So much for a housing recovery: Home prices continue to drop in most major metro areas, according to data released on Tuesday. But some markets are suffering far less than others.
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According to the new figures, from the S&P/Case-Shiller Home Price Indices, prices fell for the third straight month in November. Of the 20 metropolitan areas tracked, home prices fell over the past year in all but two -- Washington, D.C., and Detroit. But the range of those decreases varied widely. Denver, for instance, fell just 0.2%, while Atlanta home prices plunged nearly 12%. And housing experts say it could be more than a year before many homeowners see home values rise. "We're not going to see any stabilization in the housing markets this year," says Jack McCabe, an independent housing analyst in Deerfield Beach, Fla.
Experts say many factors are contributing to new declines in home prices. Though there's been some improvement in unemployment, it remains stubbornly high. And some say home prices could fall even more this year as foreclosures spread. In 2011, 1.9 million homeowners received foreclosures notices, down from 2.9 million the year prior, but that decline was largely due to the robosigning scandal that slowed down the pace at which banks were taking back homes, says Daren Blomquist, vice president at RealtyTrac.com. He says he expects foreclosures will rise again this year. If that occurs, distressed homes that end up selling could lower the price regular homes sell for, says McCabe.
For most homeowners -- especially those hoping to sell soon -- the news is bleak. Even among the cities that gained a bit or lost the least between November 2010 and November 2011, few are actually healthy markets, experts say. If anything, cities like Detroit and Cleveland, are showing some strength because they're coming off of big recessions and housing price drops.
Here are the five metro areas performing the best, according to the S&P/Case-Shiller.
DetroitNovember 2011 compared to a year prior: up 3.8%
Foreclosures and joblessness have plagued Detroit for years, but analysts say the worst could actually be over for the troubled city. The unemployment rate is falling: it stood at 9.5% in November, above the national average, but below 11.6% where it was a year prior, according to the Bureau of Labor Statistics. Recent sales growth of American cars is starting to result in new job hires, says Brad Hunter, chief economist at Metrostudy, a housing market research and consulting firm. From October to November 2011, the city's unemployment rate fell 1.3 percentage points. More job growth could occur once more consumers feel confident to buy new cars, he says, and American car manufacturers ramp up production.
The impact on housing has been twofold. As jobs increase, Detroit residents who get hired could feel more confident to buy a home and some of those who left during the height of the recession are starting to come back, says Maureen Maitland, vice president of the S&P Indices. Sensing new opportunities, investors are entering this market to buy homes on the cheap, fix them up and rent them, says Hunter.
But for all the positive signs, Detroit still has a long way to go, experts say. Overall home prices are 30% below their 2000 level and effectively back to where they were in the mid 1990s, says Maitland.
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Washington, D.C.November 2011 compared to a year prior: up 0.5%
Whether they like it or not, D.C. residents can thank government jobs for helping to keep home prices in the green. The unemployment rate in the nation's capital was 5.4% in November, compared to 5.7% a month prior and 6% in November 2010, according to the BLS. Widespread government layoffs haven't occurred though federal job cuts remain a big wildcard and could kick in next year, says Hunter.
But for now, jobs are helping to keeping down foreclosures. Less than 1% of homes in the D.C. metro area received foreclosure filings in 2011, according to RealtyTrac.com. Also helping home prices is that D.C. didn't experience a building boom and a subsequent oversupply of new homes, says Maitland. That's led to fewer homes on the market, that in turn helps keep prices afloat.
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DenverNovember 2011 compared to a year prior: down 0.2%
Unlike many SunBelt cities, home prices in Denver didn't experience massive spikes and subsequent busts, and that has helped keep the Denver housing market on relatively healthy footing. Separately, unlike cities in California and Arizona where properties were often bought as vacation homes, the homes bought in Denver have mostly been primary residences, says Maitland. When tough times hit, cash-strapped homeowners are more likely to let a secondary residence go first than the home they live in, experts say.
Like the other cities on this list, jobs have helped the Denver housing market. The unemployment rate isn't as high as the national level, at 7.9% in November 2011 compared to 9% a year prior, according to the BLS. Foreclosures as a percent of the number of homes in the city are higher than the national average though: About 2% of homes received foreclosure filings in 2011, compared to the 1.45% average for the U.S.
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DallasNovember 2011 compared to a year prior: down 0.8%
Like many Texas cities, Dallas home prices are boosted by a relatively strong economy led in part by the energy sector that has kept people employed. The unemployment rate in the metro area was 7.4% in November compared to 8% the month prior and 8.2% in November 2010, according to the BLS. Foreclosure filings are also fairly low, occurring on about 1.3% of homes in 2011, below the national average.
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ClevelandNovember 2011 compared to a year prior: down 1.1%
It's a sign of the times that a city ranks in the top five on a housing market list when its home prices fall 1% over 12 months. And to be sure, experts say Cleveland homes still have a way to go: Home prices are below their 2000 levels, says Maitland. But, she says, it appears that Cleveland might be coming out of a recession.
Housing remains mixed, but in the outer suburban rings of Cleveland, for instance, the rate of home value depreciation has been slowing, says William Mahnic, associate professor in the banking and finance department at Case Western Reserve University in Cleveland. That's in part because people are taking advantage of low mortgage rates to buy a home, he says -- assuming they can qualify for a mortgage.
The jobs picture could also be getting better. Unemployment was 6.9% in November, compared to 7.1% the month prior and 8.6% in November 2010, according to the BLS. And there are signs that the economy is diversifying and could be creating more jobs beyond manufacturing, says Hunter. He points to an expansion of legal and accounting sectors in the city as well as warehousing and shipping.
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