The Crashing US Housing Metro Areas

drhousingbubble's picture

The Crashing US Housing Metro Areas – Atlanta home values crash by 17 percent in last year and Las Vegas continues to move lower

US home prices have once again made a post-bubble low in spite of all the artificial intervention and massive bailouts to financial institutions.  The bottom line unfortunately is that US household incomes have been strained for well over a decade.  You can slice it up by nominal or inflation adjusted data but household incomes have been moving in a negative direction during the 00s and continuing into this decade.  Keep in mind there is a massive pipeline of problems still in the housing market with over 5.5 million mortgage holders in some stage of foreclosure or simply not paying on their mortgage.  This is more than a housing crisis but a crisis of quality job growth.  At the core, that is truly the problem.  There are markets in the US that are still correcting severely even after record breaking declines from their peaks reached in 2006 or 2007.  Some of these markets are approaching two lost decades which seems stunning but again, this reflects weaker household balance sheets.


Correction still hitting major metro areas

While the US housing market overall did make post-bubble lows, there does appear to be some bottoming out in certain areas.  For example, Detroit saw year-over-year prices move up by 1.5 percent.  Then again, the median home price in Detroit is in the $60,000 range.  But overall the correction seems to be continuing as the large shadow inventory works its way through the market.

When looking at the hardest hit areas, it is interesting to see a mix of low price metros and two very expensive metros taking the biggest annual declines:

case shiller 2012 one year change metro areas

Atlanta was absolutely slammed in the last year.  Home prices have fallen by 17 percent only in the last year driving home values back to 1997 levels!  This is for a very large metro area plagued with massive numbers of foreclosures.  Atlanta was the only large Case-Shiller tracked metro area to have a double-digit annual decline.  The second biggest hit came to Las Vegas.  I’ve talked about this market in the past and cautioned people from diving in before doing careful due diligence.  The market has fallen another 8.5 percent in the last year bringing the total decline from the peak to a whopping 61 percent without even adjusting for inflation.

You also see a handful of large mid-tier markets with Chicago, Los Angeles (including Orange County), and San Francisco falling yet again in the last year.  For real estate in California, the economy continues to be weak and mid-tier home values are still inflated relative to local area incomes.  The mid-tier markets are taking the biggest hits.  For example with L.A. the mid-tier is down over 5 percent for the year but interestingly enough, the high tier has made a new post-bubble low.

The weakness is being driven by the large number of distressed properties being sold.  Even though foreclosure sales are trending lower, this is being over shadowed by a larger number of short sales being ushered through by lenders.  In other words, properties are exiting quicker from the system but they are still distressed.  Lenders have a front row seat to what is going on and essentially what they are saying with a swarm of short sales is they believe home prices in the intern will be going down.  Why else would you want to exit at this moment if you believed home prices would be soaring shortly?  Bank balance sheets are still inflated with poor performing properties and what the Case-Shiller report shows is there is likely to be little support for higher prices anytime soon.

Take a look at the nationwide data here:

case shiller annual change

Source:  Zero Hedge

If you look at a chart like the above, what is the major impetus to rush out and buy in 2012?  The trend to the contrary is showing weaker prices and lenders are openly discussing that more shadow inventory will be leaked into the market.  Certainly short sales are not going to prop prices up.  Here in Southern California, the number of MLS short sales is growing and this has been a big story for 2012.  I also realize that some folks think they are going to get a Beverly Hills property for $200,000.  That is not going to happen.  The biggest long-term driver for housing sustainability is going to be local area incomes and prices in places like Corona Del Mar for example will remain high for the average person because people do have high solid incomes in these markets.  A $4 million home going to $2 million is not exactly going to open the floodgates.  Those that pretended and over extended will be washed out of the market in the next few years but make no mistake, there are pockets of high priced housing that justify a high price simply because local incomes are able to support prices.  The mid-tier markets are the areas that are subject to the biggest shocks in the next year or so.  The issue is that many in mid-tier markets somehow believe they are in some of these tiny luxury markets (they are not).

