Richard Florida
by Richard Florida
Thu Jul 23rd 2009 at 10:00am UTC

Housing and the Crisis, Part II

Yesterday, I compared 2009 housing prices to their 2006 baseline. Today, I turn to the change in housing prices. The graph below plots the percentage units change in housing prices between 2006 and 2009 against the 2006 baseline price.

There is a significant relationship between the two. The slope is steep, with a correlation of  -0.42 and the R2 of 0.19. Metros above the line have seen drops which are less than would be expected based on national trends, while those below the line have seen drops in excess of the national trend. The numbers in parentheses are the percentage difference between the actual and predicted values.

Under-performers: These are regions where the decline in housing prices has been greater than predicted based on the national trend. The biggest losers are metros in the Sunbelt and Rustbelt. In Cape Coral-Fort Myers, FL, for example, housing prices have declined 47.3 percent more than expected based on the national trend. For Akron, OH, the figure is 44.9 percent; Lansing, MI (-39.6 percent); Cleveland, OH (-35.4 percent); Grand Rapids, MI (-33.9 percent); Phoenix, AZ (-31.7 percent); Sarasota, FL (-29.7 percent); Riverside, CA (-29.3 percent); Toledo, OH (-29.3 percent); Palm Bay-Melbourne, FL (-29.1 percent); Sacramento, CA (-28.8 percent); Canton, OH (-28.3 percent); and Las Vegas, NV (-28.2 percent). Miami (-18.56 percent), Atlanta (-18.05 percent), Chicago (-11.72 percent), Los Angeles (-10.07 percent), and Washington, D.C. also performed worse than expected.

Over-performers: There were again a series of regions that performed better than the national trend. These are places where housing prices have held up better than expected based on the national pattern. In Honolulu, HI, for example, housing prices remain 31.1 percent above what could be expected based on the national pattern. Cumberland, MD, a suburb of Washington, D.C., has held up 30.4 percent better than expected. In Salt Lake City, UT, the figure is 29.8 percent; Bismarck, ND (26.2 percent); Beaumont-Port Arthur, TX (25.9percent); Farmington, NM (25.7 percent); Binghamton, NY (24.2 percent); Columbia, MO (22.4 percent); Raleigh, NC (21.3 percent); and Austin, TX (19.7 percent). New York (11.3 percent), Philadelphia (7.4 percent), Houston (6.37 percent), and Dallas (+4.2 percent) also performed better than expected.

5 Responses to “Housing and the Crisis, Part II”

  1. MPS Says:

    Cumberland is nowhere near a suburb of Washington. It’s over 2 hours away and just as close to Pittsburgh as DC. It’s housing resilience is probably a function of being a small, stable Appalachian city similar to Charleston or Morgantown, West Virginia. Hagerstown, MD, about an hour east of Cumberland, is probably a more plausible “exurb” of DC/Baltimore.

  2. James Russell Says:

    The data seem to underline the key meltdown causes. In Calif., Fla., Ariz., and Nev., there was enormous speculative activity, some of it fraudulent, lots of it just get-rich-quick dips__ts. Fla. and Ariz. are serial offenders, flim-flammer paradise. Details will probably show in the underperforming rust-belt cities a combo of industrial decline and aggressive predatory subprime lending.

    Isn’t it nice my home city of NYC has declined less than others? No, it makes us even less competitive than ever. Same for Seattle and a few others. Our prices will A) continue to drift downward, or B) take a hit after the recovery, when people give up and move someplace they can get a good job and afford.

  3. Michael Wells Says:

    You get a different picture if you push the baseline back a little to 2001. The numbers below are all estimated from Zillow graphs.

    In hard hit places you get a hill-shaped curve. The average house price in Modesto in 2001 was $150,000, in 2006 it was $350,000, and today it’s $150,000 again. Rapid climb and even more abrupt dropoff, and with foreclosures and forced sales, this may not be the bottom.

    In Portland during the same time, the average went from $150,000 to $300,000 to around $200,000. The USA as a whole went from $120,000 to $200,000 to $180,000. So while the ride was scary, especially if you bought in the middle, there was actually a reasonable increase over 8 years. Of course, things could still fall further.

  4. RS Says:

    I was just taking a second look at the housing series figures and it occurred to me that a finding that the initial 2006 housing values are negatively related with the change from 2006 – 2009 suggest that housing values are converging over time.

    Those places with high initial housing values had, on average, negative growth whereas those places with low initial levels had, again on average, positive growth (or rather less negative growth). This is an indication of covergence.

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