Nationwide, the housing market is still reeling from one of the worst crashes in history. Still, over the next two years, some areas are expected to start recovering. 24/7 Wall St. has identified the ten metropolitan areas where home prices are projected to increase the most by next year. However, since most of those markets have experienced exceptionally large drops in home prices, the revival is bittersweet.

Six of the ten metropolitan areas that are projected to have the largest home prices increase from the second quarter of 2011 to the second quarter of 2012 are also among the top 50 areas that experienced the worst housing prices declines from the second quarter of 2008 to the second quarter of 2011. The housing markets in these areas were so decimated by their real estate bubble burst that they are considered to be at their bottom with no room to get even worse. Such bottoms tend to draw in investors. The inflow of new money causes these markets to bounce back, driving home prices back up.

Of course, there are many large cities, such as Las Vegas, Nev., and Riverside, Calif., that were also hit exceptionally hard by the housing crisis that are not expected to recover in the coming year. The difference between these cities and those on this list is their size. The metro areas that are projected to recover have slightly more than 100,000 residents, for the most part. Carson City, where home prices are expected to increase by 15.5%, has fewer than 55,000 residents. As a result, housing inventories are much smaller. It is much easier to turn around a housing market on this scale than on a much larger one.

24/7 Wall St. used data from Fiserv for 384 metropolitan areas to compile this list of the ten cities where home prices are expected to increase the most from the second quarter of 2011 to the second quarter of 2012. We also included future projected price increases, population, when the metropolitan areas reached their price peaks, and unemployment rates, all provided by Fiserv.

These are the cities where home prices are expected to increase the most by next year.

10. Mobile, Ala.
> Change in home prices (2011 Q2 to 2012 Q2): 6.2%
> Change in home prices (2012 Q2 to 2013 Q2): 14.2%
> Population: 411,536
> Prices reached peak in: 2008 Q2 (-27.1%)
> Unemployment: 11.2%

Home prices in Mobile, Ala., dropped more than 27% in the past three years. From the second quarter of 2010 to the second quarter of 2011, prices dropped 18.8% — the second largest decrease in the country. According to the Mobile Area Association of Realtors, foreclosures and short sales accounted for 40% of all sales in the area for the 12 months that ended October 1. However, the metropolitan area is one of a few in the country where prices are expected to increase significantly this coming year and even more so the following year. The real estate market is expected to make a comeback in the coming 12 months, with a projected increase of 6.2% in prices.

9. Syracuse, N.Y.
> Change in home prices (2011 Q2 to 2012 Q2): 7.0%
> Change in home prices (2012 Q2 to 2013 Q2): 1.5%
> Population: 647,108
> Prices reached peak in: 2008 Q1 (-7.9%)
> Unemployment: 8.0%

Home prices in Syracuse, N.Y., decreased only 7.9% from their peak in the first quarter of 2008. This is not only significantly lower than the national drop of 32.3% from the national peak in the first quarter of 2006, but also significantly lower than other metropolitan areas on the list. The city’s housing market has done exceptionally well compared to the rest of the country. In 2010, it had the fifth-lowest foreclosure rate in the nation, according to RealtyTrac.

8. Las Cruces, N.M.
> Change in home prices (2011 Q2 to 2012 Q2): 7.4%
> Change in home prices (2012 Q2 to 2013 Q2): 7.3%
> Population: 211,617
> Prices reached peak in: 2007 Q3 (-12.6%)
> Unemployment: 6.6%

Las Cruces’s unemployment rate of 6.6% is the 47th lowest in the country and is much lower than the national rate of 9.1%. This measurement indicates a healthy economy, which in turn influences the housing market. From the second quarter of 2011 to the second quarter of 2012, housing prices are expected to increase 7.4%. This trend is projected to continue through the next year, and prices to increase another 7.3%.

7. Niles-Benton Harbor, Mich.
> Change in home prices (2011 Q2 to 2012 Q2): 7.5%
> Change in home prices (2012 Q2 to 2013 Q2): 2.4%
> Population: 160,414
> Prices reached peak in: 2007 Q4 (-13.2%)
> Unemployment: 10.7%

The Niles-Benton Harbor, Mich., metropolitan area has seen a 13.2% decrease in housing prices since its peak in the fourth quarter of 2007. In the last 12 months, housing prices dropped by 5.2%. Prices are expected to bounce back dramatically, increasing 7.5% by the second quarter of 2012, and then increasing just 2.4% in the following 12 months.

