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America's Best And Worst Housing Markets
Forbes staff, 08.11.09, 12:01 AM ETThough U.S. home values have dropped for the 10th consecutive quarter, homeowners in some parts of the nation are seeing prices appreciating.
Countrywide, second-quarter values fell 12.1% year-over-year to $186,500. This is a 22.3% drop in value since the mid-2006 market peak, according to Zillow.com's Second-Quarter Real Estate Market Report. The real estate research firm's Home Value Index measures the value of all homes in a metropolitan statistical area or metro, not only those that sold in the measured period.
But Fayetteville, N.C., posted a Q2 2009 $120,600 median home value, up 13.4% over a year ago. In Oklahoma City, values rose in the last year 4.8% to $118,700. Further north, in Binghamton, N.Y., the $112,300 median value is 4.5% higher than it was a year ago. A relatively low percentage of June foreclosure resales–11.9% in Fayetteville and 4% in Oklahoma City–and percent of mortgages in negative equity–16.2% and 14.9%, respectively–likely contributed to the boost in home values.
In Depth: America's Best And Worst Housing MarketsSkies aren't as bright in California, epicenter of the home-construction boom and bust. Four of the state's metros–Merced, El Centro, Madera and Modesto–posted declines of between 30% and 40%. In these areas, the sheer amount of foreclosures is depressing home values. In Merced and Madera, for example, foreclosure resales dominate home purchases, at 77.4% and 71%, respectively, for all June sales.
What's more, these areas have high concentrations of homeowners with underwater mortgages (the situation in which the homeowner owes more than what the home is actually worth). These high rates, coupled with Merced's 18.8% unemployment and Madera's 9.6%, means more foreclosures are likely on the horizon.
Behind The Numbers
Our rankings for the best and worst housing markets come from Zillow's Home Value Index. It is the median estimated valuation for a given metro on a given day and measures the value of single-family residences, condominiums and cooperatives, sold or unsold. The national Home Value Index is arrived at using a weighted average of each county's median home value. Data is aggregated from public sources for 161 metros. Negative equity figures indicate home values as of June 30. Foreclosure resales measure sales of bank-owned properties in the last year.Though California is home to four of the worst-performing markets, nine of the state's metros–including Santa Rosa-Petaluma, Napa and Modesto–posted three consecutive quarters of smaller year-over-year home-value declines, which signals the beginning of stabilization.
In the Los Angeles MSA, where prices have fallen 34.8% from the 2006 market peak, June sales were up, jumping 11.4% over the same time last year. In San Diego, which experienced a similar overall price decline, June sales were up 9.7%, and the Home Index fell 14.5%; in the previous quarter it had fallen 18.1%. And in Stockton, where home values have fallen an astounding 60.9% since the 2006 peak, the year-over-year Home Value Index fell 29.9% in the second quarter, compared to 32.9% in Q1.
While these numbers likely give area homeowners a glimmer of hope, there are warning signs that stability is not yet in sight.
In many areas, low-priced foreclosure resales are boosting overall sales, which keeps overall home prices down, says Stan Humphries, Zillow chief economist. High rates of negative equity–a Deutsche Bank report last week estimated that just over a quarter of U.S. homeowners are underwater, and that that figure could rise to 48% by 2011–could result in another round of foreclosures or short sales.
What's more, cyclic sales might be disproportionately boosting prices.
"Prices are supposed to go up in the spring; they're seasonal," says Jonathan Miller, president of Miller Samuel, a Manhattan-based appraisal firm. "The seasonality is playing tricks on our eyes."
Contributing to the spring bump may be the government's new home buyer tax credit, which was part of the economic stimulus bill.
"Current trends may owe a lot to seasonality and the $8,000 first-time buyer tax credit," says Humphries. "As such, current demand may not be based on sustainable market forces. With negative equity rates high and unemployment continuing to rise, we have likely not seen the peak in foreclosure rates."