Posted by: Prashant Gopal on August 15, 2008
I was playing around this morning with the National Association of Realtors’ second-quarter home sales data (I know, I lead an exciting life) and I noticed something startling.
We’re entering a kind of real estate Twilight Zone.
Many of the states with the best housing and job markets (Washington, Idaho, Oregon, Hawaii, North Carolina) have had the biggest drops in sales, and the worst markets, in terms of foreclosure rates and home price declines (Arizona, California, Nevada, Ohio and Florida), are now seeing the strongest sales. Home sales in the robust Washington state market fell 36.6% in the second quarter compared to the same period a year ago. During the same one-year stretch, home prices in the Yakima (Wash.) metro area increased by 8.9% — the highest appreciation of any metro area tracked by the Realtor group. Home sales in Nevada increased 17.9% in the second quarter and home prices fell 23.6% in the Las Vegas-Paradise metro area.
To explain this phenomenon, it helps to remember that the credit crisis began one year ago. Last summer, the weakest housing markets, in Nevada, California, Arizona and Florida, were already seeing rapidly falling home prices and sales. But the stable markets in Utah, Idaho, Washington and North Carolina weren’t. After the credit-crunch began in August, those markets suddenly began to flag as buyers found it increasingly difficult to secure mortgages.
At the same time, foreclosures pushed home prices so low in California, Arizona, Florida, and Nevada markets that they became more affordable and attractive for first-time homebuyers and investors. Sales in many of the weakest markets suddenly began increasing. I’ve heard anecdotally that some foreclosed homes in California are getting competing offers from investors and first-time buyers.
States like New York and Texas, which have good job markets, don’t seem to be following this trend. They have maintained relatively stable home prices and sales.
And now, the states with the best and worst sales for the second quarter:
1. NEVADA 17.9%
2. CALIFORNIA 3.7%
3. ARIZONA -4.2%
4. VIRGINIA -8.1%
5. SOUTH DAKOTA -8.7%
6. OHIO -10.5%
7. MINNESOTA -10.8%
8. NORTH DAKOTA -11.4%
9. NEW YORK -11.6%
10. COLORADO -11.7%
1. WASHINGTON -36.6%
2. IDAHO -33.7%
3. OREGON -33.5%
4. IOWA -31.7%
5. HAWAII -31.1%
6. MARYLAND -30.0%
7. DELAWARE -29.3%
8. NORTH CAROLINA -29.1%
9. WYOMING -28.2%
10. District of Columbia -28.0%
BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.