• SmartMoney

5 Cities Where Home Prices Hit New Lows

In another sign the housing downturn may be far from over, home prices in several cities are hitting new lows as sellers unload homes at bigger losses than a year ago.

Home values fell for the sixth straight month in February, according to new figures released this morning from the S&P/Case-Shiller Home Price Indices. Nationally, home prices are down 3.5% from a year ago. But some cities are posting much bigger losses, with nine metro areas recording new post-crisis lows. Atlanta prices, for instance, have dropped 39% from their market peak and homes are selling at 1996 levels, while Chicago prices are back down to 2000 levels. Experts say the new round of losses suggests more trouble may be ahead for the overall housing market. “We’re at a critical turning point where we’re wondering if we’re going to recover or if there will be a second round of weakness,” says Brad Hunter, chief economist at Metrostudy, a housing market research and consulting firm.

Several factors have contributed to the latest price drops. Experts say that extended high unemployment in some cities, like Atlanta and Chicago, has weakened buyer demand and increased foreclosures that, in turn, have dragged down the values of surrounding homes. Separately, more distressed homes are coming on the market as banks try to sell the homes they repossessed. Most of these homes are selling at a discount — 29% lower than non-distressed homes according to RealtyTrac.com, which also lowers home prices.

To be sure, some cities are showing improvements. Home prices in five metro areas — Denver, Detroit, Miami, Minneapolis and Phoenix — rose slightly from a year ago, according to the S&P/Case-Shiller report.

But experts say it’s unclear when the following cities will bottom out. As a result, would-be sellers who purchased their homes less than a decade ago are unlikely to earn much of a return – and may not even earn back what they paid for it. Those who can no longer afford to pay their mortgage have little choice but to sell, but experts say those who can afford to stay put may want to hold onto their homes until their local housing market improves.

Las Vegas

  • Home prices compared to August 2006 peak: -62%

Experts say it’s little surprise that Las Vegas, the poster child of the housing downturn, tops this list.  Home prices are down a whopping 62% off their 2006 peak and at the lowest level since 1996, according to S&P/Case-Shiller. Las Vegas has consistently had one of the highest foreclosure rates since 2007, says Daren Blomquist, vice president at RealtyTrac, which tracks foreclosures. Lenders have taken back nearly 140,000 homes so far — accounting for 3.3% of foreclosures nationwide. And there’s no telling whether the worst is over for the city: Home prices continue to drop, falling 9% during the past year as of February, according to S&P/Case-Shiller.

Still, real estate agents in the area say there are some reasons to be optimistic. Lenders are trying to unload foreclosed properties at prices that are either at or just below market values, says Brad Snyder, a Las Vegas realtor with ZipRealty. And that’s largely why the median sales price in Vegas was nearly identical to the median asking price as of December, according to data from Realtor.com and the National Association of Realtors. Snyder says individual investors (many of them from abroad), as well as hedge funds, have been actively buying real estate in the area over the past year.

Still, the future remains unclear. Last year, the Nevada legislature passed a bill that required lenders to pass more hurdles before foreclosing on a home. That’s helped restrict the number of distressed properties for sale, says Snyder. But those homes could ultimately make their way to the market and drag prices of nearby properties down.

Getty Images
Suburban Las Vegas


  • Home prices compared to July 2006 peak: -48%

Home prices in Tampa are at their lowest level since 2002 and down 48% from their peak in 2006, according to S&P/Case Shiller. Experts say luxury homes and condos account for most of the value that was lost and that those properties haven’t hit a bottom yet. In the past six months, Tampa house prices fell about 3%, and though that’s lower than the national average, experts say there are likely more losses to come for this sunny city before things get better.

Luxury homes, specifically those selling for $750,000 or more, have been sitting on the market for at least six months and as of late are selling for as little as half the asking price, says Denise Carter, real estate agent with Re/Max Action First in Tampa. Many homeowners purchased these homes with a jumbo mortgage and after losing their job have been unable to keep up with mortgage payments, she says. To avoid foreclosure, they’ve been selling their homes at a discount to willing buyers and often doing short sales. (With a short sale, a home sells at a price that’s lower than the amount the borrower owes the lender.) Condos are also lingering on the market, says Carter, and are posting some of the largest price drops. Many condo owners in Tampa owe more on their property than it’s actually worth, she says.

