The 13 Housing Markets That Will Never Recover

[keepinitreal]

May 17, 2010

1. Riverside, CA. Housing prices are down 52% and unemployment is at 18%

2. Lansing, MI. Housing prices are off 38% and unemployment is 11.8%

3. Palm Coast, FL. Housing prices down 63% and unemployment is 16%

4. Sacramento, CA. Housing prices down 47% and unemployment is 17.5%

5. Orlando, FL. Housing prices down 49% and unemployment is 15%

6. Fort Meyers, FL. Housing prices are down 65% and unemployment is 14.2%

7. Grand Rapids, MI. Housing prices are down 30% and unemployment is 14.3%

8. Reno, NV. Housing prices are down 44% and unemployment is 13.3%

9. Toledo, OH. Housing prices are down 30% and unemployment is 13%

10. Boise City, ID. Housing prices are down 34% and unemployment is 9.9%

11. Rockford, IL. Housing prices are down 16% and unemployment is 17.9%

12. Las Vegas, NV. Housing prices are down 51% and unemployment is 13.8%

13. Providence, RI. Home prices down 27% and unemployment is 13.2%


24/7 Wall St. reviewed the NAR data for the first quarter along with Bureau of Labor Statistics unemployment levels by city. The two databases should match one another very well. Each has municipalities defined by metropolitan statistics areas (SMA) as set by the US Office of Management and Budget in 2004.

City unemployment rates are compared to a 9.9% national rate for purposes of this article. Government numbers for joblessness do not include part-time workers looking for full-time jobs or people who have become “unattached” from the work force. These additions would bring the national unemployment rate to 17.1%. That means that if a city has unemployment of 14%, joblessness could be closer to 21%

Home prices were based on NAR indexes for the first quarter of 2010 compared with the full-year 2007, near the top of the housing market.

There are some areas where housing prices have dropped but unemployment has improved, so home values may recover. Honolulu is an example of this. But, most cities with sharp drops in home values are also the hardest hit by the recession’s impact on employment. These areas may take years to get back to “normal” unemployment rates of 5%. In the meantime, home prices will continue to stagnate, or worse, continue to fall because of a lack of buyers.

These are the thirteen cities where, based on home values in 2007 and current unemployment, housing will never return to the levels of three years ago.

http://www.businessinsider.com/thirteen-housing-markets-that-will-never-recover-2010-5#1-riverside-ca-housing-prices-are-down-52-and-unemployment-is-at-18-13

[Meatstick]

Nice read and thanks for the info.

I am amazed that Phoenix didn't make it. We have no jobs and no real industry except construction trades and the service industry. I know alot of people who are unemployed and/or are working for $8 - $14 and hour and lucky to get a 40hr work week. Foreclosures are rampant and seem to be escalating lately, my castle for example is worth about 40% of what we originally paid for it 5 years ago.

[btbeme]

I am amazed that Phoenix didn't make it.

Phoenix, on the surface, does not seem to be in as bad of shape with unemployment as most of these areas. That being said, Arizona as a whole is suffering from tremendous underemployment, as you describe.

Phoenix may recover, but it will take years and years.

A measurement for just how bad the situation is: Phoenix is the city with the highest % increase in bankruptcies year over year. My bet is that trend will continue for another year or two as more people slide slowly into BK and foreclosure here.

[newbie2]

Detroit isn't on there either. In my opinion Detroit may never recover, while Grand Rapids and Lansing will.

[Brazzy]

Never huh? You have got to be kidding me. Anyone when "never" is? I mean really? Come one. 1 bad decade wipes out centuries of housing market trends and all the bears come out of their caves. We've seen booms and busts before and we will see them again.

[WhatMoney]

That Business Insider article looked at 2007 as the peak year for prices. In cities like Detroit the peak was earlier. Detroit housing peaked around 2003-2004, and had a sharp decline starting in 2006. Detroit was the canary in the mine.
Detroit missed the list because by 2007 housing prices were low enough that eventually it may recover from 2007 prices, despite its poor economy.

