America’s
Sickest Housing Markets
Posted: July 13, 2012 at 6:48 am
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more: America’s
Sickest Housing Markets - 24/7 Wall St. http://247wallst.com/2012/07/13/americas-sickest-housing-markets/#ixzz20jXiEDBM
According
to data released earlier this month, asking home prices in the nation’s largest
metro regions rose for the fourth time in five months. This is another positive
sign for the national real estate market. However, a review of the data,
provided by home price authority Trulia.com, indicates that many of the
country’s largest cities continue to struggle due to weak demand, high
foreclosure rates and negative
equity.
equity.
While
many of the largest housing markets are showing positive signs, based on both
vacancy rate and average year-over-year home price decline, many markets are
taking longer than most to recover. Several of these are a product of the burst
housing bubble, while others have been in trouble for decades. Based on housing
data, 24/7 Wall St. identified the five “sickest” housing markets in America.
Three
of the five worst housing markets are in California. They are Sacramento, San
Diego and the Riverside-San Bernardino-Ontario metro region — the central part
of the state often referred to as the “Inland Empire.” The remaining two cities
are Virginia Beach, Va., and Toledo, Ohio. Each of these areas averaged a
decline in home prices between the first six months of 2011 and the first six
months of 2012.
These
housing markets also have high home vacancy rates, indicating a lack of
interest in these regions. High vacancy rates — the percentage of homes
currently unoccupied — also tend to depress property values. Each of the five
markets is among the top 25 for the highest home vacancy rates and rental
vacancy rates. Riverside and Virginia Beach are in the top 15 for each. Toledo
has the highest home vacancy rate in the country, at 5.6% of homes.
Trulia’s
chief economist, Jed Kolko, told 24/7 Wall St. that the underlying causes of
home price declines are high vacancy rates, foreclosures and negative equity.
He explained that in many cases the burst housing bubble, and subsequent
collapse of home prices, were the primary causes of these metro regions real
estate woes.
Of
the five markets on our list, three had among the largest declines in home
prices during the recession. Housing in Sacramento and Riverside lost over half
of their value during the decline. “Markets like Sacramento and Riverside-San
Bernardino saw a lot of overbuilding during the bubble and therefore had more
housing than there was demand. They have a lot of foreclosures still on the
market, their short sales are still a big share of home sales,” said Kolko.
Indeed,
according to the first quarter 2012 negative equity report from real estate
site Zillow, each of the three California markets have among the largest
proportions of homes with mortgages worth less than the current home value,
known as underwater mortgages. In San Diego, nearly one in 10 mortgages is
underwater.
The
troubles in other markets, Kolko explained, are more the result of long-term
economic difficulty, as in the case of Toledo, for example. Toledo and many
other Midwestern locations, he explained, “are not suffering from overbuilding
so much as from years of slow job growth and slow demand.” A review of
Realtor.com’s search ranks, which rate the amount of interest in a housing
market based on incoming searches, shows that Toledo is the second-least
searched large housing market in the country.
RealtyTrac’s
foreclosure rates for the first six months of the year also reflect the trouble
these markets are in. Four of the five markets on our list are in the top third
for homes in foreclosure. The Riverside-San Bernardino-Ontario metro area has
the highest foreclosure rate in the country among the 75 markets we reviewed,
with one out of every 39 homes with mortgages foreclosed upon between January
and June.
To
identify the America’s sickest housing markets, 24/7 Wall St. reviewed
U.S. Census Bureau home and rental vacancy data for the 75 largest metropolitan
statistical areas in the country for the first quarter of 2012. We then
narrowed the list to markets where home vacancy rates had declined from the
previous quarter to eliminate those markets that are showing real improvement.
Using a six-month average of year-over-year declines in asking price from
Trulia.com, we excluded metro regions where asking prices had shown a trend of
increasing in the past six months. Finally, we excluded any remaining markets
with positive housing data. These data sets included: negative
equity and home price declines from Zillow.com, foreclosure rates from
Trulia.com, home price forecasts from Fiserv and time on market and real estate
search popularity from Realtor.com.
These
are America”s sickest housing markets.
Read more: America’s Sickest Housing Markets - 24/7 Wall St. http://247wallst.com/2012/07/13/americas-sickest-housing-markets/#ixzz20jXRdKXS
5) Sacramento-Arden-Arcade-Roseville, Calif.
