San Francisco
Median home price: $675,000 Value lost since 2006: 25.7% Forecast gain by 2011*: 4.8%
The San Francisco metro area has seen its home values drop by a quarter, and the city still has some pain to work through. The city's median home price is expected fall another 8.3% by June 2010.
After that, however, the market there may come roaring back: Fiserv predicts a 14.3% gain between June 2010 and June 2011. Averaged out, that means a 4.8% gain over the next two years.
One reason for the sharp comeback is that much of the area's excess inventory will have been sold. It's already dropped by nearly in half over the past year.
The recovery will be delayed, though, as the area -- particularly Oakland and the East Bay -- works through its foreclosure problems. During the first six months of 2009, one of every 52 homes had at least one foreclosure filing.
The good news, according to Mark Fleming, chief economist for First American CoreLogic, is that core city neighborhoods don't have nearly as many foreclosures as those out on the fringe. The steady demand in those communities will serve as a base as other neighborhoods rebuild.
Seattle
Median home price: $371,000 Value lost since 2006: 15.2% Forecast gain by 2011*: 3.8%
Seattle has become a world-class city with a diverse, vibrant economy. As a home to manufacturers such as Boeing and software providers such as Microsoft, the job market has held up better than average, with a current unemployment rate of 8.8%.
Home prices had a softer landing as well, dropping just 15.2% over the past three years, about half the national average. However, prices do tend to be volatile, according to Mark Fleming, chief economist for First American CoreLogic. The lack of available land for development is one reason for that volatility, as are political restrictions on growth.
After another modest price decline of 2.3% in the next eight months, the market should begin to turn up. Between June 2010 and June 2011, the city should see a gain of 6.2%. Averaged out, that means a 3.8% gain over the next two years*.
And while that may not sound all that robust for those jaded by the annual double-digit returns recorded during the boom, that performance will be one of the best of any large city during that period.
Pittsburgh
Median home price: $122,000 Value lost since 2006: 0.8% Forecast gain by 2011*: 2.2%
Pittsburgh's main problem has been a brain drain. The metro area has been losing residents for years: Its population shrank 3% since the 2000 census, and the core city of Pittsburgh has lost almost half its population over the past 50 years. But that worked in Pittsburgh's favor when it came to real estate. There was no shortage of housing during the boom years, which helped keep a heavy lid on housing prices. Homebuyers never had to resort to exotic mortgages just to buy a starter place.
There are few barriers to entry for homebuyers here, according to Mark Fleming, chief economist for First American CoreLogic. As a result, Pittsburgh's foreclosure rate has been running at about half the national average.
Meanwhile, the area's economy has transitioned from steel to services, finance, bio-med, health care and other more sustainable industries. This diversification has enabled the area to muddle through the recession with less angst than many other places. "It's where we would like to see Detroit go through over the next decade," said Fleming. The unemployment rate for the metro area is a modest 7.9%.
Once the national recovery begins in earnest, the housing market shold start to record moderate gains. Fiserv predicts a home price rise of 0.5% by June 2010 followed by a 1.7% increase in the following 12 months. Averaged out, that means a 2.2% gain over the next two years.
Rochester NY
Median home price: $119,000 Value lost since 2006: 5.2% Forecast gain by 2011*: 2.2%
Like Pittsburgh, Rochester has had to reinvent itself. Old economy companies like Eastman Kodak and Xerox have lost much of their importance and reduced their workforces.
The slack has been picked up by such newer companies as Paychex, a successful payroll-service company headquartered there, as well as high-tech optical companies. The current unemployment rate of 8.1% is was well below the national average of 9.6%.
Rochester is also a learning center with the University of Rochester, which hosts both the foremost optics research center in the nation and the Eastman School of Music, a premiere music institution. A few years ago, the university surpassed Kodak as the city's largest employer, with more than 17,000 workers. Another notable outpost of academia is the Rochester Institute of Technology and there are several smaller colleges.
Rochester home prices never bubbled during the boom, but they have enjoyed slow, steady growth during the bust, gaining 5.2% over the past three years*. Since many of the area's jobs pay reasonably well (the median household income is $63,000, which is above the national median), the relatively affordable housing market has been open to most of the population.
