Double-digit home price drops coming, says Moody's

[w¡n9Nµ7 §£@¥€r 123]

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.

I don't know how to paste tables directly from HTML. Go here for the table - http://money.cnn.com/2007/09/19/real_estat...oming/index.htm

[AnaAndDaniel 0]

shouldn't matter to folks who aren't selling.

for those who are, there should be two camps. 1) bought way back and owe less than the new dropped level and will be ok. not as well as one would hope, but ok. 2) bought recently and owe more than what they can get. trouble.

for buyers, it brings the prices a bit more affordable but still very high compared to what a 'average' household income.

Daniel

:energetic:

[Dan J 277]

shouldn't matter to folks who aren't selling.

for those who are, there should be two camps. 1) bought way back and owe less than the new dropped level and will be ok. not as well as one would hope, but ok. 2) bought recently and owe more than what they can get. trouble.

for buyers, it brings the prices a bit more affordable but still very high compared to what a 'average' household income.

Daniel

:energetic:

Yeah, some sellers will likely get screwed. But anyway, it looks like its going to keep going down in most markets for the next year or two.

[w¡n9Nµ7 §£@¥€r 123]

shouldn't matter to folks who aren't selling.

it matters if you're a data geek, which i am. data is fun, i am excel-ing this thing to death as we speak lol.

[AnaAndDaniel 0]

shouldn't matter to folks who aren't selling.

it matters if you're a data geek, which i am. data is fun, i am excel-ing this thing to death as we speak lol.

does that include flagging any houses whose price is within the "buy" range?

Daniel

:energetic:

[w¡n9Nµ7 §£@¥€r 123]

Sure. My friends and I have a pool of cash ready to go. Just waiting for the bottom to pass, we'd rather buy on the way up. Let's see.

[AnaAndDaniel 0]

Sure. My friends and I have a pool of cash ready to go. Just waiting for the bottom to pass, we'd rather buy on the way up. Let's see.

i see.

capitalist!

that is cool man. i wish you and your friends well.

Daniel

:energetic:

[chri'stina 190]

Sure. My friends and I have a pool of cash ready to go. Just waiting for the bottom to pass, we'd rather buy on the way up. Let's see.

Tell one of your friends to move to Florida next summer and buy our house.

[w¡n9Nµ7 §£@¥€r 123]

Thanks.

We've had ideas in the past, researched them to death, and then when it was time for action, nada. Nothing. Hopefully this time will be different

[AnaAndDaniel 0]

Loooks like you guys can move in with Stina & family!

Daniel

:energetic:

[w¡n9Nµ7 §£@¥€r 123]

Sure. My friends and I have a pool of cash ready to go. Just waiting for the bottom to pass, we'd rather buy on the way up. Let's see.

Tell one of your friends to move to Florida next summer and buy our house.

No, that's one of the parameters we've agreed on. Nothing out of the NYC metro area. I'd actually like to get my hands on a condo in the city when manhattan prices come crashing down after wall street takes it dump (I can't wait!). If we can make payments for a decade, the next upswing will be sweet.

[AnaAndDaniel 0]

Sure. My friends and I have a pool of cash ready to go. Just waiting for the bottom to pass, we'd rather buy on the way up. Let's see.

Tell one of your friends to move to Florida next summer and buy our house.

No, that's one of the parameters we've agreed on. Nothing out of the NYC metro area. I'd actually like to get my hands on a condo in the city when manhattan prices come crashing down after wall street takes it dump (I can't wait!). If we can make payments for a decade, the next upswing will be sweet.

yeppers. very similar to SF. gold i tell ya!

Daniel

:energetic:

[Heracles 417]

The people who made dot-com style money from flipping houses will be hit the hardest..

Edited September 19, 2007 by Boo-Yah!

[w¡n9Nµ7 §£@¥€r 123]

You know who I think will be hit the hardest, the people who made dot-com style money from flipping houses. They will be hit hard..

I hate HGTV.

[GaryC 7]

This was bound to happen. The housing market has been overheated for years now because of speculators. The chickens are coming home to roost now. I think the economy in general is still sound. Inflation is low, unemployment is low and interest rates are low. IMO the housing problems are self contained for the most part. People that make their money in the housing industry will suffer but I doubt if it will spread to the economy in general.