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5 Key Housing Markets to Watch in 2014

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./p>

Another boost: local population grew 3.3% between 2010 and 2012./p>

Add it all up and Zillow predicts Utah's capital will see median home values rise 4.2% this year.

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