Not sure if it got missed in all the news coverage but the California unemployment rate is back up to 11 percent meaning the underemployment rate is above 21 percent:

california unemployment

If you want to see leading indicators for solid potential growth look at unemployment but also the quality of jobs being added.  No use in having everyone working at K-Mart and trying to buy a $500,000 home.  The crashing markets of Atlanta and Las Vegas simply show that economic growth is not able to support current home prices even in cheap metros.  The lower prices in Chicago, Los Angeles, and San Francisco reflect the correction in the mid-tier markets.  What impact will 5.5 million distressed and foreclosed properties have on the market going forward?  So far, it has been to push prices lower which isn’t a surprise.

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Escapeclaws's picture

How about living in a trailer? Has anyone tried that? I would think that would be much more economical than buying a crappy house. Anybody thinking of living in a trailer for retirement?

Bansters-in-my- feces's picture

Truely at the core of the problem is the FED...

Not Federal and aint got NO reserves.

q99x2's picture

Pittsburgh is interesting. Seems like it never experienced a housing bubble. Prices went up and hardly came down at all. Must be a lot of old money still there. Night of the Living Dead was filmed about 6 miles from where I grew up in Pittsburgh. Very morbid place to live.

Bansters-in-my- feces's picture

Pittsburgh,I hear yous have penguins there.

BernankeHasHemorrhoids's picture

Good to see that California is fucked. Only idiots live there. And if you're one of them? FUCK YOU!

disabledvet's picture

don't know why you got a down arrow for that. i found that quite funny actually...

dolph9's picture

Alot of these homes are cheaply built McMansions in far flung exurbs or areas prone to disasters of all types.  And inhabited by people who don't have any income whatsoever other than government transfer payments.

Believe me, they are not going to be maintained.

If you buy a home, make sure it's solid, in a decent neighborhood above water and far from hurricanes, twisters, and earthquakes.  Oh and put alot of money down, or buy it outright.

It doesn't matter if mortgage debt is forgiven.  These squatters still won't win, they'll be trapped in deteriorating ghettos.

Buck Johnson's picture

You're spot on, spot on.  They essentially built these houses to make money and be damned who bought them.  And many of these McMansions are falling apart along with housing divisions.  I've always believed that we haven't seen the bottom yet for housing.  Also remember many of the baby boomers used the equity in their house and/or refinanced in order to maintain their lifestyle, to live and also to help an adult child via school and life.  Many of these baby boomers can't or won't have the income to maintain the houses and the mortgage and they will go into default.

mjk0259's picture

Building houses to make money? Is there something wrong with that? That's what capitalists are supposed to do.

TheMerryPrankster's picture

burning houses down, that's what real capitalist do.

There is no capitalism, it was a fantasy just like the bill of rights and your right to privacy.

Update your Facebook page please, the CIA needs to know your current whereabouts.

cynicalskeptic's picture

And meanwhile, your local property taxes on that 'worth less than I paid for it' house are GOING UP!

With the Feds and states cutting back and dumping more and more unpaid mandates (and pension funds for public employees and teachers lsoing money on the stock market) local property taxes on your house are going up far faster than inflation (even REAL inflation, not the bogus 'official' rate).

And even when 'caps' are put in place they are never ironclad and have lo0ts of loopholes.  The cap in Y has slowed increases in local property taxes but they are still increasing at an unsustainable rate.  My local taxes have more than triopled in the time I've owned my house (less than 20 years).  Our income hasn't tripled over that time.  Even when you do everythign right - save up, put down a good deposit, pay down your mortgage and DON'T continually take money out, you get screwed by NEVERENDING TAX INCREASES.  

Our property taxes are now higher than our mortgage payments - and that is not all that unisual for many suburbs that are a sane commuting distance from the remaining good paying jobs.

boogerbently's picture

Why is it taking SOOO long for everyone to catch on to the housing "problem".

The "unemployment" numbers are bogus.

Loans are HARDER to get, now.

The "robo-signing" debacle has been "fixed" with a fine, so foreclosures are in full swing, again.