>Average annual list price decline: -7.2%
> Rental vacancy: 6.8%
> Homeowner vacancy: 2.5%
Asking home prices in the Sacramento
metro region were down by 4.1% from June of this year compared to June of last
year. Since they peaked in late 2005, home prices in the Sacramento metro
region lost more than half of their value. This 54.7% drop is the sixth-largest
decline among the country’s large housing markets. More than 2% of homeowners
were in foreclosure between January and June of this year, the sixth-highest
proportion of the 75 metropolitan areas considered. The number of home listings
in the metro region has decreased by almost 36% since April 2011. In March
activists from the region visited President Obama’s Sacramento reelection
offices demanding that government sponsored enterprises reduce principals
on mortgage loans to reflect the
present value of homes in the area.
4) Virginia Beach-Norfolk-Newport News, Va.
> Average annual list price decline: -3.4%
> Rental vacancy: 6.8%
> Homeowner vacancy: 2.8%
The
housing market of Virginia’s south shore is still suffering from the recession
— the average drop in list prices for the first six months of this year was
3.4%. Median home prices have plummeted almost 20% since peaking in 2007, but a
disconnect between potential buyer incomes and housing prices in the Virginia
Beach area seems to still exist. The metropolitan area has a median list
price that is almost 25% higher than the national average, while median incomes
there are only about 13% higher than the national median, according to Fiserv
2011 fourth-quarter estimates. In February, the Virginia Beach Assessor’s
Office released a projected fiscal year 2013 assessment of $48.7 billion for
the value of all taxable property in the area. This represented a 3.7% decline
from the previous year, with 79% of properties receiving a decreased assessment
value.
3) San Diego-Carlsbad-San Marcos, Calif.
> Average annual list price decline:-3.2%
> Rental vacancy: 8.6%
> Homeowner vacancy: 2.7%
With
nearly 165,000 home mortgages underwater, the greater San Diego metropolitan
area has one of the nation’s highest number of homes in negative equity. Home values in the San Diego region
had the 13th-largest drop (37.1%) from their peak in 2006 to the first quarter
this year of all metropolitan areas reviewed. Underwater homes are a problem,
and the region has $20.5 billion in total negative equity, with nearly 10% of
homes under water. According to the North County Times, the assessed
value of all taxable property in the county fell by 0.14% to $395.1 billion in
2011.
2) Toledo, Ohio
> Average annual list price decline: -6.8%
> Rental vacancy: 6.4%
> Homeowner vacancy: 5.6%
From
January to June, 2012, Toledo has had some of the sharpest declines in housing
list prices. Between January 2011 and January of this year, for example, asking
prices fell 11.7%. Between the fourth quarter of 2011 and the fourth quarter of
this year, Fiserv project that median home value in the region will
fall by nearly 3%, which would be one of the largest declines among large metro
regions in the U.S. Toledo has the single highest homeowner vacancy rate among
largest metro areas, with a rate of 5.6% in the first quarter 2012. In the
Toledo metropolitan area, 37.5% of homeowners with mortgages are in negative
equity.
1) Riverside-San Bernardino-Ontario, Calif.
> Average annual list price decline: -1.8%
> Rental vacancy: 9.4%
> Homeowner vacancy: 4.4%
Riverside is
the third California metropolitan area suffering from a sick housing market. In this region,
homeowners paying a mortgage have $41.5 billion in negative equity, the
fifth-highest amount in the nation. Many of these homes are under water
because median home prices plunged by 55.6% from their peak in 2006. The metro
had an annual unemployment rate of 14.3% in 2010, the highest among the largest
cities in the country (it was 11.8% in May 2012), and 12.3% of homeowners with
a mortgage are 90 or more days delinquent on their payments — the ninth-highest
rate. According to Southern California’s City News Service, the
assessed value of all taxable property in the county is estimated to be $204.8
billion for the 2012-2013 fiscal year, a $300 million decline from the $205.1
billion assessment in the previous fiscal year. While the decrease
is lower than previous years, it means things have yet to improve.
Michael A.
Sauter, Lisa Nelson and Alexander E. M. Hess
Read more: America’s Sickest Housing Markets - 24/7 Wall St. http://247wallst.com/2012/07/13/americas-sickest-housing-markets/#ixzz20jWwwop2
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