The 5 best markets for 2010
It won't be a high bar to be considered a top performer in this year's housing market.
After a dour year when housing prices fell more than 12% nationwide, will 2010 bring sunnier tidings?
The short answer: only a tad in a select few places but overall, not really.
Yes, there have been pieces of good news over the past few months that have indicated a quiet, slow bottoming of real-estate prices. For instance, sales of existing homes rose 7.4% in November from the previous month, the highest rate since February 2007, according to data from the National Association of Realtors released last week. The tax incentives for homebuyers passed earlier this year along with historically low interest rates have nudged many buyers into the market.
Yet a recovery depends on several factors. At the top of the list is a turnaround in the labor market. More people going back to work would have a beneficial effect on household income and consumer confidence and would stabilize the housing market, says Stuart Gabriel, director of UCLA’s Ziman Center for Real Estate. As of November, one of out every 10 American workers is unemployed, according to the Bureau of Labor Statistics. And while that’s down slightly from October, Moody’s expects the jobless rate to peak in the third quarter next year at 10.6%.
Another factor is the backlog in foreclosures, which are dragging down values and adding to the housing supply. “By all accounts, that backlog is at a historic high,” says Gabriel. “It suggests that many more homes will be sold on a distressed basis either via foreclosure or short sale.”
RealtyTrac, an online marketplace of foreclosure listings, estimates 3.2 million households will have received a foreclosure notice in 2009, up from 2.3 million in 2008. The firm projects that number could approach 4 million in 2010. “We do think 2010 will probably represent the peak, and in 2011 [foreclosures] will start to go down at least marginally,” says Rick Sharga, senior vice president at RealtyTrac. Why the acceleration next year? First, says Sharga, there have been enormous delays in processing this year. Many homes that would have gone into foreclosure in 2009 won’t actually enter and complete the process until 2010.
Second, a big wave of option adjustable-rate mortgages (ARMs) will reset next year. (These are a somewhat obscure category of ARMs that were popular during the real-estate boom, which allowed borrowers to make a range of monthly payments. The options include a partial-interest payment that adds the unpaid interest to the loan's balance. On many of the loans, balances have risen while values of the underlying properties have plummeted.) “The number of loans that will adjust starts to go up significantly in the middle of next year. A lot of those loans are underwater ... and owners will be really hard-pressed to avoid going into foreclosure,” Sharga says.
Home prices, of course, are variable and depend on many factors, each of which is difficult to predict. Still, average home prices will drop by 7.9% nationwide in 2010, according to Moody’s Economy.com. In the few areas where there could be positive price growth, the projected increase is modest. “These areas will essentially be flat next year,” says Steve Cochrane, managing director at Moody’s Economy.com.
The top 5 cities for home prices
- Tacoma, Wash. (+2.44%)
- Memphis, Tenn. (+0.99%)
- Pittsburgh (+0.89%)
- Charleston, S.C. (+0.18%)
- Seattle (-0.50%)
These five markets are culled from data on Moody’s Economy.com and based on the largest 100 metro areas.
These pockets of the country share a few important characteristics. One is that they are starting with a limited supply of housing stock. Another is that throughout most of the decade, prices basically stayed in sync with household income, says Cochrane.
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There are other factors, too. Pittsburgh, for example, along with western Pennsylvania, is late in the traditional business cycle, and “our variations tend to be smaller,” says Robert Strauss, a professor of economics and public policy at Carnegie Mellon University in Pittsburgh. The economy has managed to stay fairly stable mostly because over the past several decades it transformed from a center of manufacturing to one of education and health care with a bit of financial services and technology.
Smaller areas across the Southeast are expected to fare well in 2010 primarily because they fared relatively decently during the housing crisis, says Jeannine Cataldi, a senior economist at IHS Global Insight. “They didn’t have such a big run-up, and they have a diverse economic base that enabled them to stay stable,” she says. Home prices in Charleston didn’t get out of line with household incomes; also, Boeing is investing in a fairly large manufacturing plant there, which could create some potential for income and job growth, says Cochrane.
As for Memphis, the city’s largest employer is FedEx. Transportation services is one of the early industries to turn around as the economy recovers, says Cochrane, and that should support the area’s housing market.
The economies of Tacoma and Seattle — which are neighboring cities — were “much stronger for much longer than much of the rest of the country,” says Cochrane. Software giant Microsoft, based in Redmond, Wash., a Seattle suburb, was one reason the area remained stable. (Microsoft is the publisher of MSN Real Estate.) Another was Boeing, which builds commercial airplanes in Seattle.
Going forward, Seattle’s position as a key hub of trans-Pacific trade should be a plus for the economy. Orders are increasing for commercial aircraft and it should see some rising demand for tech products, Cochrane says. The outlook for 2010 for the two Washington cities “is for fairly stable, moderate economic growth,” he says.
