Regional differences in home prices

Location matters, in good times and bad. If you look across the 20 cities followed by the S&P/Case-Shiller Home Price Indices you can see how the differences in location have played an important role in the relative magnitude of the increases and declines in home prices across the United States.

During mid-2000, the cities’ prices peaked over a two-year time span, with Boston the earliest (September 2005) and Charlotte the latest (August 2007).  The two Composites were roughly in between with the 10-City peaking in June 2006 and the 20-City in July 2006.

As we have pointed out in the past, and demonstrate in the graphs below, the geographic regions generally defined as the Sun Belt saw the largest run-up in prices in the early-to-mid 2000s and some of the largest percent decline in the past five years. Using January 2000 as a base, Miami home prices grew by about 180% when they reached their peak in December 2006. Then the market fell by about 50% through July 2011. Los Angeles, San Diego and Tampa all grew by between 135% and 175%, and all have fallen by 38% or more through July. Las Vegas and Phoenix also posted very high growth rates of 135% and 127% but have fallen by about 59% and 56%, respectively.  As seen below, these two cities have the highest percent declines from their relative peaks.

S&P/Case-Shiller Home Prices Indices.

As of July 2011, 10 cities and both Composites have fallen by more than 30% from their relative peaks and these are confined to the Sun Belt – Las Vegas, Los Angeles, Miami, Phoenix, San Diego and Tampa, the Mid West – Chicago, Detroit and Minneapolis, and the North West – San Francisco.

Not all the cities listed above saw the types of increases witnessed by the Sun Belt. Chicago and Minneapolis saw respective peak prices of only 69% and 71% above their 2000 levels; however, both have fallen by more than 30% from their relative peaks. Cleveland and Detroit only rose about 25% from 2000 to their relative peaks, but have since fallen by about 18% and 43%, respectively. With July 2011 index levels below 100, Detroit and Las Vegas are the markets where average home prices are below their January 2000 levels, meaning home prices have lost any and all of the appreciation in value of the past 11+ years. At 101.53 and 100.54, respectively, Cleveland and Phoenix are not far behind. In contrast, at -7.5% Dallas is the only market covered by our indices where the decline from peak is above -10%.  Denver is not far off, down 10.2%.

The posts on this blog are opinions, not advice.
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