Will the Strong Survive the Slump?
- May 08, 2008
During the housing decline, some markets seemed to be holding steady–avoiding large drops in home value and residential building.
But now, according to some sources, even those resilient markets are feeling the housing slump’s effect.
Seattle, Portland, Ore., Charlotte, N.C. and Salt Lake City all had home price increases last year–while more than half of the 150 markets the National Association of Realtors tracks posted declines, CNNMoney.com said.
But those housing markets aren’t looking as strong these days.
- Prices in Charlotte declined about 3.4 percent from August 2007 to February, according to the S&P Case/Shiller Home Price Index. And the area’s future didn’t look too promising: Builders began work on 48 percent fewer new homes in the first quarter of the year, and building permits dropped 45 percent, the Charlotte Observer said.
- Seattle saw a 6.5 percent loss compared to its July high point. In April, the median house price was $440,000, a 2.4 percent drop
from March and an 8.3 percent decline from April 2007, according to the Seattle Post-Intelligencer. Condos were especially hard hit: They comprised a smaller percentage of total sales in April.
- Portland prices fell
about 5 percent during the same period.
- Although Forbes recently called Salt Lake City one of the most recession-proof cities in America, its local home prices dropped about
7 percent in the fourth quarter of 2007.
The housing market in areas like Miami had gotten so pricey during the boom that a large drop was almost inevitable.
But in areas like Seattle–where homes remained relatively affordable before and during the slump–it seemed like the national housing decline would have an only minor effect.
For one, the cities are highly desirable to live in. Home to several large companies (Bank of America in Charlotte; Microsoft in Seattle, etc.), the areas offer a strong job market, which encourages new residents to move in.
Most of the cities also offer a positive living experience for the non working, CNN.com says. They’re similar to other retirement hotspots like Florida, but lack the higher taxes and insurance costs related to the several hurricanes that passed through Florida in recent years.
So many retirees have flooded areas like Charlotte that there’s even a term for it–the halfback phenomenon, which refers to the fact retirees are moving partway back to their original home.
Then why are prices falling?
Well, credit it tough to get, no matter where you live. And it’s getting harder to obtain–according to the Federal Reserve’s recent bank survey, residential mortgages became more difficult to get in the past three
months than at any time in the survey’s 17-year history.
And–even if your market is doing OK–there is no way to avoid the widespread bad press about the housing market, which is likely inciting fear across the country. People are afraid to buy; they’re even more hesitant to sell–all of which can slow down a housing market.
The fact that some previously solid housing markets are hitting hard times is sad news–but chances are, if those markets stayed strong this long, they’ll bounce back early on in the recovery period.
But when that will be … is anybody’s guess.