Though outspoken billionaire Warren Buffett predicted at the end of February that the United States housing slump would be over by the end of 2011, many others aren’t quite as optimistic.
Areas across the country that have been hit the hardest include California, Florida, Las Vegas, and cities in Arizona. Places known as hot spots for tourism and disposable spending were hit the hardest, said Eric Landry, director of industrial sector research at Chicago-based investment research company Morningstar.
Recovery in California is expected to be modest. The California Association of Realtors’ forecast is for home sales to rise 1 percent next year to 496,200 units. That follows two flat years with 491,100 sales forecast this year and 491,500 homes sold in 2010.
According to the Bureau of Labor Statistics, Nevada had an unemployment rate of 12.9 percent in August, the worst in the nation. That coincides with the number of default notices jumping 30 percent from July to August. That means one in every 103 households received a foreclosure filing, according to Bloomberg news service, more than five times the national average.
So where are we recovering?
Economically speaking, a quarterly report from the Brookings think tank found that in many instances, wherever there is a heavy government presence, there is relative prosperity.
“Nearly all the metropolitan areas whose economies suffered the least since the start of the recession rely substantially on government, education, or energy production, and had increases in government employment since the start of the recession,” wrote Howard Wial, a Brookings fellow and co-author of the report. “Meanwhile, nearly all the metropolitan areas that suffered the most since the beginning of the recession either experienced a large house price boom and bust, or depend heavily on auto and auto parts manufacturing.”
Landry mentioned Washington, as well.
“For the past couple of years, it’s not a big secret the government has expanded significantly,” he said. “Washington, Maryland and Virginia have enjoyed better price performance, relative to the rest of the country, and as far as unit of volumes, they’ve done a bit better, as well.”
Another sleeper Landry mentioned was Miami, which enjoys the proximity of strong South American currency and Chinese buyers who are purchasing condos.
“Things have been on sale there for over a year at 55 to 60 percent of peak prices,” he said. “There are a couple of markets in Florida acting that way. The Ft. Myers/Cape Coral region is also acting better than it has in years. It’s not lighting the world on fire, but compared to Chicago, its doing OK.”
Las Vegas was experiencing a similar pricing trend because of the amount of units for sale for a prolonged period of time, Landry said.
That’s great for buyers and bargain hunters looking for good deals. Landry said that, overall, home prices in the country – based in aggregate against per capita disposable income – have not been cheaper in 35 years.
“That doesn’t mean an imminent uptick is coming throughout the country, because that is not a high likelihood due to the dicey economic situation,” he said. “One of the main problems is confidence. As a homebuyer, you don’t want to make the biggest decision in your life with the idea that this asset will be cheaper next week.”
In September, the National Association of Home Builders’ new First American Improving Markets Index identified 12 metro areas that had seen a turnaround for at least six months in three economic areas key to the real-estate market: housing permits, employment, and housing prices.
Topping that list was the state of Louisiana, the only state with three cities on the list: New Orleans, Alexandria and Houma. Texas and Alaska each had two cities on the list.
There’s no single reason to explain which regions are doing better and why, Landry said, though there are common characteristics. The uptick in Florida was largely because bargain hunters moved in and drove inventories down significantly. In places such as Dallas and Washington, more jobs has meant stronger economies.
“Dallas has enjoyed stronger than average job growth due to the Texas economy, which has been fueled by the energy market and done better than the country as a whole,” Landry said.
In today’s economy there’s one adage that always rings true – where there are jobs, people are buying homes.