Real Estate

Double-digit home price drops coming

Three quarters of housing markets - many in crashing Sun Belt areas - face price declines over next few years.

By Les Christie, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) -- Over the next few years, more than three-quarters of the nation's housing markets will suffer some decline in home prices. Many will experience double-digit hits in a forecast that has worsened considerably in recent months.

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.

The table below shows the 100 largest-by-population markets among the 290 metro areas that are forecast to have declines of 1 percent or more. In an analysis that considered mortgage rates, the local job market and other factors, the study makes projections on when those markets would peak, when they would hit their worst point, and how much the total decline would be. Top of page

Untitled Document
100 largest metro areas by population that are forecast to witness a decline in the median existing single-family house price
Rank Area State Peak Bottom Peak to bottom
home price decline
1 Stockton CA 06Q1 08Q4 -25.0
2 Palm Bay-Melbourne-Titusville FL 06Q1 08Q4 -24.9
3 Sarasota-Bradenton-Venice FL 06Q1 08Q3 -24.8
4 Reno-Sparks NV 06Q1 09Q1 -22.4
5 Modesto CA 06Q2 08Q3 -22.3
6 Detroit-Livonia-Dearborn MI 05Q3 09Q1 -21.3
7 Fresno CA 06Q2 09Q1 -20.0
8 Oxnard-Thousand Oaks-Ventura CA 06Q2 08Q3 -19.2
9 Sacramento--Arden-Arcade--Roseville CA 06Q1 08Q4 -19.1
10 Las Vegas-Paradise NV 06Q2 08Q4 -18.7
11 Deltona-Daytona Beach-Ormond Beach FL 06Q1 08Q3 -17.9
12 Phoenix-Mesa-Scottsdale AZ 06Q2 08Q2 -17.8
13 Hartford-West Hartford-East Hartford CT 07Q1 08Q4 -17.6
14 Cape Coral-Fort Myers FL 06Q1 08Q4 -17.3
15 Visalia-Porterville CA 06Q2 08Q4 -16.1
16 Riverside-San Bernardino-Ontario CA 07Q1 09Q2 -15.9
17 Bethesda-Gaithersburg-Frederick MD 06Q2 08Q4 -15.9
18 Lansing-East Lansing MI 05Q3 09Q1 -15.7
19 Bakersfield CA 06Q2 09Q1 -15.6
20 Warren-Farmington Hills-Troy MI 05Q4 09Q1 -15.4
21 Newark-Union NJ-PA 07Q1 08Q4 -15.4
22 Vallejo-Fairfield CA 06Q1 09Q2 -15.3
23 Orlando-Kissimmee FL 07Q1 09Q1 -15.1
24 Santa Rosa-Petaluma CA 06Q1 08Q4 -14.0
25 Poughkeepsie-Newburgh-Middletown NY 06Q2 08Q3 -13.9
26 Edison NJ 06Q3 08Q4 -13.3
27 Worcester MA 05Q4 08Q3 -13.0
28 Baltimore-Towson MD 07Q2 09Q2 -12.8
29 Peabody MA 05Q4 08Q3 -12.5
30 Nassau-Suffolk NY 07Q2 09Q1 -12.3
31 West Palm Beach-Boca Raton-Boynton Beach FL 06Q1 08Q3 -12.2
32 Tampa-St. Petersburg-Clearwater FL 06Q4 08Q3 -11.7
33 Tucson AZ 06Q2 08Q4 -11.7
34 Santa Ana-Anaheim-Irvine CA 06Q2 09Q1 -11.6
35 Washington-Arlington-Alexandria DC-VA-MD-WV 07Q3 09Q4 -11.5
36 Fort Lauderdale-Pompano Beach-Deerfield Beach FL 06Q1 08Q4 -11.5
37 Flint MI 06Q1 08Q2 -11.3
