According to an analysis conducted by Moody's Economy.com, declines
will exceed 10 percent in 86 of the 379 largest housing markets. And
290 of the cities will experience price drops of 1 percent or more.
The
survey attempted to identify the high and low points of housing prices
in each of the markets, some of which started declining from their peak
in the third quarter of 2005. All are median prices for single-family
houses.
Nationally, Moody's is projecting an average price
decline of 7.7 percent. That's a jump from the 6.6 percent total price
drop that the company was forecasting in June and more than twice that
of last October's forecast of a 3.6 percent price decrease.
Many
of the worst hit cities are in Sun Belt areas that experienced outsized
home-price growth during the real estate bubble, according to Arnold
Slesers, an associate economist at Moody's. The home price correction
in many of these cities will be severe as unsold new homes and leaps in foreclosures add to already big inventories.
The Stockton,
Calif., metro area, where Moody's predicts a 25 percent price drop,
will be the hardest hit among the 100 most populated cities surveyed.
Prices
in Stockton - in California's Central Valley - rose quickly through
2005 as many would-be Bay Area buyers, frozen out of the expensive San
Francisco area housing market, moved in. That influx drove up the
median, single-family home price to about $375,000. Stockton prices
peaked during the first quarter of 2006 and have gone downhill since.
Prices likely won't turn around until the end of next year.
Just
a tick or two behind Stockton in the Moody's survey were two Florida
metro areas, Palm Bay/Melbourne (down 24.9 percent) and
Sarasota/Bradenton (down 24.8 percent). All three markets are on almost
the same peak-to-trough schedule, with Moody's forecasting that
Sarasota will bottom out in the third quarter of 2008, a quarter sooner
than the other two.
Outside of the Sun Belt, the worst hit areas
are in the Midwest, where auto industry layoffs and plant closings have
devastated local economies.
Detroit prices are experiencing the
steepest fall of any large Rust Belt city. Moody's forecasts a 21.3
percent drop in Motown, which was hit earlier - in the third quarter of
2005 - and will suffer longer than most places. A turnaround in Detroit
isn't expected until early 2009.
Six of the nation's 10 biggest
cities face price declines of 1 percent or more with Phoenix, at a 17.8
percent loss, undergoing the worst reversal. The San Diego area will
suffer through a 10.9 percent fall, Los Angeles (down 10.6 percent),
New York, (down 5.3 percent), San Jose, (down 4.4 percent) and
Philadelphia (down 3.1 percent) will also fall.
Among smaller
cities, the biggest price declines will be in Saginaw, Mich., where the
drop is forecasted at a numbing 31.8 percent. Other devastated markets
will be in Punta Gorda, Fla. (down 28.8 percent), Merced, Calif (down
26.5 percent) and Santa Barbara, Calif. (down 25.9 percent).
The
markets where Moody's is forecasting growth generally have one thing in
common: Home prices in these cities are quite low. The top appreciating
market will be the Brownsville/ Harlingen area in Texas, forecast to
rise by 7.9 percent between July 2007 and the end of 2009. The median
single-family home price there is less than $120,000.
In Killeen,
Texas, the No. 2 appreciating market, prices are forecast to rise 4.6
percent and the median home price is about $129,000. Other inexpensive
housing markets showing predicted price growth include Buffalo/Niagara
Falls, N.Y.; Pittsburgh and Huntsville, Ala.
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