The housing sector has exhibited encouraging signs of recovery over the first half of 2013. Improved market conditions, in association with a distinct lack of inventory, served to facilitate national price increases. The rate in which homes are appreciating is extremely conducive for healthy market conditions. Recently established equity has helped many homeowners sell their property, an option that has not been available for quite some time. However, there are still cities on the verge of recovery.
Of particular concern, are several large metropolitan areas that have yet to participate in the housing rebound. Twelve cities experienced drops in home prices for the year ending on March 31. For comparison, each city consists of more than 250,000 people and has experienced high unemployment rates. Similarly, the majority of these 12 cities have an oversupply of homes on the market.
According to statistics provided by CoreLogic, more than half of the distressed sales (foreclosures and short sales) in the respective cities are bank-owned. Those properties owned by the bank are therefore sold at a drastically reduced rate, further facilitating the downward spiral of home depreciation.
The following metropolitan areas make up the top 5 cities on the verge of recovery:
1.) Montgomery, Alabama
Several indicators, one of which is a housing inventory supply, exemplify a healthy market. A balanced market is directly correlated to a supply of houses that can last approximately four to six months. However, Montgomery’s current supply is projected as far out as 8.9 months. The capital of Alabama simply has too many homes sitting on the market. While the previous year witnessed home sales increase by 22.3 percent, the average property was subjected to an average of 115 days on the market.
- Change in home prices over the last year (-14.5%)
- Average home price ($86,000)
- Change in price since 2006 (-45.8%)
- Unemployment rate (7.9%)
- Foreclosure rate (1 out of 517)
2.) South Bend, Indiana
Despite experiencing a steady decline in prices over the past year, in association with a high unemployment rate, South Bend has turned the corner. In what was looking like a desperate scenario, South Bend has taken the necessary steps towards recovery. The city’s housing supply has dropped from 8.9 months to 7.3, suggesting a return to normal market conditions. The reduced housing inventory may be attributed to a six percent increase in sales over the last year.
Sellers received just 86% of their list price in the past year. That suggests that they continue to price their homes too high for the market; 95% or higher means list prices are on target.
- Change in home prices over the last year (-11.7%)
- Average home price ($62,000)
- Change in price since 2006 (-43.3%)
- Unemployment rate (10.2%)
- Foreclosure rate (1 out of 478)
- Distressed sales (25.5%)
3.) Winston-Salem, North Carolina
Winston-Salem is currently sitting on top of 11.3 months of shadow inventory, suggesting that they have approximately twice as many houses on the market than a health economy should have. However, the number of homes sold increased by more than one-third compared to this time last year. Even more encouraging, more than half of the listings sold within 90 days.
- Change in home prices over the last year (-10.9%)
- Average home price ($95,050)
- Change in price since 2006 (-26%)
- Unemployment rate (8.8%)
- Foreclosure rate (1 out of 241)
4.) Trenton-Ewing, New Jersey
Despite a relatively large decline in shadow inventory (25%), Trenton housing supplies are still well above normal market standards. The 9.5-month supply they currently have significantly favors buyers over sellers, causing an unbalance. Of particular concern, however, are numbers that suggest buyers are not taking advantage of the low prices. The number of homes sold in the previous year fell seven percent. Homes took an average of 109 days to sell, but at least sellers received an average of 96% of their original list price.
- Change in home prices over the last year (-8.1%)
- Average home price ($129,500)
- Change in price since 2006 (-43.2%)
- Unemployment rate (7.6%)
- Foreclosure rate (1 out of 385)
- Distressed sales (14.4%)
5.) Manchester, New Hampshire
While Manchester has yet to participate in the housing sector rebound, encouraging signs suggest the city is not far off. As of March, total home sales increased by 9.6 percent from the same time last year. Perhaps even more significantly, however, is that those homes were on the market for an average of 94 days. Unlike the other cities on this list, inventory levels in Manchester are constricted. The number of listings coming to the market fell by 4.5 percent when compared to last year.
“Things are improving, but let’s not break out the punch bowls yet,” says Bill Weidacher, president of the New Hampshire Association of Realtors.
- Change in home prices over the last year (-8%)
- Average home price ($200,000)
- Change in price since 2006 (-40.6%)
- Unemployment rate (6%)
- Foreclosure rate (1 out of 351)
- Distressed sales (35.9%)