The 15 Worst Housing Markets For The Next Five Years
Provided by The Business Insider’s Gus Lubin and Linette Lopez
If you bought a home in Miami in 2005, we’re sorry: over the following six years it depreciated in value by more than 54.3%. And the rebound — if there is a rebound — won’t come soon.
Between Q2 2011 and Q2 2016, Miami home prices will decline at an annualized rate of 0.7%, according to data provided by Fiserv Case Shiller.
Fiserv identified 15 housing markets that will appreciate at an annualized rate of less than 1.5% — a pretty lousy investment. If you stay out of these markets, the national average is slightly better at 3.7%.
Here are the 15 Worst Housing Markets For The Next Five Years
The worst place to invest: Miami, Florida
Cumulative growth from 2005 to 2011: -54.3%
Annualized growth from 2011 to 2016: -0.7%
Trough: Q3 2012
The second worst place to invest: Atlantic City, New Jersey
Cumulative growth from 2005 to 2011: -34.05%
Annualized growth from 2011 to 2016: 0.2%
Trough: Q3 2012
3. Nassau County, New York
Cumulative growth from 2005 to 2011: -27.3%
Annualized growth from 2011 to 2016: 0.7%
Trough: Q4 2011
#4 (tie) Fort Lauderdale, Florida
Cumulative growth from 2005 to 2011: -52.9%
Annualized growth from 2011 to 2016: 0.8%
Trough: Q4 2012
#4 (tie) Midland, Texas
Cumulative growth from 2005 to 2011: -40.95%
Annualized growth from 2011 to 2016: 0.8%
Trough: Q1 2009
#4 (tie) Washington, D.C.
Cumulative growth from 2005 to 2011: -28.1%
Annualized growth from 2011 to 2016: 0.8%
Trough: Q1 2009
#7 Abilene, Texas
Cumulative growth from 2005 to 2011: -18.9%
Annualized growth from 2011 to 2016: 1.0%
Trough: Q1 2009
#8 Morgantown, West Virginia
Cumulative growth from 2005 to 2011: -4.15%
Annualized growth from 2011 to 2016: 1.1%
Trough: N/A
#9 (tie) Austin, Texas
Cumulative growth from 2005 to 2011: 2.63%
Annualized growth from 2011 to 2016: 1.2%
Trough: Q4 2012
#9 (tie) Waterloo-Cedar Falls, Iowa
Cumulative growth from 2005 to 2011: -2.73%
Annualized growth from 2011 to 2016: 1.2%
Trough: N/A
#11 (tie) Baton Rouge, Louisiana
Cumulative growth from 2005 to 2011: -14.48%
Annualized growth from 2011 to 2016: 1.4%
Trough: Q1 2012
#11 (tie) Amarillo, Texas
Cumulative growth from 2005 to 2011: -10.5%
Annualized growth from 2011 to 2016: 1.4%
Trough: Q4 2012
#11 (tie) Lancaster, Pennsylvania
Cumulative growth from 2005 to 2011: -5.15%
Annualized growth from 2011 to 2016: 1.4%
Trough: Q2 2012
#11 (tie) Monroe, Louisiana
Cumulative growth from 2005 to 2011: -11.31%
Annualized growth from 2011 to 2016: 1.4%
Trough: N/A
#11 (tie) Shreveport, Louisiana
Cumulative growth from 2005 to 2011: -10.38%
Annualized growth from 2011 to 2016: 1.4%
Trough: Q3 2011
Foreclosures fall for 8th straight month
Foreclosure filings experienced their eighth straight month of declines, according to RealtyTrac.
In May, filings fell 33% from a year earlier and 2% month-over-month, according to the online marketplace of foreclosed properties. The number of homes that were repossessed (referred to as REOs or real estate-owned properties) in May also declined to 66,879, down 3.8% from April and 29% year-over-year, the firm said.
The huge year-over-year drop in foreclosures doesn’t necessarily mean the housing market is staging a recovery, however.
James Saccacio, the CEO of RealtyTrac, says the declines are likely due to lingering effects of the “robo-signing” scandal, which broke last September, when it was discovered that banks were playing fast and loose with foreclosure documents.
In some cases, it was found that banks brought foreclosure proceedings upon homeowners when they had no standing to do so. Sloppy paperwork sometimes made it impossible to tell which entity was the rightful owner of the mortgage notes.
To help fix the mess, foreclosure proceedings were temporarily suspended. Even though the suspension has since been lifted, the pace of foreclosures remains significantly slower as banks more thoroughly review each case to ensure they are being handled legally and properly.
“Foreclosure processing delays continue to mask the true face of the foreclosure situation,” said Saccacio. “Lenders are somewhat unevenly pushing batches of bad loans through foreclosure as they overhaul their paperwork and documentation procedures.”
There’s another factor at play, as well. The banks can’t sell the homes they’ve already seized so they aren’t as incentivized to repossess more homes.