Housing prices will NOT improve until the ENTIRE inventory of existing homes, AND all new foreclosures have been sold.

Supply increasing + Demand decreasing = price falling

RoadKill's picture

Thats not true. The idea that real estate is local has never been more true. The foreclosures and short sales are in far suburbs. They are not being maintained and in many cases are being lived in by people with no incentive to maintain them (rent free loan jumpers, squatters and meth producers / grow houses / crack dens). The toniest suburbs, gated communities with strong HOAs and country clubs, will probably be ok. The established urban areas are doing fine. The "affordable housing" communities are screwed.

Im in Miami. Bal Harbor, Brickell, Brickell Key, Collins and South Beach are Hot. Some suburbs like Weston are also strong. The other suburbs overflowing with foreclosed $500k mcmansions and rennovations are soft. Lots of rich South Americans coming to avoid the commies taking over S. America.

A friend I do real estate investing with also says prime Boston locations are moving constantly. I rented a 4 story brown stone in Back Bay for $5,300 a month and it sold for $1.3mm recently. Thats what they were asking back in 2010 and up a few hundred k from the sale price in 2008.

Another friend I do commercial real estate with says values there are going crazy due to easy money. They are refinancing things they bought a year ago for 100% money out and 10% rental yeilds net of the newer loan balances.

imaginalis's picture

A friend I do real estate investing with.....

Another friend I do commercial real estate with.....

LawsofPhysics's picture

Housing goes nowhere so long as wages remain stagnant.  It is really that simple.

eatthebanksters's picture

Housing sales would go up in the lower price ranges if there were job creation even if wages remain stagnant. Jobs are the critical key to saving not just our housing market, but our economy.

krispkritter's picture

True, but the only increase in 'wages' is who we 'wage' war on. Brown? No Central Bank? Got Gold? Game on! Now if you want housing, let's rebuild all the crap we blew up!

AldousHuxley's picture

Atlanta = blacks under water

Las Vegas = casino mobsters under water

Chicago =Obama's friends under water

Los Angeles = illegals under water

Cleveland =Drew Carey under water

San Francisco = gays under water


Welcome to America where you get screwed regardless of color, gender, nationality, morality, weight.

FrankDrakman's picture
  1. Drew Carey lost a lot of weight.
  2. He moved to California to take over Bob Barker's job of having sex with models.
cynicalskeptic's picture

Seems like white bankers and Wall Street types are doing pretty damn well (despite the clusterf*ck they caused).  

jwoop66's picture

Those damn white people...

cbxer55's picture

Dr. HB, good to see you as a contributor here. I've been a long time follower and subscriber to your website. Lived in CA for 26 years, now live in much cheaper and more business friendly Oklahoma. Funny how CA is #50 in the list of business friendly states. #50 being worst, with New York right above at 49, and Illinois at 48. New Jersey at 47. Texas at the big UNO. OK at 11.

Peter Pan's picture

No matter how you look at the housing problem, it is still a very sick sector. How can low interest rates and government subsidies overcome unemployment, low wages, high youth unemployment and education debt which hamper household formation, Mexicans leaving by the droves, exploding number of baby boomers, urban sprawl now at the mercy of high fuel prices, bigger house sizes which meant higher cost and therefore more debt, teaser rates that spawned a generation of non-qualifying home owners which in turn fuelled an excessive building boom, and so on and so forth.

To make matters worse, the economic downturn means that houses are being neglected or even stripped or vandalised by departing owners or thieves.

Housing baically encapsulates what went wrong with America in that it made crooks out of those in banking and made peasants out of those that were sucked in with the promise of great wealth.

e-recep's picture

are we sure it's still a correction? i think the ship is sinking.

dalkrin's picture

I will buy a house the day I can afford one without entering into a 15 or 30 year slave contract, sorry "mortgage."

Supplying credit/debt at easy terms only serves to allow all parties on the selling end to justify raising prices as much as they can get away with.

