by Francesca Levy
Friday, September 18, 2009
provided by www.forbes.com
*(STORY CONTINUED BELOW)
Where Home Prices Are Likely to Rise:
Charlotte, N.C.
Percentage Change:
1 Year, 2009: -8.15%
3 Year, 2009-2012: 3.54%
5 Year, 2009-2014: 12.20%
Boston, Ma.
Percentage Change:
1 Year, 2009: -9.75%
3 Year, 2009-2012: 4.48%
5 Year, 2009-2014: 20.44%
Baltimore, Md.
Percentage Change:
1 Year, 2009: -13.32%
3 Year, 2009-2012: -3.33%
5 Year, 2009-2014: 9.22%
Atlanta, Ga.
Percentage Change:
1 Year, 2009: -14.91%
3 Year, 2009-2012: 0.98%
5 Year, 2009-2014: 11.35%
Austin, Texas
Percentage Change:
1 Year, 2009: 0.29%
3 Year, 2009-2012: -1.54%
5 Year, 2009-2014: -1.01%
Though home prices in many areas still have room to drop, economists say some of the country’s real estate markets are showing early signs of repair. A two-year slide in values has eased its stomach-turning pace, and some analysts expect the national market to bottom out by mid 2010.
That’s the good news.
But just as subprime lending, the housing bubble and the country’s subsequent wave of foreclosures had distinct consequences in separate areas of the country, the recovery will also look dramatically different by region.
When prices do rise, they’ll inch, rather than soar, and some areas won’t match their pre-bubble prices for a decade, according to home price forecasts by Moody’s Economy.com.
In cities in Florida, such as Miami and Orlando, housing prices peaked late, leaving ample time for developers to go on a building bender. This has resulted in a bloated inventory. As a result, these areas may have a long wait before real estate costs level out. In Texas metros like Houston and Dallas, sustained economic health and less exposure to the 2004-2006 run-up in prices are expected to help homeowners there weather the bust better than most.
BEHIND THE NUMBERS:
Moody’s Economy.com provided Forbes with a housing price forecast for the country’s 40 largest metropolitan statistical areas (or metros)–geographic entities defined by the U.S. Office of Management and Budget for use in collecting statistics. The forecast predicts the percent change in home prices over one year, three years and five years, using data from the S&P/Case-Shiller Home Price Index. In the MSAs for which Case Schiller does not publish numbers, Moody’s used a weighted average of metropolitan divisions within those areas.
Moody’s calculates future changes in home price by measuring both long-term demographic and economic fundamentals, like income and population changes; and changes caused by short-term supply and demand shifts.
HOUSING SWINGS:
The data provider’s forecasters evaluated not only the relationship between such drivers in each metro, but the effect of overlying economic principles. Typically, prices will continue on the trajectory they are on, a trend that economists call persistence.
“When people see prices rising, they think housing is a good investment,” says Celia Chen, Moody’s Economy.com research staff senior director, specializing in housing economics. For some time afterward, these buyers will bite, helping to push prices even higher.
But, “sentiment can turn when prices are proceeding very quickly,” says Chen, referring to post-bust buyer reaction. “At some point people can think, ‘it’s not realistic, nothing is supporting this increase,’ and there’s a drop in demand for housing.”
Moody’s predicts a 16.08% decrease in prices nationwide by the end of the year. By 2012, however, prices will be 3.7% above 2009 levels, and by 2014 they will have nearly reverted to their pre-2009 state.
THE CRISIS IN THE COUNTRY’S METROS:
But nationwide data doesn’t tell the whole story. To understand the effects of the crisis one must examine thousands of micro-economies.
“This whole cycle didn’t play itself out uniformly across the country in magnitude or timing,” says Sean Snaith, director of the Institute for Economic Competitiveness at the University of Central Florida. “All housing markets are truly local. They’re a function of the structure of the local economy.”
Moody’s data show how prices will move relative to where they are now. Thus the depths to which prices have fallen in many metros means that what looks like a dramatic recovery may only reflect a prior correction that was just as severe.
In San Jose, for example, the five-year forecast calls for a 23.04% jump in prices. That sounds impressive until you note that at the one-year mark, prices will have fallen by more than that–25.14%.
But the numbers are useful for sketching out the potential shape of a recovery, and many experts agree with Moody’s outlook.
“Recent trends show a slowing of declining prices and the formation of a bottom,” says Susan Wachter, a professor of real estate at the University of Pennsylvania’s Wharton School. But she stops short of heralding a new real estate boom. “The big picture here is that there’s no rebound. I think it is in fact far more likely that we will see an L-shaped outcome.”
COMPLETE STORY CAN BE READ AT:
http://finance.yahoo.com/real-estate/article/107740/where-home-prices-are-likely-to-rise.html?mod=realestate-buy#top30
