Nationally, home prices are projected to decline 4% by the end of this year, according to Fiserv Case-Shiller’s latest report. Most of the country’s largest metropolitan areas will not escape this fate. In fact, in all but 50 of the 384 metropolitan areas examined, home prices are projected to decline at least through the end of the year before they start improving.
Among the regions where home prices are expected to decrease, only 10 are projected to drop by 7.5% or more, with the largest decrease estimated at 12.2%. 24/7 Wall St. reviewed these 10 areas to identify the reasons behind their falling prices.
In most cases, housing prices in these areas are projected to decrease because the areas are not yet considered good investments. This could be because buyers either do not believe home values have fallen far enough, because of relatively weak local economies, or a combination of the two.
Many of the collapsing housing markets already have experienced significant slumps in home prices. In all 10 of the metropolitan areas, housing prices fell by more than 25% since their prerecession peak. Home prices in seven of the 10 metro areas have plummeted more than 50% since their peak.
Home prices in most of these markets will continue dropping next year too. David Stiff, chief economist at Fiserv Case-Shiller, told 24/7 Wall St. that the nation’s housing recovery is not expected to reach full swing until the end of next year — even in the areas that are currently leading the country in recovery. Nationally, home prices are expected to increase much more in 2013 than in 2012, but not for many of the cities on this list.
In addition to large declines in home prices during the recession, most of the cities with the worst housing markets have unemployment rates higher than the national average. Seven of the cities have unemployment rates above the national rate of 8.3% in February 2012. Half of the cities have unemployment rates above 10%.
Finally, foreclosure processing is another factor that appears to be affecting the recovery in these 10 metros. Housing markets that have been able to resell foreclosed homes have done better than those that have not, Stiff explained. “In California, foreclosures are nonjudicial. They don’t go through the courts, so California is further along in liquidating their foreclosure inventory, whereas foreclosures in Florida,” which are further behind in liquidating foreclosures, “are judicial.” Florida has three housing markets that are on this list.
24/7 Wall St.’s Cities Where Home Prices Are Collapsing is based on Fiserv Case-Shiller’s forecast of changes in home prices from the fourth quarter of 2011 to the fourth quarter of 2012. 24/7 Wall St. also included each metropolitan area’s February 2012 unemployment rate and change in home prices from the fourth quarter of 2010 to the fourth quarter of 2011 — both of which were provided by Fiserv Case-Shiller.