America's new housing crisis capitals
Housing prices in these formerly stable markets are expected to fall significantly this year.
Denver, formerly seen as insulated from the housing crisis, has seen prices slump in the past year. // © Visions of America/Joe Sohm/Getty Images
During the housing bust, while the effects of foreclosures and a crushing recession tore through real-estate markets in states such as Florida, California and Nevada, the Denver metro seemed insulated from economic harm. It has consistently performed relatively well among the 20 major metropolitan housing markets tracked in the S&P/Case-Shiller Home Price Index, which measures sale prices and is published with a two-month lag. In its January report, covering the year ending in November, Denver topped those markets with a 0.5% home price increase.
But real-time asking-price data provided to Forbes by Altos Research, a Mountain View, Calif.-based real-estate research firm, suggest the Mile High city is taking a turn for the worse. In July 2009, list prices fell 0.5% from the year before, the first decline since 2008. The slump has since worsened; in January, year-over-year asking prices were down 3%, to $368,870.
Denver is not alone. In eight other areas, current housing trends show similar sustained year-over-year slumps. Altos' data allow its researchers to forecast trends in the coming year, and near-term prices in these spots are expected to continue to drop. They're not all places you might expect. Some, like Charlotte, N.C., and San Francisco we identified recently as smart places to think about buying, since according to our measures, buying for the long term there had become attractive.
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On others, economists looking at long-term price estimates have been bullish. During the housing boom, Dallas benefited from a relative lack of price inflation and speculation, and thus took less of a hit during the bust. Home values were roughly flat in 2005 through 2007 and stayed above the national average even after it peaked, as opposed to bubble cities like Las Vegas, where home values rose to 21% above the national average in late 2006 and are now below it by 31%, according to data from Zillow.com.
But in August, according to Altos, for the first time, list prices in Dallas fell 0.5% from the same month the previous year. They have continued to drop moderately and in January were 1.2% lower than a year earlier, at $237,720. Austin, Texas, is experiencing similar price declines. Price tags began to fall in November by 2.5%, and this month prices were down 4.25% from the previous year, to $289,216. Modest dips, to be sure, but ones worth noting in cities with housing markets thought to be relatively healthy.
"Particularly in Dallas and Austin, it is entirely possible that there could be a double-dip recession or at least a slowdown in the rate of recovery," says James P. Gaines, research economist at the Real Estate Center at Texas A&M University. "Some of that is because there is a little more reality slipping into the market in what the expectations are by sellers. They're beginning to figure out that prices are not going up like they did a couple of years ago, so they can't just take whatever their house is worth, add 20%, and go list it."
Trouble in store for money cities
Certain cities that get a big chunk of their revenue from the financial services industry have also come late to the housing slide. The ripple effect of Wall Street's 2009 decline has reached the Charlotte, N.C., metro area, headquarters to Bank of America and other major financial institutions. Prices fell 1% in May from the previous year and are now down 5% from the previous January, at $242,488.
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"Charlotte is the banking center of the South, and the jobless rate has jumped to higher than the national average," says Scott Sambucci, vice president of data analytics at Altos Research. "You can only hold off the pressure for so long; even if it's a great place to live, eventually fewer and fewer people have jobs, and rest of the economy feels like it's not really recovering."
In San Francisco in June, prices were down 4.5%. As of January they were down an additional 8.5% to $1.02 million. High-priced homes make up a huge chunk of the city's housing market and many of these homes aren't being bought, a decline in demand that pushes down prices. Part of the reason is that it's harder now to obtain nonconforming, or “jumbo,” loans, considered more risky and not backed by Fannie Mae or Freddie Mac.
"The price of homes in San Francisco is among the highest in country. A large percentage of those homes are people needing to take out jumbo loans, and not a lot of lenders are doing that," says Sambucci. "It's a tougher market at the top end because fewer of those mortgages are getting approved, so people needing to sell at the top end might not list their homes, because there are no buyers."