This chart is also interesting - it shows Detroit getting close to recovery, eg positive housing equity, by 2020. Note the areas in Florida and PA that have a long wait as well. The earliest area to recover is Washington-Arlington-Alexandria-DC. As usual Federal government jobs are the safest bet. Central valley of CA also looks good for recovery starting in 2016.



http://www.cvic.com/Clients/FACL/201...os_equity.html

[justbroke]

I called the Central Florida (Orlando) debacle back in 2004-2005! I sold my overinflated home that I made 60% on in 2 years (from 2003-2005) back in 2005! Luck or just insightful?

[albacore44]

Lucky me. i live in Riverside, we were # 1 on the list. yes it is bad here. Way too many Mcmansions built between 2002-2008. i bought my new house in June 2003 for $450K. When I refied in July 2007, it appraised at $950k. might sell now for $400K.

unemployment is very bad. Riverside has never had enough industry to provide good paying jobs. you have to commute 50 miles on the clogged 91 freeway to get to a good paying job.

it was booming while all the housing construction was going on. mostly illegals were doing those jobs though. my neighbor kid just got his Masters DG, and is working 3 part time jobs to get by.

interesting thing i just noticed. We had a wave of foreclosures in my housing tract over the last few weeks. But the houses seem to be selling, but at 2002 prices. not sure what is driving it. Hmmm.

[backtoschool]

Detroit isn't on there either. In my opinion Detroit may never recover, while Grand Rapids and Lansing will.

I have to agree. I can't imagine why the Detroit suburbs and Detroit itself are not on that list. In my opinion they should be in the top five.

Grand Rapids and most of Western Michigan will recover in my opinion because the job-economy there is not dependent on the auto industry.

I think when looking at Detroit, you have to treat the suburbs of Detroit and the city as different markets. In my opinion, the suburbs will not recover. Detroit has already sunk so low pricing wise, that there is no where to go but up, but housing in the suburbs is still sliding in price as more workers are laid off by the auto companies, and more businesses that used to support the auto industry in various ways are shut down and/or are downsized.

[ryan]

Its hard to say whether things will ever come back in these areas. I'm guessing they will actually, but it will take at least a decade. For example:

I recall the oil bust in Texas and what it did to Houston properties. They peaked in 1982 and it was almost exactly a decade later when prices returned to that level (1993)....During that time drops of 40 and 50% were not uncommon.

[WhatMoney]

http://www.cvic.com/Clients/FACL/201...os_equity.html

[backtoschool]

It would be interesting to figure out what hyperinflation will do to these numbers. I would also like to see the numbers where only fixed 30 year mortgages are considered, since in these markets, arm's will just re-foreclose (ie, extending the interest only period, is only postponing the foreclosure, not permanently averting it in my opinion).

[angles]

It would be interesting to figure out what hyperinflation will do to these numbers. I would also like to see the numbers where only fixed 30 year mortgages are considered, since in these markets, arm's will just re-foreclose (ie, extending the interest only period, is only postponing the foreclosure, not permanently averting it in my opinion).

Excellent insight.

[banca rotta]

They will never solve the negative equity problem without hyperinflation.

The US debt clock recently passed 13 trillion which is approaching our total annual GDP so taxes will be rising for us all. Too much college debt and not enough younger people with the ability to buy up all this surplus real estate.

This economy really needs a painful massive deflationary depression to correct all of these imbalances, but no one wants it.

The people and politicians made their choice and decided that hyperinflation will occur. That is how they will get these home prices back to "normal".

[BCA2009]

[QUOTE=banca rotta;420398]They will never solve the negative equity problem without hyperinflation.

The US debt clock recently passed 13 trillion which is approaching our total annual GDP so taxes will be rising for us all. Too much college debt and not enough younger people with the ability to buy up all this surplus real estate.

This economy really needs a painful massive deflationary depression to correct all of these imbalances, but no one wants it.

The people and politicians made their choice and decided that hyperinflation will occur. That is how they will get these home prices back to "normal".[/QUOTE]

But can the politicians manage to allow hyperinflation with out interest rates going up??

If interest rates go up much, it will offset any benefit of decreased home prices. Payments will stay too high for a lot of borrowers becuase of the increased interest component of the payment. Remember 15% interest in the early 80's. Home values were reasonable for cash buyers, but payments were super high compared to what we are used to (home size to payment).