Abraham Snake's picture

Many counties in the metropolitan Atlanta area have ratcheted up the already hostile GA State environment for illegal immigrants. So many immigrant families are moving out to other states, and taking their demand for Atlanta area housing and commercial leases with them.

Damn .... 1997 price levels ... that appears to mean that the majority of Atlanta homeowners are underwater.

Meremortal's picture

After 40 years in real estate I havbe learned that there is no such thing as the American housing market. There are about 240 submarkets around the country, and different conditions rule in them. In Denver, inventory is down over 40% in the last 12 months. Market supply has dropped from over 9 months to 3.4 in one year. We are getting multiple offers, some above the listed price, on homes in good condition.

If President GreenBrain would unfetter the energy market, we would see the economy and housing improve quickly. Lack of jobs is all that is holding most submarkets back from a huge boom. There is a lot of pent-up demand, inventory is falling in many submarkets, and interest rates are at record lows. New home construction has been very low for some time. These conditions will breed a housing shortage quickly when and if jobs come back.

Obama is working every day to make sure that doesn't happen. 


cranky-old-geezer's picture



These conditions will breed a housing shortage quickly when and if jobs come back.

They're not coming back.

WmMcK's picture

"In Denver, inventory is down over 40% in the last 12 months. Market supply has dropped from over 9 months to 3.4 in one year. We are getting multiple offers, some above the listed price, on homes in good condition." Long Castle Rock and the Springs. (Short Monument, weather sucks.)

Bansters-in-my- feces's picture

Just wondering if you know how that Mark to Market thingy is going for the banks...?

Oh ya....

Iam_Silverman's picture

"After 40 years in real estate"  "There is a lot of pent-up demand, inventory is falling in many submarkets, and interest rates are at record lows."

Thank You Larence Yun.

Oh, you forgot the tagline "there has never been a better time to buy".

eatthebanksters's picture

it's been 32 years in the biz for me and you are right on Meremortal.

RECISION's picture

 There is a lot of pent-up demand

Define "pent up demand".

I am sure there are lots of people that would love a home of their own.  

But without the cash, then that = Zero demand.

Cole Younger's picture

I think you have a short memory like most people do..The foreclosure fraud put a stop to just about all foreclosure proceedings nation wide. Now that the government made a deal with the banks, your inventory will grow and those who are buying now will take a hit..

Rainman's picture

Fannie and Freddie could bleed out another $ 200 billion in losses by the end of 2014.....backstopped by what's left of the taxpaying commoners, of course.

SmittyinLA's picture

We're just beginning the greatest housing bubble sell off of all time and its not triggered by "the economy" but natural population demographics and federal elderly subsidy policies.

Funny they call LA CA a "mid tier" market but when you look at the demographics you find 2 groups, elderly White homeowners in homes that are already paid off on fixed incomes backed by massive debt promises and millions of unskilled uneducated low wage immigrants on the dole sitting on upsidedown mortagages they don't have a prayer of making, to me that's not "mid tier", that's "low wage fixed income" dependent upon a continuing flow of subsidy capital from "other people".

When I look at future demographics (millions of elderly homeowners with no savings and paid off homes and millions of unskilled immigrants and aliens) I see nothing but housing declines.

Prices in LA CA will be cut in half over the next 10 years, and that's from today's lows assuming no change in elderly pension (SS) & healthcare (medicare) benefits, but we know those benefits will be cut too and when the elderly house rich get squeezed they'll sell in a nano second, on top of that LA & CA have massive unfunded liabilities (over 500B at last count) that those same "fixed income" elderly will be asked to pay and their only way of paying will be to sell and exit CA in a permanent way.  

AldousHuxley's picture

come on connect the dots.


dotcom bubble = 401k boost for boomer retirement

housing bubble = asset boost for boomer retirement


uncle sam is trying to help boomers retire because social security isn't cutting it anymore. Except dumbasses just sat on the giveaways until the fraudulent nature was exposed by the market system.



Dicite justitiam's picture

Why not buy a house?  People need somewhere to live.  There are pockets of opportunity.  I'm biased because I'm in Denver, we haven't taken a huge hit.  I wouldn't have bought in Cal/Az/etc. based on fundamentals and short-term outlook.

