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Friday, August 12, 2011

10 housing markets that will collapse this year

Image: Home for sale in Miami

The real estate market is already in the deepest depression in modern U.S. history. If you think it can’t get any worse, think again.

In several cities, the real estate market is about to drop even more. Home values in many of those cities, such as Las Vegas, have already collapsed as unemployment has shot higher. And with no hope of quick recovery, housing prices are expected to continue to fall. 24/7 Wall St. identified ten housing markets that are expected to drop by at least another 10 percent by 2012.

Methodology: We used data from the Fiserv Case-Shiller Indexes, which track real estate activity in 380 cities. We selected those that are forecast to have the largest percent price drop between the first quarter of this year and the first quarter of next. We added several other pieces of information to our city-by-city information, including June unemployment levels, median household income, and when home prices are expected to reach their troughs in each market.

Median household income in these cities tended to be near the U.S. median, and in some cases well below. We expected to find high unemployment in these cities. This turned out to be the case. In all but one of the cities we examined, unemployment was well above the national average. The rate was over 18 percent in two of the cities. This link between unemployment and expected future drop in home prices shows again how insidious the housing price problem is.

Home prices fell from all-time highs in 2006. Home equity tapped by second mortgages had been a tremendous source of income then for families who used it for retirement saving, education, and simple consumer purchases. Three years later, many of those homes were worth less than their mortgages. A large population of homeowners still owed a second mortgage. The burden of those two home loans happened to come at a time when national unemployment rose from 4 percent in the mid-2000s to 10 percent. The mix of unemployment and high mortgage payments ripped the home market apart.
The ten markets on the 24/7 Wall St. list of “Housing Markets That Will Collapse This Year,” and several other like them, may not see a full recovery in home prices for years. Inventories in these markets tend to be large. Demand tends to be low as the unemployed cannot be buyers. Finally, fear of further price drops all exacerbate the problem. No person or organization, including the federal government, has been able to help support the housing market, although the administration has tried. 

10. Fort Lauderdale, Fla.
Expected price drop:
 -11.1 percent
Median family income:$58,800 (194th highest)
Unemployment rate: 11.8 percent
Median home price:$196,000 (55th highest)
Projected to hit lowest level: Q2 2013

9. Bethesda, Md.
Expected price drop:
 -11.5 percent
Median family income: $114,100 (the highest)
Unemployment rate: 5.1 percent
Median home price: $417,000 (5th highest)
Projected to hit lowest level: Q3 2012

8. Salinas, Calif.
Expected price drop: 
-11.8 percent
Median family income: $62,100 (145th highest)
Unemployment rate: 12.8 percent
Median home price: $240,000 (34th highest)
Projected to hit lowest level: Q2 2012

7. El Centro, Calif.
Expected price drop:
 -12.1 percent
Median family income: $43,300 (10th lowest)
Unemployment rate: 28.6 percent
Median home price: $130,000 (70th lowest)
Projected to hit lowest level: Q1 2012

6. Miami, Fla.
Expected price drop: 
-13 percent
Median family income: $47,800 (32nd lowest)
Unemployment rate: 13.4 percent
Median home price: $175,000 (76th highest)
Projected to hit lowest level: Q2 2013

5. Merced, Calif.
Expected price drop:
 -13.2 percent
Median family income:$42,900 (8th lowest)
Unemployment rate: 18.6 percent
Median home price:$112,000 (38th lowest)
Projected to hit lowest level: Q2 2012

4. Detroit, Mich,
Expected price drop: 
-13.4 percent
Median family income: $49,000 (47th lowest)
Unemployment rate: 12.7 percent
Median home price: $42,000 (the lowest median home price)
Projected to hit lowest level: Q2 2012

3. Las Vegas, Nev.
Expected price drop:
-13.9 percent
Median family income: $58,900 (196th lowest)
Unemployment rate: 12.4 percent
Median home price: $140,000 (90th lowest)
Projected to hit lowest level:
Q4 2012


2. Riverside-San Bernardino, Calif. 
Expected price drop: -15.6 percent
Median family income: $59,700 (190th highest)
Unemployment rate: 13.7 percent
Median home price: $181,000 (70th highest)
Projected to hit lowest level: Q1 2012

1. Naples, Fla.
Expected price drop: 
-16.6 percent
Median family income: $62,800 (137th highest)
Unemployment rate: 10.5 percent
Median home price: $225,000 (40th highest)
Projected to hit lowest level: Q4 2012


CNBC

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