10 Markets Where Housing Prices Have Fallen the Most

(Image credit: Thinkstock)

By Miriam Cross, Patricia Mertz Esswein, Kaitlin Pitsker

published 28 August 2014

Let’s call it cause for optimism. After one of the worst housing collapses in history seven years ago, price declines have pretty much halted across every major metropolitan area in the U.S. Alas, these 10 U.S. Census metro areas with population of more than 250,000 still had small drops (-0.71% to -4%) in existing single-family home prices for the year ending June 30. Please take a look. Prices come from CoreLogic, a data and analytics company.

In many of these cities, the housing markets never really boomed nor busted. Most of them have ample supply of homes and relatively cheap prices, which should favor buyers. But many also have low wage bases, or declining or aging populations. Others rely on an employment sector that hasn't fully recovered from the recession. A couple of them are still burdened by a large share of distressed sales.

Disclaimer

All home-price data is for existing single-family homes only (including distressed sales) and comes from CoreLogic. Distressed sales statistics are from CoreLogic. Sales, supply and other market data come from national and regional associations of Realtors.

Topics

Lists

1. Fayetteville, N.C.

One-year drop in home prices: -4%
Median home price: $128,750
Change in price since 2006 peak: -8.2%
Distressed sales: 15.5%
Months' supply of inventory: 11.1
Unemployment rate: 7.5%
Rate of job growth: -0.7%

When this market busted in 2008, builders went on vacation for a couple of years, says Zan Monroe, with the Fayetteville Regional Association of Realtors. When they came back, they offered dramatically lower prices that appealed to younger military buyers and pulled them from the resale market. Over the past year, however, builder sales have fallen. The metro area has a six-month supply of newly constructed homes on the market, which is considered balanced between sellers and buyers. But almost a year’s supply of existing homes for sale still makes this a buyer’s market.

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2. Tallahassee, Fla.

One-year drop in home prices: -3.6%
Median home price: $119,900
Change in price since 2006 peak: -24.8%
Distressed sales: 31.5%
Months' supply of inventory: 8
Unemployment rate: 5.8%
Rate of job growth: 2.3%

The capital city of the Sunshine State doesn't attract out-of-state and international buyers and investors the way Florida's coastal cities do. Employment here is perking up, but most of the recovery has been in low-wage jobs in the service sector, which “may not generate enough income to support [demand in] the housing market,” says Carl Hudson, director of the Center for Real Estate Analytics at the Federal Reserve Bank of Atlanta. The metro area still has a significant inventory of houses going through foreclosure.

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3. Worcester, Mass.

One-year drop in home prices: -3.4%
Median home price: $210,000
Change in price since 2006 peak: -21.8%
Distressed sales: 10.5%
Months' supply of inventory: 7.2
Unemployment rate: 6.1%
Rate of job growth: 2.2%

This aging mill town in central Massachusetts is only 50 miles west of Boston. The 2006-07 housing collapse was steep here and all across the Bay State. But Worcester’s real estate market tumbled harder than Boston’s, and it hasn’t snapped back the way Beantown has. “It doesn’t have the same history [as Boston], it’s not a transit hub, and the jobs and support systems aren’t there,” says Cassidy Murphy, editorial director for The Warren Group, a New England-based real estate and banking data analysis firm. “Boston is where the jobs are, but Boston is too far away [for most commuters]," she says. The result: Worcester metro area housing prices continue to decline, with unsold inventory higher than in other metro areas in the U.S.

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4. Fort Smith, Ark.

One-year drop in home prices: -2.1%
Median home price: $93,000
Change in price since 2006 peak: -5.5%
Distressed sales: 15.1%
Months' supply of inventory: N/A
Unemployment rate: 6.4%
Rate of job growth: -0.2%

Located in the northwest corner of Arkansas along the Oklahoma border, Fort Smith's housing market has just plugged along for several years. Its manufacturing economy suffered mightily in the last recession. A local Whirlpool plant shut down, which hit other local support businesses hard, says Michael Pakko, an economist at the University of Arkansas at Little Rock. Of the state's three metro areas, Fort Smith is the only one that has lost population, albeit slightly, during the first half of this decade. So the housing market has seen reduced demand for existing homes and little demand for new construction.

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5. Utica-Rome, N.Y.

One-year drop in home prices: -1.9%
Median home price: $78,903
Change in price since 2006 peak: -14.3%
Distressed sales: 1.5%
Months' supply of inventory: 11.3, Oneida; 20.2, Herkimer
Unemployment rate: 6.2%
Rate of job growth: 0.5%

This housing market in Upstate New York never really boomed or busted. Utica continues to suffer from a decades-long economic decline, an aging of population, and unlike most of Upstate, it has seen no bounce-back in employment from the Great Recession. The result is weak demand for housing and a supply of homes that harks back to bust days in hard-hit parts of the country: 11.3 months' supply in Oneida County and 20.2 months in Herkimer County. The median home price here is one of the lowest in the nation.

