How Risky Is Your Local Real Estate Market?
These days as I am tossing around the options of selling vs renting out (part 1 & part 2), I pay special attention to any news about the general health of the housing market. Particularly, I want to know the prospect of further house price appreciation in the Seattle local area.
The August issue of Kiplinger's Personal Finance has a featured story The 13 Riskiest Housing Markets that is well on point. The article, citing a research done by PMI Group, discussed thirteen markets that have a high probability of wide house price decline over the next two years.
A quick search brought me to the source at PMI Group. The cited report is actually the Spring 2005 Edition of Economic and Real Estate Trends, a quarterly publication. In that report, PMI mentioned the following 15 markets that bear a high (>30%) probability of sharp price decline in the near future:
Boston-Quincy, MA (53%)
Nassau-Suffolk, NY (51%)
Oakland-Fremont-Hayward, CA (49%)
San Jose-Sunnyvale-Santa Clara, CA (48%)
San Diego-Carlsbad-San Marcos, CA (47%)
Cambridge-Newton-Framingham, MA (45%)
Santa Ana-Anaheim-Irvine, CA (43%)
Los Angeles-Long Beach-Glendale, CA (41%)
Sacramento-Arden-Arcade-Roseville, CA (40%)
San Francisco-San Mateo-Redwood City, CA (40%)
Providence-New Bedford-Fall River, RI-MA (39%)
Detroit-Livonia-Dearborn, MI (38%)
Riverside-San Bernardino-Ontario, CA (34%)
New York-Wayne-White Plains, NY-NJ (33%)
Edison, NJ (31%)
I'm glad Seattle area is not at the top of the list. As a matter of fact, Seattle was rated with only 8.4% probability of price correction. The house price is also considered as affordable.
Of course, no one has the perfect crystal ball in predicting the future, but as one of the largest private mortgage isurers in the States, PMI certainly has a huge stake in this game. Can I say it has a better crystal ball than most of us?
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I'm also glad to see that Seattle isn't one of the hottest markets, but it's hard to believe. The top 15 markets must be completely unaffordable.....
Seattle is bad enough, although as a homeowner, I'm okay with it going up further....
Hazzard
http://elym.blogspot.com
The Kiplinger's article is interesting when compared to a recent article in Forbes listing Seattle as the most overpriced city.
http://news.yahoo.com/s/nm/20050715/us_nm/life_seattle_dc
OL, it sounds like Forbes' list is different from PMI's list. Forbes' list is based on the gap between income and living cost whereas PMI's list is based on the likelihood of price decrease due to slower demand attributed to affordability. Here in Vegas houses are, I believe, overpriced and according to the Kiplinger article, 44% are investment properties. My hope is the prices here fall like crazy, but then it could be just wishful thinking considering Vegas is the fastest growing city in US and there will always be demand.
Interesting article. I recently began looking into selling my condo and renting for a year. I truly believe that most markets are overheated (including CT). When the average person thinks that real estate will continue to increase at 20%+ per year it's probably the 'top'. Sounds a lot like 1999...
I would wait for a correction in the price of homes in the short term. Better deals are around the corner. Remember that unlike a stock which someone can liquidate fast and easy, with a home you have to find a buyer. All these people sitting on houses with intrest only loans will be feeling some massive pressure if home prices begin to decline. One more point, Mr. Greenspan said there is no housing bubble. Well that is the conformation in my opinion that we are in one.
I bought my home here in Huntington Beach, CA in 1998. Currently its value has gone up considerably. What's surprising, property continues to increase but I can't believe this can continue. As a townhouse, I'm afraid if the value begins to depress where owners can't get what they paid for the home, we could see bankruptsies in our neighborhood. For me, I don't want to go anywhere living 2 mi. from the beach with what I consider a perfect climate. We saw this in the 80's and it could happen again.
Seattle and particularly the east side is deflating. I purchased a house in Redmond at Woodbridge 7 months ago and have been finding that current residents are selling houses for less than the price they paid a year ago. Same story at Redmond Ridge, Trilogy and other newer communities on the eastside.
2004 November price = $410k
2005 June price = $398k