Stormy markets in resort areas
High-end second-home spots aren't expected to fare well, either. Among the picturesque vineyards of Napa County, Calif., trouble is brewing: Prices there, as elsewhere in California, started falling in mid-2007, but asking prices in August 2009 fell 3.25%, a dramatic plunge compared with recent drops. This month they've fallen 7.25%, to $740,066. In tony Naples, Fla., prices had risen two percentage points between June and August 2009, though they were still down 15.5% from the previous year. In September they started to sink, and this month prices are down 18% to $572,162. Budgets for second homes simply don't exist for many, and restrictions on jumbo loans don't help this market, either. Hilton Head, S.C., a favorite of Southern luxury homeowners, is experiencing a similar trend; asking prices fell 4.25% in August 2009 and 9.25% in January to $472,240.
"The high-end market has been harder hit because before, you had 35-year-old investment bankers with big bonuses buying $3 million and $4 million properties at 10% down, and they can't do that now," says Jonathan Miller, president and CEO of New York City-based Miller Samuel Real Estate Appraisers. "In many ways, the problems we're having are credit-related."
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In these places, the story has been negative for some time, but these data point to few signs of a speedy recovery. In healthier markets like Denver, Dallas and Austin, prices are only down a few ticks, but their sudden change in fortune is worth keeping an eye on.
A lot of the market data simply have the experts baffled. Gaines jokes that his presentations on market conditions feature a slide picturing a deer in headlights, as a metaphor for how real-estate economists feel.
5 new housing crisis capitals
I work in new housing in California. The #2 bad market in this article is a hop, skip and a jump away from me...so I am living the pain. I agree that the government is throwing bandaids on things as others have said...but you need to look at this on a wider spectrum. The Governor of California will announce a new 10K state tax credit that will start the day after the federal 1st time buyer credit ends...tomorrow afternoon. Some may look at this as a bandaid but consider...no single industry employs people like the building industry at good wages. The auto industry is close...but we don't import houses from Japan and Korea so housing trumps. While giving a 10K credit seems excessive to some to try to encourage sales...consider that the state makes upwards of 15K on every new home in California...usually way more. Building new homes creates jobs for cement workers, framing workers, electricians, landscapers etcetera. When you think about it this tax credit makes sense...if those people are working they are not collecting government money....they are providing the government with taxes instead. The only thing I would argue is making those tax benefits available on resale homes will help realtors and a limited number of individuals but they do not create any jobs. Being in the new home industry I feel a little guilty saying this but I think they should limit these benefits to new homes or perhaps structure it in a way where new homes get 2x while resale gets x. I do agree with others that say this crisis is far from over...we have a year or two of rough times ahead at least...and I am not sure that the federal decisions on various programs make anywhere near as much sense as the on California will announce tomorrow. So hopefully we will get it together soon.
Don’t forget the city that’s fully embraced the full deliciousness of Obamanomics – Detroit.
I am a Realtor, full time mom of 2, a military wife, and a true believer that this is just our temporary home...I hope that you all know that. It is not just a Carrie Underwood song. One day soon He will be coming back to take us home and when he does...will any of this other stuff matter? Worry is a sin. Give it all to God. Cast your cares upon Him...He will carry your load! If we just put it all in Gods hands and live each day doing His Will...nothing the government, the market, the economy does will matter. You will have that peace...The peace that passes all understanding...and you will be able to sit back and just pray. Pray that others will achieve that same peace. I am not a preacher and did not get saved until I was 24 and my husband was getting ready to leave for his first deployment. Without God, I know I would not still be here as his wife and the mother of our 2 children with him off on his now 3rd deployment in 5 years. I sell houses here in the Savannah, GA area and yes our market is up and down and yes there are troubles everywhere, but at the end of the day...when you die...you can not take any of it with you. The troubles, the strife, the worries, the market. Your house, your car, your money!!! Is it really worth all these well our market is worse than yours high school cracks? We are living in a time where our government has taken away prayers from our schools, the 10 commandments from our courthouses, the word God from our money, and now the words "One Nation Under God" from our National anthem. All you can complain about is the market....that is the very very least of our problems!