But with the New Normal policy of supporting TBTF balance sheets, methadone housing liquidity, and the fact that houses > paper, why not invest a chunk in a property that will allow flat cashflow with good (not great) occupancy rates?  After all, the New Normal policy will continue until inflationary forces get out of control.  Then shelter values will increase and debt is reduced in real terms.

My only concern is that when the methadone runs out, municipal and state forces will affect property values in asymmetric ways.  That is, crime pockets will form in the poor areas, enforcement will decline or be inadequate, and neighborhood strength will continue to deteriorate in tandem with our increasing social diaspora (more online/electronic interaction, less neighborhood-related belonging).

Like I said, pockets of opportunity.  I think it's not a bad play in the right locations.  Not for the glorious upside, but as a paper-ponzi hedge.

Please, only junk if love NAR propaganda.

Obadiah's picture

I am beginning to think this site is just full of gloomer posters or million dollar bullshit artists trolls????

I stoped going to infowars for that very reason???

Post positive REAL on the street experiences and your post is ignored or red arrowed????

ebworthen's picture

Don't take it personal, we're just pissed off that we are in a Depression but hopium 1%'s keep denying it.

boogerbently's picture

There does seem to be an AWFUL lot of :

"Buy bullets and gold for the chaos to come"

crowd posting here.

SmittyinLA's picture

Lets crunch the numbers, here is a nice 70 year old fixer in the city of Bell CA for only $175,000  (these are allegedly a "fire sale" 50% off prices)

You can rent it out for $1200 a month to a large latino family-maybe* (*assuming the current level of Latino child subsidies remain at the current unsustainable levels, any change in the EITC or state subsidies will dramatically lower rents)

The annual property tax rate is only 1.553634%* or $2719 *(*assuming property taxes don't rise further LOL). 2719/12= $226 a month in property taxes alone.

The annual HO insurance is $600 /12 or $50 mo

The interest expense on the down payment (17500X5%) is $73/mo

The annual maintance for this home is $100 a month (this is for painting, flooring, roofing, plumbing and electrical maintenance).

So we haven't paid a dime in interest or principal (on the balance) and our $1200/month in income is reduced by expenses of $449 per month to  $751** (** assuming no change in expenses or taxes) out of that you still have to manage the house in Bell, collect rent, eat the costs when empty and PAY OFF THE MORTGAGE which is $733 a month (assuming you can get a 10% down 30 year fixed loan @3.75%).

So for $18 a month would you commit to a 30 years of home maintenance on the prospect that a 100 year old house in Bell CA will be worth more than $175,000 and in making that bet you're also betting that the inflated home prices of Bell CA won't fall further and raise property taxes and the state of CA can continue to pay the alien renter mob the same current level of subsidies for the next 30 years under the greatest boomer home selloff in the history of the world.

XOM is looking pretty good at this point.

Cole Younger's picture

Something all small real estate investors today forget about..inflation..When inflation hits, it is going to hit hard....The books may look good but the cost of goods and services are rising. At some point, rent will have to go down otherwise the property will be vacant (this may take a few years). The small real estate investors cost will continue to rise. Buy a dwelling, not an investment and pay cash if possible..

Lord Koos's picture

You forget a positive of inflation - in real terms the fixed mortgage payment gets smaller every year, but rents can & will increase in nominal terms along with every other consumer product.

Bollixed's picture

Another hole in the boat is those damn HOA fees. I have four properties subject to those fees and one of the properties has had the HOA fees double already in the seven years I've owned it.

Once inflation finds its wings those HOA fees will no doubt skyrocket. I'm looking to unload two of those toads this year.

Great time to be selling...

Blythes Master's picture

Ah yes, the old "Jack the fees up as other peoples units go into foreclosure, lose renter, or has sluggo the squatter not paying a dime." trick.

Gotta love those fascist HOA's.

krispkritter's picture

Awesome! There's beer for the week! Er, ok, the weekend! Um, tonight and lunch tomorrow?...