Housing prices have plunged in Jackson County in recent years, but The Business Insider magazine predicts the area will have the second highest surge in values in the U.S. over the next five years, topped only by the Bend area.

Housing prices have plunged in Jackson County in recent years, but The Business Insider magazine predicts the area will have the second highest surge in values in the U.S. over the next five years, topped only by the Bend area.

Based on data provided by Fiserv Case-Schiller, The Business Insider predicted the Medford area would see an 11.7 percent average annual price increase over a five-year period, second only to Bend,which it said would have 11.9 percent annualized growth. Fiserv Case-Schiller tracks home prices across the country and around the world.

The Eugene area also made the top 15 list for real estate price increases, with an estimated annualized growth rate of 8.8 percent over the next five years.

Jackson County home prices have sunk almost 40 percent from the peak in 2006. Prices in the Bend area have dropped by more than 45 percent.

Colin Mullane, a spokesman forf the Rogue Valley Association of Realtors, said he's often skeptical of these sort of forecasts. (Corrected title)

"I would be pleasantly surprised," he said. "I haven't seen the evidence to support that."

He said Bend is often cited in these kinds of studies, because Deschutes County, like Jackson County, suffered sizeable drops in real estate values.

"It's easy to say a market has taken a huge hit on a decline and is now more ready to make a comeback," Mullane said.

At best, Mullane said he hopes for a stabilization of prices, but he doesn't see that happening until later this year or next.

He said projected increases in home values will be deceiving because 42 percent of homes on the real estate market are distressed sales — either in foreclosure, owned by a bank or a short sale.

As the number of foreclosures drop, the median home price will appear to rise, but for most homeowners, their value will not change as quickly. The median price is based only on homes that are sold and foreclosure-related homes typically sell sooner because they are more discounted.

The good news is that home values will be able to recover more quickly once most of those homes are sold.

"We will have the gradual evaporation of discounted homes," Mullane said.

Mullane said it is difficult to predict when the rate of foreclosures will begin easing because it is widely believed that banks are holding onto inventories of houses to avoid flooding the markets.

Other real estate signs point to improvements in the local economy.

Housing inventory has declined over the past two years, unlike some communities around the country where entire subdivisions are in foreclosure, Mullane said. Eventually, Jackson County could strike the right balance between inventory and sales, Mullane said.

"We have hit the sweet spot," he said.

Fiserv, a financial services company, predicts the country as a whole will continue to see a 3.6 percent decline in home prices through the second quarter of 2012, then an increase of 2.4 percent in the second quarter.

Lower inventories and increased demand could lead to a more stable real estate market, according to the company. Continued economic growth in the U.S. also would translate into a more favorable real estate market, according to Fiserv officials.

Prices have fallen in 340 of 384 metropolitan areas in 2011. Overall, single-family home prices dropped 5.9 percent in the second quarter of 2011 compared with the same quarter in 2010, Fiserv reported.

The decline in prices has improved the affordability of homes. According to Fiserv, the monthly mortgage on a median-priced single family home is now $700 compared with $1,140 in 2006, a decline of nearly 40 percent.

Reach reporter Damian Mann at 541-776-4476, or email dmann@mailtribune.com.