January 7, 2011

NEW YORK (CNNMoney) -- Move over, Cleveland. Make room, Detroit. Beat it, Buffalo. There are some competitors for the title of America's most depressed real estate market.

These are not old Rust Belt post-industrial cities, where the manufacturing economy vanished years ago; these cities were flourishing as recently as 2005. But they got crushed by the housing bubble, and most won't recover from the damage until at least 2030.

The bubble caused a lot of over-investment in these markets," said Celia Chen, a housing market analyst for Moody's Analytics.. "It's all collapsing because of the recession and over-valuation."

So, bring on the contenders.

Chen estimates that Las Vegas home prices won't return to their pre-recession peak until after 2032; in Phoenix, the rebound will take until 2034; and Salinas, Calif., and Naples, Fla., won't come back until sometime around 2038.

And these are nominal prices: Inflation-adjusted recovery will take even longer.

"The economies were very closely tied to residential construction," said Chen. "Now, housing is over-supplied and that part of the economy will not come back for a long time."

Chen cautions to take those forecasts with a grain of salt, however. It's impossible to be exact about such long-term trends. Housing is also very dependent on the overall economy and other factors. Predictions can easily be off by many years as conditions change.

Welcome to Zombieland: Ladera Ranch, Calif.
Still, it illustrates the devastation wrought by the housing bust. Many on the list of cities where the recovery will take the longest had tied their fortunes to home building. The bust has put such a hurt on that industry that the cities are now stagnating.

A case in point is Stockton, Calif., where prices soared 230% from 1980 to 2006 because residents of the Bay Area, unable to afford pricey San Francisco, purchased homes there.

"People moved farther and farther out to less expensive markets," said Chen.

Once the bubble burst, that all ended. Some homeowners got tired of the commute. Investors stopped coming. Foreclosures piled up and added to inventory. Prices fell and fell faster. Now prices are only 9% higher than in 1980 and about the same as they are in Detroit.

For non-bubble markets, the damage was usually much less severe. Cities such as Pittsburgh, Syracuse and Rochester, N.Y., Clarksville, Tenn., and Spokane, Wash. will be back to their peaks within three years or so, Chen said.

Many of the larger, older metro areas that saw moderate or even fairly high home price appreciation during the boom years will recover faster than the bubble markets but slower than the steady-eddie ones.

Washington will return to peak by around 2025, Chen said. Boston and Chicago will recover by about 2019, and New York by 2021.

"Nationally, we expect U.S. [home prices] to recover by 2021," said Chen.

That only sounds like a long way off because it is