“[There's] weak demand from buyers, making it tough for lenders to unload their REO inventory,” said Saccacio. “Even at a significantly lower level than a year ago, the new supply of REOs exceeds the amount being sold each month.”
The banks don’t want to take on the expense of maintaining the homes — property taxes, heating costs, repairs and insurance — if they can’t sell them quickly
The steepest drops in filings have come from judicial states, ones in which the courts are involved in repossessions. In these states, where foreclosure proceedings are subject to the scrutiny of the courts, it appears banks are taking special care to make sure they’ve stamped out the last vestiges of the robo-signing issues.
Nevada, where most cases are handled outside of court, continued to be foreclosure central. One of every 103 households received a notice of some kind in May. However, that was an improvement of 23% compared with May 2010. Arizona, with one filing for every 210 households, and California, one for every 259, were second and third.
The judicial state of Florida, where the housing market is no better, has seen a much greater drop-off in filings over the past year, down 62%. It now has the eighth highest foreclosure rate, of one filing for every 461 households. A year ago, it was in the top four, along with the other “Sand States.”
May Pending Home Sales Index
California pending home sales rose in May, posting the first year-over-year increase in 18 months.
Pending home sales in California rose in May, according to C.A.R.’s Pending Home Sales Index (PHSI)*. The index was 118.3 in May, up 1.6 percent from April’s revised index of 116.4, based on contracts signed in May. The index also was up 12 percent from May 2010. Pending home sales are forward-looking indicators of future home sales activity, providing information on the future direction of the market.
“May marked the first year-over-year increase in pending sales since November 2009 and the largest annual increase since August 2009,” said C.A.R. President Beth L. Peerce. “May’s increase in pending sales is consistent with our expectation that home sales in the second half of 2011 should be higher compared with the second half of 2010, and as a result, annual sales for all of 2011 should match or exceed last year’s annual pace.”
Distressed housing market data:
- The total share of all distressed property types sold statewide was unchanged in May from April’s 48 percent, but up from 46 percent in May 2010.
- Non-distressed sales made up the remaining share at 52 percent in May, unchanged from April but down from 54 percent in May 2010.
- Of the distressed properties sold statewide, the total share of REO (real estate-owned) sales was 28 percent in May, unchanged from April, but up from 26 percent in May 2010.
- At 19 percent, the statewide share of short sales also was unchanged in May, but down from 20 percent in May 2010.
Renew your lease – rents could rise 10%
Already, rental vacancy rates have dipped below the 10% mark, where they had been lodged for most of the past three years.
“The demand for rental housing has already started to increase,” said Peggy Alford, president of Rent.com. “Young people are starting to get rid of their roommates and move out of their parent’s basements.”
By 2012, she predicts the vacancy rate will hover at a mere 5%. And with fewer units on the market, prices will explode.
Rent hikes have averaged less than 1% a year over the past decade, according to Commerce Department statistics, adjusted for inflation. Now, Alford expects rents to spike 7% or so in each of the next two years — to a national average that will top $800 per month.
In the hottest rental markets, the increases will likely top the 10% mark annually for the next couple of years, according to Lesley Deutch of John Burns Real Estate Consulting. In San Diego, she anticipates rents will rise more than 31% by 2015. In Seattle rents will climb 29% over that period; and in Boston, they may jump between 25% and 30%. This is a sharp change from the recession, when many Americans couldn’t afford to live on their own. More than 1.2 million young adults moved back in with their parents from 2005 to 2010, said Deutch. Many others doubled up together.
As a result, landlords had to reduce prices and offer big incentives to snag renters.
Now that the recession is easing, many of these young people are ready to find new digs, mostly as renters, not owners. Plus, the foreclosure crisis continues unabated, and the millions losing their homes are looking for new places to live.
Apartment developers many not be able to keep up with this heightened demand, which will force prices upwards, according to Chris Macke, a real estate analyst with CoStar, which tracks multi-family housing trends.
“There will be an envelope of two or three years,” said Macke, “when the rise in demand for rentals will exceed the industry’s ability to meet it.”
Plus, Alford added, “there’s been a shift in the American Dream. We’re learning from our surveys that a huge proportion of people are choosing to rent.”
They’ve experienced the downsides of homeownership — or seen friends and family suffer — and don’t want to take the risks or pay the higher costs of homeownership.
Where homeownership costs are particularly high, there are many more renters than owners. In Manhattan, for example, only about 20% own their homes; in San Francisco, about of third of the population does; in Los Angeles, less than 40%; and in Chicago, about 44%.
There’s one factor that could rein in rent increases: the huge number of foreclosed homes that could hit the market over the next few years. In many markets, like Phoenix and Las Vegas, there are neighborhoods filled with recently built, single-family homes going for fire-sale prices. When the cost of owning homes falls well below the costs of renting them, more people will buy.