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6. Erie, Pa.

One-year drop in home prices: -1.4%
Median home price: $107,600
Change in price since 2006 peak: -8.5%
Distressed sales: 11%
Months' supply of inventory: 2.1
Unemployment rate: 6%
Rate of job growth: 1.2%

Much like Utica, the story of Erie’s housing market hinges on local economic stasis. Like many smaller Great Lakes (as well as Midwestern) cities with economies dependent on manufacturing, Erie has yet to fully recover the jobs it lost since the peak of the business cycle in 2007, and average weekly wages have been falling since 2012. Plus, Erie has experienced population loss over the past decade, and a high percentage of its residents are elderly or disabled. "On the demand side, that isn't a recipe for strong appreciation in home prices," says Guhan Venkatu, a Pittsburgh-based economist with the Federal Reserve Bank of Cleveland. On the supply side, much of its housing stock is older, in need of repairs and not worth the expense of rehabbing.

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7. Little Rock, Ark.

One-year drop in home prices: -1.4%
Median home price: $140,500
Change in price since 2006 peak: -2.9%
Distressed sales: 9.4%
Months' supply of inventory: 8.7
Unemployment rate: 5.8%Rate of job growth: 1.2%State government and health care jobs kept the economy of Arkansas’s state capital relatively healthy during the Great Recession, says Michael Pakko, an economist at the University of Arkansas at Little Rock. So the metro area housing market didn't suffer quite as much as the rest of the state through the downturn, he adds. But it hasn't seen a big rebound, either. The metro area's level of employment (and the state's) is about where it was at the beginning of the recession. While the economy and home prices have been fairly stable, supply here strongly favors buyers (8.7 months' supply in June).

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8. Hagerstown, Md.

One-year drop in home prices: -1.3%
Median home price: $133,750
Change in price since 2006 peak: -32.7%
Distressed sales: 23.9%
Months' supply of inventory: 7.2
Unemployment rate: 6.5%
Rate of job growth: -0.6%

Nancy Allen, president-elect of the Pen-Mar Regional Association of Realtors, says that inventory has risen in Hagerstown, with foreclosures still coming to market and competing with traditional home sellers for limited buyers (more than half of the homes in Hagerstown are rental units).With still-strict requirements for getting a mortgage, many home seekers are "right on the edge" and can't quite qualify to borrow for a home, Allen adds.

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9. Peoria, Ill.

One-year drop in home prices: -1%
Median home price: $116,000
Change in price since 2006 peak: -9.7%
Distressed sales: 9.9%
Months' supply of inventory: 5
Unemployment rate: 7.3%
Rate of job growth: -1.4%

Located midway between Chicago and St. Louis, Peoria's economic mainstays are manufacturing, agribusiness and health care. Global giant Caterpillar is headquartered here and is the largest employer. But the company had major layoffs in 2009 and 2013. While employment in manufacturing and local consumer confidence have yet to fully recover, health care has regained all its lost jobs, and a local index of business and economic indicators is on the upswing so far in 2014. That should improve demand for housing.

Home sales in the metro area have increased by 20% in the past year, and the months' supply of homes (5 months) is balanced between buyers and sellers. Homes here are affordable, especially smaller homes on smaller lots in Peoria proper, which appeal to young professionals and first-time home buyers, says Sally Hanley, of the Peoria-based Economic Development Council for Central Illinois. Smaller, rural communities in the outlying counties of Tazewell and Woodford are seeing spurts of home building.

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10. Durham-Chapel Hill, N.C.

One-year drop in home prices: -0.7%
Median home price: $197,500
Change in price since 2006 peak: -3.7%
Distressed sales: 11.3%
Months' supply of inventory: 4.8, Durham; 4.5, Wake; 7.9, Orange
Unemployment rate: 5.1%
Rate of job growth: 1.5%

Anchoring two corners of the Research Triangle, the Durham-Chapel Hill metro area saw steady gains in home prices, particularly from late 2012 through the early spring of 2013, as home buyers jumped to take advantage of low interest rates. But over the past year, that growth has tapered off, and prices flattened. Sales fell (-4.5% in Durham County and -13.6% in Orange County in June). Supply in Durham is balanced between buyers and sellers (with 4.8 months' supply), but buyers rule in Orange County (with 7.9 months' supply).

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Miriam lived in Toronto, Canada, before joining Kiplinger's Personal Finance in November 2012. Prior to that, she freelanced as a fact-checker for several Canadian publications, including Reader's Digest Canada, Style at Home and Air Canada's enRoute. She received a BA from the University of Toronto with a major in English literature and completed a certificate in Magazine and Web Publishing at Ryerson University.