BOSTON ( TheStreet) -- U.S. home prices appear poised to rise 3.3% nationally this year -- but some markets can expect more than twice those gains while others will see property values actually fall, market tracker Zillow.com predicts. "Real estate has returned to a more-normal condition of lots of small, local markets instead of one big national one," says chief economist Stan Humphries of Zillow, a website that estimates values for virtually every house and condo in America. Zillow ( Z) released 2013 forecasts this month for 30 major U.S. metro areas, predicting price gains and losses by looking at local market conditions, job growth and other factors. Humphries says cities with this year's biggest projected gains are generally those that lost the most during the housing bust -- partly because they've got room to rebound, but also because many homeowners there are "underwater." (That's where property owners owe more on their mortgages than their homes are worth, making it virtually impossible in many cases to sell -- boosting prices by reducing the supply of available listings.) The economist adds that 2013's hottest markets are all in the Southwest, where warm temperatures are attracting retirees, vacation-home buyers and real estate investors who hope to get in on the cheap. Lastly, Humphries says the cities where Zillow expects prices to rise sharply are all in "non-judicial-foreclosure" states -- areas where laws allow banks to retake distressed homes without lengthy court proceedings. The expert says lenders in such states have already seized and resold lots of troubled properties, whereas those in "judicial-foreclosure" states still have backlogs of foreclosure cases that threaten to eventually flood markets with bank-owned homes. "Non-judicial-foreclosure states 'pulled the Band-Aid off' quickly in terms of the foreclosure crisis," Humphries says. "Judicial-foreclosure states are pulling the Band-Aid off slowly -- which is prolonging the housing recession in those markets." Here's a look at the five cities that Zillow expects will see the biggest percentage gains this year among America's largest metro areas (excluding Houston, which makes too little property information public to allow for analysis).Forecasts refer to median property-value gains for all houses and condos in a given market, whether they're put up for sale in 2013 or not. Estimates of current median values are as Dec. 31, the latest date with figures available.
Projected median price gain: 7.3% Zillow predicts L.A.'s housing market will see big price increases this year, partly because it's so beaten down that the only way to go is up. Humphries says median L.A. prices are back to December 2003 levels, "so affordability is looking quite good." Zillow estimates that median Los Angeles home values plunged 38% after peaking in early 2006 -- and while they've been rebounding since last March, they're still way down. The site puts the typical La-La Land house's current value at $414,900 -- 33% below 2006's $619,200 peak.
Projected median price gain: 7.3% San Francisco ranks fourth on Zillow's list because the site technically forecasts the Bay Area's median price gain at 7.325% for 2013 -- a hair above fifth-place L.A.'s 7.316%. Humphries says Frisco's home values are rising sharply because the Bay Area's famous tech companies are creating plenty of high-paying jobs. "You've got a lot of job growth in the tech sector, a lot of income growth from IPOs like Facebook's ( FB) and strong stock performance by companies like Google ( GOOG)," he says. But the economist adds that the City by the Bay's $526,200 current median home value is still 26% below a $710,800 peak reached in January 2006. In fact, prices are back to January 2004 levels -- which Humphries says leaves plenty of room for additional gains in 2013.
Projected median price gain: 8.5% Like the phoenix of Greek mythology, the Phoenix housing market is rising back to life from its ashes. Median home values in Arizona's capital city fell 56% after peaking at $282,600 in early 2006, but have been rebounding strongly since August 2011. Prices have risen 27.3% in a little over a year to reach $157,800, but are still nearly 50% below the market's peak. So Zillow expects home values to add another 8.5% in 2013. Humphries attributes the turnaround to huge buyer demand amid little available supply. He says more than 40% of local homeowners are underwater, making it tough for them to sell. Underwater consumers must either convince banks to approve "short sales" -- a difficult process -- or pay cash out of pocket to make up the difference between their unpaid mortgage balances and their homes' current values. The result: a listing shortage just as investors have begun snapping up Phoenix's bargain properties. Retirees and second-home buyers, particularly those from chilly Western Canada just three hours away by air, are also buying up houses and condo in the sun-drenched city, Humphries says. "Demand is returning to the Phoenix market while supply levels are tight -- which is helping prices," he says.
Projected median price gain: 11.9% California's state capital saw median home prices plummet 52.3% during the bust, tumbling from $421,900 in late 2005 to just $201,200 by January 2012. And while home values have rebounded 12.9% since then to hit a median $225,200, the market is still down nearly 50% from its peak. Humphries says prices are only back to mid-2002 levels, part of the reason Zillow predicts Sacramento's median home values will add another 11.9% this year. He adds that California's state government recently reversed years of budget problems and expects a small surplus in 2013 -- good news for Sacramento's housing market. "Being the state capital probably hasn't been a big factor for the Sacramento real estate in the past couple of years -- but now that they're running a surplus, we'll see if that will help," the economist says.
Projected median price gain: 12.5% Property values in this city 60 miles east of Los Angeles tumbled nearly 70% during the housing bust, but have been rallying back sharply for more than a year as buyers snap up bargain-priced homes. "Riverside was one of the hardest-hit markets in the country, but now its affordability is extremely high," Humphries says. Median price have returned to early 2003 levels, "and when you pair that with today's 3.5% 30-year fixed mortgages, anyone who can reasonably qualify for a