Posted on Thursday, January 27, 2011
A second wave of falling home prices is battering some cities that had escaped the worst of the housing market bust.
Prices in Seattle, Charlotte, N.C., and Portland, Ore., have hit their lowest points since peaking in 2006 and 2007. Denver and Minneapolis are nearing new lows. High unemployment and rising foreclosures are taking a toll even on markets that never overheated during the boom years.
Home values are dwindling in nearly every American market. Prices fell in November in all but one of the 20 cities in the Standard & Poor's/Case-Shiller index released Tuesday. Eight of those markets hit their lowest point since the housing bubble burst.
The damage from the real estate bubble has spread well beyond Las Vegas, Phoenix and Miami, which built frantically during the mid-2000s, and is sapping prices from coast to coast. In many places, prices are expected to keep falling for at least the next six months.
In Charlotte, homes are going for 2004 prices. Last year, more than half of the homes sold in surrounding Mecklenberg County were foreclosures, says Mark Vitner, a senior economist with Wells Fargo.
"There's a huge oversupply, and a lot of people are struggling," says Vitner, who works in Charlotte. "We're expecting it to fall even further in 2011."
The banking industry, which helped Charlotte boom over the past two decades and accounts for roughly one in every 11 jobs there, was hit hard during the recession. The city lost 12 percent of its financial jobs in 2008 and 2009, according to the Labor Department.
Adding to the region's economic woes, about a third of jobs tied to the auto industry also vanished in the downturn, said Michael Walden, an economist at North Carolina State University in Raleigh. Charlotte's unemployment rate was 12.8 percent a year ago, well above the national rate. It has fallen to 10.8 percent, still more than twice what it was when the recession started.
"We're feeling it, there's no doubt about that," says Mike Shaffer, owner of Century 21 Southern Comfort Realty.
Of course, while foreclosures weaken resale values, they're great for renters who want to own a home. Robert Hubbard closed on Monday on a three-bedroom, two-bath house in Charlotte that he bought for about $79,000. While it takes some looking to find the right place, the market is "saturated" with foreclosures, he says.
In Seattle and Portland, the two largest cities in the Pacific Northwest, prices peaked in the summer of 2007 and have fallen back to 2005 levels.
Foreclosures were uncommon in Seattle until about a year ago. Now they're dragging prices down, says Jim Conlan, branch manager for Century 21 North Homes Realty Inc. Home prices in Seattle were down nearly 5 percent in November from a year earlier.
"They're the anchor on the market here that's keeping it from starting to appreciate," Conlan said.
As usual after the holidays, customer traffic at open houses is picking up, he says.
The region's economy grew rapidly from 2002 to 2007 as Boeing rebounded from the post-9/11 drop in aircraft production and tech companies recovered from the dot-com bust. The region expanded at a faster clip than the rest of the country, attracting more people and lifting home prices.
"We had a bubble thing going on like everyone else," says Dick Conway, an economic consultant based in the city.
The region was damaged by the recession. One in every three construction jobs vanishes. Washington Mutual, the nation's largest thrift, collapsed and took 3,500 jobs with it. Seattle unemployment jumped from 4.1 percent in December 2007, when the recession began, to 9.1 percent in November 2010.
Portland home prices have suffered from historically low timber yields and deep cuts within so-called Silicon Forest high-tech companies.
And while Seattle's two biggest employers, Boeing and Microsoft, haven't laid off many workers, they won't need as many new people as the economy improves, Conway says. During the recovery after the 2001 recession, Boeing was a major job generator, directly or indirectly creating 65,000 jobs.
But in this recovery, "it's going to be closer to zero," Conway said.
By ALEX VEIGA and CHRISTOPHER S. RUGABER, THE HUFFINGTON POST