I'm reading so many great comments. I believe that America is the greatest country in the world.. have lived overseas! BUT some of the companies here make it so difficult to do the right thing..to continue the progress and help people stay on their feet. For every person who loses their home we lose a bit of America. No jobs.. overseas... no ability to recover! I continue to watch manufacturers forced to go overseas because our work force is no longer trained... and there are no places to continue their manufacturing that are affordable. I own a store and I cannot tell you how many times my mfg. rep tells me he's waiting on shipments from China to deliver what my customers have ALREADY agreed to buy!
Here's a little story of my family that just shows how poorly paid clerks with no training IN AMERICA deal with today's issues: In Feb. we contacted BoA to restructure our loan with Stimulus money..They took their sweet time.. First of April I asked my husband to check on our loan.. WE WENT INTO FORECLOSURE while going through the process. May 4th we were told would be the "sale at the court house steps." ????? We were sending them their paper work necessary...ALL ALONG thinking that this was not going to happen, as we wanted to RESTRUCTURE our loan, not give up our home.
Well, April dragged by.. husband talked to BoA EVERY DAY.. they kept saying, "It takes time to process." On April 28th, we reached an agreement with BoA.. our restructure.. $13.00 less a month and NO STIMULUS MONEY.. they did not tell us that... we had to ask. Clerk told my husband that the paper work would be forthcoming. On April 30th.. last day of the month and a Friday.. no paper work by fax, email, no emails, etc. my husband CALLED AND CALLED AND CALLED THEM that day. Said all was okay from bank.
On Monday, May 3rd, we received the paper work and ON THE PAPER IT IS WRITTEN, "PAPER WORK DUE BEFORE MAY 13, 2010."
next day......On Tuesday, May 4th, our house was SOLD to a person on the "court house steps." We had NO IDEA!!!!!! Wednesday, next day, the new owner tried to get into our home. He was turned back......none of us were home. We did not know who he was or what he wanted. The next week, Fulton County Sheriff Officer shows up with an eviction notice... ????My husband called BoA and asked what the heck is going on... got NOT ONE PERSON could tell him a thing... one department told him that if our house was sold, it was sold and hung up on him..Husband sent paper work to Fulton County Court.. still had to go to court ... got an official court date... meanwhile, he's begging BoA to give him paper work stating who owns the house...NEVER TO THIS DAY HAVE DONE THIS....!!!!!
So, husband goes to court and buyer does not show up, so court case dismissed........
Husband calls BoA they say takes 2=3 weeks to get everything done and does not communicate any more at this point.Last week, husband gets through to a clerk who promptly tells him, "BoA has been in talks with your attorney and we are sending settlement money??? WE DON'T HAVE AN ATTORNEY!" STupid BoA! Seems we figured out, BoA had to pay the buyer off.Now, the paperwork we sent back May 3rd... for the processing... we were to include a check for restructuring.... THE BANK told us how much... we got a cashier's check and sent with the paperwork. GUESS WHAT WE GOT BACK?THE CHECK WHY?Because it did not match our mortgate amount. IT WAS FOR RESTURCTURING! So, we have the check and AGAIN, no one will answer the phone at BoA to tell us what to do with the check!
This has been a full time job for us. If BoA had just trained their people, NONE of this would have happened they lay off people put new ones in let go of the older folks so they don't have to pay retirement benefits.. all the wisdom, all the proceedures to keep from making huge mistakes.. all the brakes to keep companies legit are gone.. the older, wiser people who KNOW how to run a business are gone.
The corrupt polititians sold our manufacturing, bring back the jobs!
Almost everything we consume is imported!,
America= big deficits ,lost manufacturing, declining middle class, going around the world begging for money, borrowing money, fighting wars we can't afford
China=big surpluses, big manufacturing, rising middle class, big creditor, acquiring natural resources, oil, lending money to other countries, making alliances with countries rich in oil, natural resources!
I hope we can one day, reverse course and again be the world's biggest creditor, manufacturer!
Yes, we are a great country. When faced with challenges in the past we have found ways to pull together to solve our problems.
Remember, this is not a purely United States problem. I happen to think that this is a global depression.
Let's not get hooked on semantics. The best (and only sure way) to get control of our finances in this country is to cut SPENDING! Cut the Defense Budget arbitrarily by 20%. Sounds drastic but do not try to micromanage the problem.
Let the government shrink by reducing the budget (not reduce the rate of growth of spending, that is semantics)
Bring the troops home from Korea, Japan,Germany,Turkey, etc. Why should we be the world's policeman. We have too many problems that need our resources.
I know that what I have said will be called naive. Remember that there are jobs in the bureaucracy at stake. They fight like hell to oppose reduction
In years past, the Defense Department Base Closing Commission made a good start in reducing the number of excess military installations.
We have the largest Navy, Air Force, Army and Marine Corps. More than enough nuclear weapons to scare the life out of any potential enemy.
Just bring our troops home from the mideast and concentrate on finding our own sources of energy. \
Nuclear, Natural Gas (of which we have an abundant supply),Wind, Solar,etc. Use our creativity and energy to solve the problems facing us.
I have utmost confidence in the resourcefulness of the people in this country. I did not say that I have confidence in our leaders.
With a little fortitude that will change and the professional politicians can return to private life in the fall.