 3.1% population gain between 2010 and 2012.
"The tech mecca of San Jose and nearby Silicon Valley has been attracting the country's best and brightest young engineers and entrepreneurs for years, and will continue to be a magnet in 2014," Rao says.
The economist admits he's concerned by the fact that median San Jose home values last month surpassed the peak reached during last decade's housing boom. "But for now, [the market] is expected to remain hot," Rao says.
2014's third-hottest housing market: Austin, Texas
Zillow expects median Austin home values to rise 1.1% this year, thanks in part to Texas-sized population growth: 6.9% between 2010 and 2012.
The Lone Star State's capital also enjoys a low 5.2% jobless rate, while median home values rose a respectable 4.7% last year, to $197,600.
"Austin is only growing in popularity as word spreads of its hip music scene and emerging tech cluster," Rao says. "It ranks first in population growth among cities on this list by a wide margin, and has the second-lowest unemployment rate."
2014's second-hottest housing market: Seattle
It's little surprise that the home of Amazon, Microsoft and other tech giants has a better-than-average 6.1% jobless rate, as well as a 3.3% 2010-12 population growth and a strong housing market.
Zillow expects median home values there to add 5.9% this year after gaining 10.3% lat year to reach $309,100.
"Seattle boasts a growing population, a very healthy jobs market driven by the booming tech sector and high demand for homes, all of which set it up to do very well in 2014," Rao says.
2014's hottest housing market: Salt Lake City
Rao says Utah's most-populous metro area "is in many ways an underappreciated city" despite a low 4.5% jobless rate that should bode well for Salt Lake City home values, which already rose 9.1% last year to a median $239,900./p>
"A strong local job market is helping keep demand high in the Salt Lake City area, contributing to healthy [projected home-price] appreciation in the year to come," the economist says.
Another boost: local population grew 3.3% between 2010 and 2012.
Add it all up and Zillow predicts Utah's capital will see median home values rise 4.2% this year.
This article was republished with permission from TheStreet.