I am in Los Angeles, and know people all around the city. From San Bernardino's 92410, where prices went from $300k (in a ghetto!) down to $45k, in Covina where they are down a good 30%, Glendale they are down a good 20%, even the tony western San Fernando Valley areas like Woodland Hills are down a solid 30%. The beach cities are holding up best, down around 10%.
I think we're in for a double dip, but they keep making it worse. California, already broke, just passed ANOTHER 10k housing stimulus to take effect May 1st after the Fed one expires in April. They just will not leave it alone. If this keeps up, slow deflation is sure for years to come. If they stop meddling with the markets, a quick deflation will give way to an eventual rise in prices.
On a brighter note though, people often forget we are in for a worker SHORTAGE in 10 years. Boomers retiring/dying, will open up positions. Look, I think things are bad, but not the end-all-be-all scenario others think. How many recession and depressions have we gotten through in the last 200 years? Over a dozen. Somehow, someway, life goes on. Maybe it will be a different lifestyle than we are accustomed too, but come on...don't stick your head in the sand or you will miss everything and regret it.
Regardless of any negative talk about Las Vegas Real Estate,, these
are truly amazing times to buy a home. Consider some
basics here,, paying rent is higher than mortgage payments in most
cases, its cheaper to buy then build in most cases and investors
are able to cash flow better on Real Estate investments than what the
banks will pay them in interest on there money sitting in bank
There are still multiple offers going down on homes priced under 150k,
and when the r.e.o inventory becomes less in volume
in some time to pass,, regular home owners will be able list and sell
there homes for prices they come up with on there own steaming
from the greed of there minds and if they have no r.e.o homes for
sale in there immediate subdivisions to off set that greed ,,
appraisers will have a new challenge of coming up with values to get
those loans to go through.
Thank God for investors and first time buyers buying all these homes
up,, otherwise they would remain empty and vandalized.
Jonathan Abbinante Realtor and Property Management, Selling Las Vegas
and Henderson Nevada Real Estate for over 12 years. Cell 702-327-8340
Designations held, The Accredited Buyer’s Representative (ABR®) and
(SRS) - Seller Representative Specialist.
Premier realty group 8010 W. Sahara Ave. Ste.150 Las Vegas NV. 89117
The reality is that we need a bit of introspection here. I'm reading a lot of "Bush started this mess" and "Obama is socializing our life away". The truth is that we, the people, became absolutely addicted to a lifestyle that was out of control. Even now, all people seem to want is to go back to the old days - an "I'll do anything just let me please go back to driving my Hummer" mentality.
Yes jobs are going to India and China but then we, the people, complain when the price of anything is too high. Well, we can't have it both ways - either it's American made and we pay for that or it's made in China by near-slave labor and it's cheap. We complain that the government is playing too big a role in our lives but I certainly don't want to be caught without health coverage if (when?) I lose my job. Everyone complained that home prices were too high and they couldn't afford one so when the government created an open credit market, we all cheered but then bought homes we could not afford becuase we just HAD to one up the neighbor (it's not Bush's fault if we didn't figure that out).
Our way of life is being chipped away at and this housing thing was a big chunk that got knocked off. The jobs in India and China are staying in India and China. I don't know if anyone else noticed but they're still relying on the US to consume Indian and Chinese products (and we happily do so). At the same time, the middle class in BOTH those countries are being built up due to the very outsourcing of our jobs. Once the middle class of those countries have a firm footing, it's going to be "bye USA... nice knowing ya". The corporations won't need American consumers anymore when they've got Indian and Chinese ones by the billions.
= PEOPLE WHO SEE THE REAL NEWS
= CNN, MSNBC, ABC and CBS NEWS FOLLOWERS
= FAR LEFT DEMOCRAT LOONIES, ILLEGAL IMMIGRANTS and OBAMA.
= EVERYONE in a YEAR!
Bought my last house after a Bush was in office. It will take 8 years from 2006-2007 before we hit bottom. Buy everything you can at the bottom because the crack head politicians will stimulate us back into a speculative frenzy with in 6 months.