The prices also meant few homebuyers resorted to toxic mortgages, and New York's strong consumer protection laws tended to discourage predatory lending. As a consequence, Rochester has been less burdened by foreclosures than most big markets. Only one property for every 276 had a foreclosure filing against it during the first six months of 2009, about a third the national rate.
Memphis Tenn
Median home price: $108,000 Value lost since 2006: 19.9% Forecast gain by 2011*: 1%
The Memphis metro area boasts some of the most affordable housing in the country -- and it grew considerably cheaper during the past few years, falling nearly 20%.
That downturn will continue for another year or so, with prices declining another 1.2% before rebounding 2.2% during 2011. Averaged out, that means a 1% gain over the next two years*.
The economy here has always been tied to the city's position on the Mississippi and, more recently, the intersection of several railroad lines and two major interstates.
Those factors, plus a business-friendly environment, helped attract such heavy hitters as FedEx and AutoZone, a Fortune 500 autoparts retailer. "Memphis," said Mark Fleming, chief economist for First American CoreLogic, "is perfectly positioned for distribution nationwide."
Still, unemployment in the metro area has been a problem lately, with the rate rising to 10.4% in August.
The metro area has been growing steadily in population since the 2000 census, up nearly 7%. The added demand for housing should support home prices, although land in the city's far-flung exurbs can be purchased and developed quite reasonably. The competition from new home builders tends to keep a tight lid on the gains of existing home prices.
Oakland CA
Median home price: $318,000 Value lost since 2006: 48.1% Forecast gain by 2011*: 0.4%
Looming over Oakland's metro area is the exotic mortgage, such as option ARMs, which will start to reset to higher rates over the next few months. It's feared that could fuel another severe wave of foreclosures.
Still, the foreclosure problem of Oakland pales in comparison with those of inland California cities. Plus, the city also has a lot going for it, including many communities that are "highly sought after by homebuyers," according to Mark Fleming, chief economist for First American CoreLogic. That should buoy home prices once the economy recovers.
Before that happens, Oakland will have to work through some significant economic problems. Unemployment, at 10.7% in the metro area, exceeds the national average, although it pales in comparison to some of the inland California metro areas. Yuba City, for example, has hit 16.1%, and El Centro is at a whopping 28.7%.
With the prospect of continued job losses, it's no surprise that Fiserv is predicting an 11.7% drop in home prices by June 2010. After that, however, Fiserv expects Oakland to take off again thanks to its strong and varied businesses, such as health insurer Kaiser Permanente, Clorox and retailer Dreyer's.
Its position across the Bay from San Francisco and its great educational institutions, led by the University of California, provide a further base for the economy. Fiserv forecasts that home prices will return to double digit growth starting next June and produce gains of 13.7% in the following year. Averaging out the drop and the gain, Fiserv expects a 0.4% rise over the next two years.
Birmingham Ala
Median home price: $152,000 Value lost since 2006: 6% Forecast gain by 2011*: 0.4%
Alabama is filled with metro areas that recorded positive returns for home sellers during the past few years. Birmingham recorded a gain of 6% during past three years, but several other state cities recorded double digit gains, including Mobile, where prices grew 13.4%.
The Birmingham area has added people, more than 6% since the 2000 census, and its economy is in transition. While heavy industry still has a presence here with functioning steel companies such as Nucor and US Steel, more modern industries, such as health care and research, have grown exponentially.
Birmingham, like most Southern metro areas, is marked by a "high elasticity of supply," said Mark Fleming, chief economist for First American CoreLogic. Developers are relatively unrestrained in building, and these markets tend to be far less volatile than places like San Francisco or Portland, where development is restricted either by government policies, in Portland's case, or geography, in San Francisco's.
As a result, these cities seem to exhibit slow, steady growth rather than big peaks and valleys. Birmingham is no exception. Fiserv forecast a slight 12-month loss of 0.7% through June 30, 2010, and then a gain of 1.1% the subsequent 12 months. Averaged out, that means a 0.4% gain over the next two years. - By L Christie
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