These next 5 markets really interest me because they are smaller, but also because they have seen a smaller drop in prices during this downturn. This fact leads me to believe that these 5 markets are more likely to have steady, sustained growth.

6. Florida – Panama City- Lynn Haven metro area

Prices Forecast to increase:26.9 percent

Population: 164,770

Median Price Home: $158,669

Median Family Income: $53,800

Home prices fell around 27 percent after hitting a peak in 2006 (according to the House Price Index). Earlier this year, real estate agents in the area would have told you that the market was stabilizing; however, the BP oil spill led some buyers to back out of their contracts and this sent the rental market into a downward spiral. However, there are some really positive things that will stimulate business and growth now and into the next several years. A new airport opened this last May which created jobs and will help the economy. The City and Tourist Development Council has a strong plan to bring more high-tech companies to the area. The area has been growing for the past decade. Panama City also has a large military presence – over 18 different project offices – such as the U.S. Coast Guard Naval, Special Warfare Training Detachment and Coastal Operation Institute, just to name a few. These offices employ approximately 2,800 civilians and military personnel with an annual payroll of more than $150 million. Panama City also saw its unemployment rate drop to 9.3 percent.

7. Arizona – Flagstaff metro area

Prices Forecast to increase: 26 percent

Population: 129,850

Median Price Home: $298,000

Median Family Income: $56,700

No one will deny that Arizona has been one of the hardest hit states by the housing downturn. Flagstaff is different, however, than the greater Phoenix area. Its economy is based on tourism, Northern Arizona University and Flagstaff Medical Center. It also has a large second home population – 1 out of every 5 homes is a second home. Inventory of available homes is low since there has been a lack of new homes constructed in the last several years.

8. New Mexico – Santa Fe metro area

Prices Forecast to increase: 25.8 percent

Population: 147,530

Median Price Home: $197,601

Median Family Income: $64,300

Santa Fe is the capital of New Mexico. The majority of its growth will come from government, Indian Casinos and tourism.
Santa Fe has had a more modest drop in prices than we've seen in other parts of the country. Homes in all price ranges are moving, which is also very different than other places in the country. It was reported by the local real estate association that the number of sales increased 40% in the second quarter of 2010 compared to the same period last year. Unemployment in Santa Fe is far below the national average at only 6.9 percent.

9. Wyoming – Cheyenne metro area

Prices Forecast to increase: 23.7 percent

Population: 88,850

Median Price Home: $106,602

Median Family Income: $62,600

The Cheyenne area, which includes Laramie County (home of University of Wyoming), has been a fairly stable market.
Cheyenne is also home to the F.E. Warren Air Force Base which is inextricably linked to the community. Housing prices only dropped 2.6 percent from the peak. They have seen appreciation in the last six months with the average time on the market becoming shorter. Unemployment is only 6.7 percent, once again, below the national average.

10. Alaska – Anchorage metro area

Prices Forecast to increase: 20 percent

Population: 374,550

Median Price Home: $177,699

Median Family Income: $77,700

Anchorage is a modern city and the hub for the state's communication, transportation, health care, finance and trade industries. The workforce in Anchorage is young and well-educated. The Median age is 32.4 years and 32.8 percent of the residents have a Bachelor's degree or higher. This market has been very stable; prices have only dropped 2.1 percent according to Fiserv Case-Shiller Indexes. "The state is seeing few foreclosures and is already showing signs of recovering," according to housingpredictor.com. Anchorage's unemployment decreased to 6.3 percent. Anchorage is also one of the few states that added construction jobs in 2009 and 2010. Business Week named it as "One of the Best Cities for Riding Out a Recession."

I believe investing in your own backyard is always the optimal way to go. However, if you're looking out of the area, these are some good markets to focus on.