It is no secret that the national housing market has gotten even worse this year. With each passing month, it seems that most measures pointed to further weakening. Although there are a few exceptions at the state and local level, the wave of foreclosures is still so large that most markets cannot stage price recoveries. And the portion of underwater home mortgages is now over a fifth of the entire home market. 24/7 Wall St. examined the nation’s metropolitan areas that had the biggest gains in home prices from January to October of this year and those that had the worst.
Home markets that continued to see steep price drops are generally those with higher-than-average foreclosure rates and, usually, higher-than-normal unemployment. Markets with price appreciation, on the other hand, are generally marked by below average unemployment rates and by home values that never fell a great deal during the recession. The reason prices held up relatively well during the recession is because housing prices peaked much later in those areas than the national peak in 2006, keeping demand relatively level.
Bloomington, Ind., is a prime example. Home values in the metropolitan statistical area did not peak until the second quarter of 2010, nearly three years after the national average. That means demand remained good through the recession. Since that peak, values have dropped only 3.7%. Compared to a national market where prices have dropped by nearly a third since 2006, this decline is nominal. Bloomington shares another characteristic with home markets that have done well. Its unemployment rate is only 7.3%, nearly two full points below the national average as of October.
A prime example at the other end of the market is the Reno-Sparks metro area. Home prices peaked early, in the first quarter of 2006. This is probably because of the Nevada building boom, which also hit neighboring Las Vegas-Paradise metro area. Home inventory was so large that the numbers of vacant homes grew rapidly, even before the recession officially began. Since their peak, home prices in Reno-Sparks have plummeted more than 51% by October, and they continue to fall to this day. There is not a strong employment base to support home prices and sales. Unemployment in the Reno area is 12.1%.
24/7 Wall St. relied on CoreLogic’s Home Price Index to identify the metropolitan statistical areas that increased and decreased the most from January to October of this year. CoreLogic also provided Foreclosure data for the 384 MSAs the company tracks. Data reflecting the amount each housing market is down from its peak value is from Fiserv-Case Shiller. Unemployment data for October of this year is from the Bureau of Labor Statistics.
24/7 Wall St. found, as it reviewed the housing markets in 384 U.S. metropolitan statistical areas, that those regions that survived the recession the best economically have begun to see a rebound in home prices. Markets marred by high unemployment and sharp drops in home prices have usually not recovered at all.