38 Cleveland-Elyria-Mentor OH 05Q3 07Q4 -11.3
39 San Diego-Carlsbad-San Marcos CA 06Q1 08Q4 -10.9
40 Los Angeles-Long Beach-Glendale CA 07Q3 09Q1 -10.6
41 Oakland-Fremont-Hayward CA 07Q3 08Q4 -10.3
42 Portland-South Portland-Biddeford ME 06Q1 08Q3 -10.2
43 Rockingham County-Strafford County NH 06Q1 08Q3 -10.2
44 Miami-Miami Beach-Kendall FL 07Q2 08Q4 -9.9
45 Boston-Quincy MA 05Q3 08Q4 -9.4
46 Providence-New Bedford-Fall River RI-MA 06Q1 08Q3 -9.4
47 New Orleans-Metairie-Kenner LA 06Q2 07Q3 -9.4
48 Wilmington DE-MD-NJ 06Q3 08Q3 -9.2
49 Cambridge-Newton-Framingham MA 05Q3 08Q3 -9.0
50 Youngstown-Warren-Boardman OH-PA 05Q1 07Q4 -8.7
51 Toledo OH 05Q4 07Q4 -8.3
52 Salinas CA 07Q3 08Q4 -8.1
53 Colorado Springs CO 07Q1 08Q3 -7.8
54 Boise City-Nampa ID 07Q2 08Q4 -7.7
55 Winston-Salem NC 05Q2 07Q4 -7.6
56 Denver-Aurora CO 06Q2 08Q3 -7.6
57 Lakeland FL 07Q2 08Q3 -7.5
58 Portland-Vancouver-Beaverton OR-WA 07Q3 08Q4 -7.2
59 Pensacola-Ferry Pass-Brent FL 06Q1 08Q3 -7.0
60 New Haven-Milford CT 07Q3 08Q3 -6.7
61 Jacksonville FL 07Q3 08Q3 -6.4
62 Camden NJ 07Q2 08Q3 -6.3
63 Minneapolis-St. Paul-Bloomington MN-WI 06Q3 09Q2 -6.0
64 Albuquerque NM 07Q3 08Q3 -5.9
65 Tacoma WA 07Q3 08Q3 -5.5
66 New York-White Plains-Wayne NY-NJ 07Q3 08Q4 -5.3
67 Grand Rapids-Wyoming MI 05Q4 07Q3 -5.3
68 Bridgeport-Stamford-Norwalk CT 07Q3 08Q4 -5.1
69 Lexington-Fayette KY 06Q1 08Q1 -5.1
70 Fayetteville-Springdale-Rogers AR-MO 06Q2 07Q4 -4.6
71 San Jose-Sunnyvale-Santa Clara CA 07Q3 08Q4 -4.4
72 Virginia Beach-Norfolk-Newport News VA-NC 07Q3 08Q3 -4.1
73 Columbus OH 05Q4 07Q1 -3.7
74 Dayton OH 06Q4 07Q3 -3.7
75 Indianapolis IN 05Q3 06Q4 -3.7
76 Provo-Orem UT 07Q3 08Q3 -3.6
77 Chattanooga TN-GA 06Q3 07Q4 -3.5
78 Tulsa OK 06Q3 07Q4 -3.4
79 Salt Lake City UT 07Q3 08Q3 -3.4
80 Allentown-Bethlehem-Easton PA-NJ 07Q3 08Q4 -3.3
81 Philadelphia PA 07Q3 08Q3 -3.1
82 Lake County-Kenosha County IL-WI 06Q3 08Q2 -3.1
83 Wichita KS 07Q1 07Q4 -2.9
84 Seattle-Bellevue-Everett WA 07Q3 08Q3 -2.9
85 Ogden-Clearfield UT 07Q3 08Q3 -2.9
86 Milwaukee-Waukesha-West Allis WI 06Q3 07Q1 -2.9
87 Birmingham-Hoover AL 06Q3 07Q3 -2.9
88 Jackson MS 06Q3 07Q4 -2.9
89 Richmond VA 07Q2 10Q3 -2.8
90 Cincinnati-Middletown OH-KY-IN 05Q3 07Q2 -2.8
91 San Francisco-San Mateo-Redwood City CA 07Q3 08Q2 -2.7
92 Albany-Schenectady-Troy NY 07Q2 07Q4 -2.7
93 Springfield MA 07Q3 08Q2 -2.6
94 Spokane WA 07Q3 08Q3 -2.6
95 Omaha-Council Bluffs NE-IA 06Q2 07Q4 -2.1
96 Kansas City MO-KS 06Q1 07Q2 -2.0
97 McAllen-Edinburg-Mission TX 05Q1 07Q2 -2.0
98 Fort Worth-Arlington TX 06Q2 07Q1 -1.9
99 Oklahoma City OK 07Q3 07Q4 -1.6
100 Memphis TN-MS-AR 06Q2 07Q3 -1.1


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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.