Since the housing market first started to suffer, it’s been the metro areas that have been hit the hardest, but good news might be on the way. According to to a recent article by Bill Briggs on NBC’s Economy Watch blog, a report by Trulia has designed nearly 30 cities “in the clear” of the housing crisis.
Taking up the top six slots on the list were the cities of Denver, San Jose, Pittsburgh, Little Rock, Austin and Colorado Springs, owing to low foreclosure rates and asking price gains in excess of 4 percent. However, Trulia chief economist Jed Kolko explains that there are some technicalities to consider when reviewing the numbers. “We defined (‘in the clear’) as metros with positive year-on-year asking-price growth and a low or moderate share of homes in foreclosure. In all, that includes 29 metros.” However, “…we didn’t list them all out because some have only very slightly price growth. Best to focus on those six.”
Denver, the best performing metro, enjoyed a year-over-year asking price increase of 7.2 percent in June. Meanwhile, although cities like Phoenix, Miami, and Detroit got back on their feet in terms of pricing, those metros are still considered at-risk because of high foreclosure rates. They may be enjoying pricing increases for now, but Kolko predicts that as foreclosed homes come onto the market, the gains will begin to shrink and possibly even reverse.
But there’s still plenty of good news to go around. For example, the Trulia report has designated San Jose and Pittsburgh in the clear, owing to significant price gains and improved foreclosure rates, and like top contender Denver, low unemployment rates have been essential to their comebacks.
Despite all the positive signs, though, many brokers take the news with a grain of salt, and their outlooks on the long-term future metro areas tend to be a little more conservative. Speaking about San Jose’s supposed in the clear status, Coldwell Banker broker Bob Stewart illustrates the problem rather bluntly, ““We would be in the clear if the government got the heck out of the (real estate) business.”
What Stewart means is that, under federal Initiatives such as HUD’s Neighborhood Stabilization Program, investors and realtors have been strong-armed out of the way by speculators, who have bought up properties and resold them for cheap.
“Speculators went out and got their (real estate) licenses and are targeting underwater properties, getting them listed at a very low price and submitting an offer immediately to the lender. If the lender accepts it, they’ve made $300,000 to $400,000 (per house),” explains Stewart. “A lot are getting accepted, and it’s keeping our prices lower than they should be in San Jose.” Stewart concludes, “The powers that be in the government really don’t understand the difference between investors and speculators,”
All in all, despite the good news, investors should be wary of over-optimistic forecasts. Despite price gains and new construction, the road ahead is long, and growth in the next three years is likely to be slow and steady.