6. St. George, Utah
> Change in home prices (2011 Q2 to 2012 Q2): 7.9%
> Change in home prices (2012 Q2 to 2013 Q2): 3.5%
> Population: 138,492
> Prices reached peak in: 2006 Q4 (-41.4%)
> Unemployment: 9.6%

Home prices have decreased by 41.4% in St. George, Utah, since the fourth quarter of 2006. In just the last twelve months, prices have decreased 12.4% — the eighth largest drop in the country. However, from the second quarter of 2011 to the second quarter of 2012 prices are projected to increase 7.9%.

5. Farmington, N.M.
> Change in home prices (2011 Q2 to 2012 Q2): 8.3%
> Change in home prices (2012 Q2 to 2013 Q2): 6.8%
> Population: 124,952
> Prices reached peak in: 2008 Q1 (-12.5%)
> Unemployment: 6.9%

With a population count slightly below 125,000, the Farmington metropolitan area is extremely small. Like fellow New Mexico metro area Las Cruces, it also has an unemployment rate that is well below the national average. Home prices in the area have fallen 12.5% since their peak in the first quarter of 2008 — a far cry from the 32.3% drop in the national average since its peak in first quarter 2006. By the second quarter of 2012, home prices in Farmington are expected to increase 8.3%

4. Yuba City, Calif.
> Change in home prices (2011 Q2 to 2012 Q2): 9.2%
> Change in home prices (2012 Q2 to 2013 Q2): 9.0%
> Population: 165,858
> Prices reached peak in: 2005 Q4 (-51.1%)
> Unemployment: 19.2%

The housing prices in California’s Yuba City, which is located north of Sacramento, sank by 51.1% since their early peak in the fourth quarter of 2005. The city also has the fourth highest unemployment rate in the country, according to the Bureau of Labor Statistics. However, home prices are now expected to increase 9.2%, and then an additional 9.0% in the 12 months after that.

3. Yuma, Ariz.
> Change in home prices (2011 Q2 to 2012 Q2): 9.5%
> Change in home prices (2012 Q2 to 2013 Q2): 9.4%
> Population: 198,637
> Prices reached peak in: 2006 Q4 (-36.2%)
> Unemployment: 24.7%

Yuma, Ariz., has fallen on difficult times, economically speaking. The metropolitan area has an unemployment rate of 24.7% — the second highest in the country. Housing prices in the area have decreased 11% in the past twelve months and 36.2% since the fourth quarter of 2006. The market is expected to bounce back with a 9.5% increase in prices in the coming 12 months.

2. Carson City, Nev.
> Change in home prices (2011 Q2 to 2012 Q2): 15.5%
> Change in home prices (2012 Q2 to 2013 Q2): 17.9%
> Population: 54,945
> Prices reached peak in: 2006 Q2 (-50.6%)
> Unemployment: 12.8%

Carson City is the smallest metropolitan area in the country, with a population of 54,945. Home prices have decreased 50.6% since their peak in the second quarter of 2006. Worst still, prices have dropped 21.9% in the last twelve months — the largest decrease in the nation. The metro area has such a small housing inventory that prices would not stay low for very long. Prices are expected to increase by 15.5% in the next 12 months.

1. Madera-Chowchilla, Calif.
> Change in home prices (2011 Q2 to 2012 Q2): 15.5%
> Change in home prices (2012 Q2 to 2013 Q2): 10.5%
> Population: 150,758
> Prices reached peak in: 2006 Q3 (-52.0%)
> Unemployment: 15.8%

Since housing prices peaked in the third quarter of 2006, they have decreased an exceptional 52% in the Madera-Chowchilla metropolitan area. This means that the average home in the area has lost more than half its value. Since 2008, home prices dropped by 39.3%. Prices are now expected to increase 15.5% by the second quarter of 2012.

Charles B. Stockdale

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