Because of the foxes controlling the chicken coop. Geitner and his cohorts have now used the United States as collateral on a nothing down, too good to be true, MEGA-JUMBO loan to the world. All the while telling us to trust him, yea! I have a great piece of swamp land I want to sell America too, I am just not treacherous enough to pull it off.
The nasty comments about American workers is sad. I don't believe that Americans are incapable or incompetent. We just didn't truly understand the real meaning in the constitution. When our fore fathers wrote about separation of church and state. The intent was to not allow organization or collectives to weigh undue influence on our government.
We need a constitutional amendment clearly stating that there will be a separation of organizations and state. This needs to be reinforced with a nice little gotcha tax. Any money spent on attempts to influence our political process by an organization will levied a penalty in the amount of 10 times the amount spent on influence pedaling.
The penalty will be paid by the 10 highest compensated decision makers in the organization. These decision makers compensation packages will be open to full disclosure and public scrutiny, assuring that the American public can identify these shadowy influence peddlers. Their current level of compensation will be frozen for the remainder of their career, and the organization will become subject to government regulation including, but not limited to, price controls that affect the public good.
American people are grossly underestimated. We need intelligent independent leaders, not bought and paid for puppets.
We can build the car that goes forever on a gallon of gas, or energy generation in you very own swimming pool. I know an american who made the last one work.
We are the most inventive, adaptive humans on earth. We even started a movement that France and Russia followed, called revolution.
Its time to give the boot to the elite rich, who have so much and only want more. They hide behind catch phrases like Capitalists. When did capitalism come to mean you can do anything to anyone, you can spend millions fighting against someone's right health care, while having a team of full time physicians caring for just you, all paid by American Tax payer.
The rich elite win as long as they can create turmoil, market crisis, and induce divisive and inhumane behavior in us by playing on our fears and greed.
Whereas, Zillow.com will tell ya your home has dropped another $5000 this month!
I find it interesting here that everyone is full of gloom and doom,,,, pull your boots up, tighten your belt and get at it people,,,, I also find it interesting that we are all so quick to point at the big bad banks and mortgage companies and that they are criminals,,, "they should be in jail for what they did",,,, REALLY,,,,, what about taking on some personal accountability here??? Granted there are / were some bad people out there that did take advantage of some people,,, BUT,,, with nearly every single mortgage that was singed, by the very people on this site,,,, there was very clear numbers and information related to the document YOU were about to sign. Why, if these mortgage companies were such criminals,,,, were you so willing to do business with them? In many cases the very loans that we are talking about, the non disclosure loans that didn't require any documentation how many of you put your "REAL INCOME" on the "application"? How many of you knew that you shouldn't be buying a $500,000 when you were making $75,000 a year? How many of you looked at these loan and took a minute of time to do a reality check and no lie to yourself that your home was going to go up 20% and you would just refi then? No one forced you to sign these mortgages that said you were agreeing to pay the price for the house,,, and that they would loan you the money so you could do so,,,, did they??
And for you real estate sales folks that are "experts" on this page,,,, stating how bad things are and how bad they are going to get,,, lets go back to your clients over the past 5 years and find out how they are doing in the homes that YOU assisted the "big bad mortgage companies" putting these people in. How many times did you oversell? Maybe you should go back and help some of these poor folks that are now stuck in these homes that you sold them and refund some of the commissions that you took on a sale that should have never happened.
If you believe that everything sucks,,,, then it will,,,, if you believe that nothing will ever get better,,, then it wont,,,, but please, please, please,,,, look in the mirror and take some of the personal accountability that you own,,,,,
And I'm going to keep renting. I don't care what anyone says, it's cheaper to rent a comfortable and modest apartment than to buy pretty much anything.
And besides, I might have to move to stay employeed! So, I'm one of those people who the rest of the taxpayers won't have to support. Imagine, in this day and age, being accountable for one's own way through life!
Everyone who wants help with their mortgage is a socialist. Period.
I rent because I like to move around a lot, and my lifestyle simply doesn't support buying a place.
I used to live in Dallas, and I can't imagine prices dropping any further! It's already dirt cheap to live there anyway!