Not all of Tampa is in the dumps, say experts:  Buyer demand is rising in some of the more affordable neighborhoods. Carter says that over the past couple of months, single-family homes that are asking less than $300,000 and are in move-in condition have been selling within a week of being listed for sale. The number of homes listed for sale is also dropping: There are nearly 15,800 homes on the market in the Greater Tampa Area — about half of what they were 12 months ago, says Willy Culkar, a real estate agent with Lipply Real Estate in Clearwater.

Getty Images
Tampa’s skyline


  • Home prices compared to July 2007 peak: -39%

Home prices in Atlanta are at their lowest level since 1996, according to the S&P/Case-Shiller report. Prices have plummeted 39% off their peak in 2007. And there’s no sign of a recovery in sight. Over the past year, Atlanta posted a 17% drop in home prices – the biggest decline out of all the 20 metro area tracked by S&P/Case-Shiller

High unemployment is contributing to the city’s woes. The unemployment rate in Atlanta was 9% in February, according to the latest data from the Bureau of Labor Statistics, compared to the national unemployment rate of 8.3% at the time. With more people out of work, fewer can afford to buy a home, lessening demand for real estate. In turn, homes in some Atlanta neighborhoods – particularly in the suburbs – have been lingering on the market for months, says Bill Golden, a realtor with RE/MAX Metro Atlanta. He says suburban home values have lost significantly more value than properties in the city’s center.

Foreclosures are also on the rise. Lenders repossessed nearly 11,000 homes during the first three months of the year, up 21% from the same period a year ago, according to RealtyTrac. These properties also impact the value of nearby non-distressed homes. On average, home property values drop about 1% when they’re within one-eighth of a mile from a residence that’s received a foreclosure filing, according to the Woodstock Institute, which researches foreclosures, and the Georgia Institute of Technology. When the home is sold – whether in an auction or taken back by the lender – homes within a quarter mile lose up to around 4% of their value, according to a separate study in the Journal of Real Estate Finance and Economics.

Getty Images
High angle view of houses in Atlanta


  • Home prices compared to September 2006 peak: -37%

Home prices in the windy city are the lowest they’ve been since 2000. Prices have dropped 37% since 2006, and a chunk of those losses is very recent. Between September and February, home prices in Chicago fell 11%, compared to the 5.4% average loss for all of the 20 metro areas tracked by S&P/Case-Shiller.

High unemployment is a big part of the problem, says Jeff Ristine, broker owner at Weichert Realtors Kingsland Properties in Chicago. The city’s unemployment rate was 9% in February, according to the BLS, compared to the 8.3% national unemployment rate at the time. Chicago’s unemployment has outpaced the national average for some time: In February 2011, the city had an unemployment rate of 9.7% compared to a 9% national figure. And more job losses could come, experts say. Illinois raised its state income tax last year, and experts say more companies could move their operations to other states as a result. Job losses have pushed up foreclosure rates in the city, says Ristine, which in turn has lowered values of nearby homes.

Fast home price appreciation during the boom is also to blame: Historically, home prices rose 3% to 5% a year but between 2001 and 2006 that spiked to 10% to 15% growth a year, says Ristine. Meanwhile, many new properties on the outskirts of the city sit uncompleted or vacant since the housing boom ended. Experts say it’s unclear what’s next for this city, but first quarter data seems relatively promising: the median sales price rose 4.7%, says Ristine, marking the first quarterly increase in roughly four years.

Getty Images
Townhouses on Prairie Avenue, Chicago


  • Home prices compared to July 2007 peak: -33%

Seattle managed to dodge the housing downturn for years, but ongoing, gradual price declines have brought home values back down to 2004 levels. In total, prices have dropped 33% since the area’s peak in 2007, according to S&P/Case-Shiller, with much of those losses occurring over the past two years.

A variety of factors have contributed to home prices falling, including rapid appreciation during the boom years, high foreclosures in some pockets of the city, and tight lending standards, says Eve Anthony, a real estate broker in Seattle. The biggest hit, she says, came after Washington Mutual – which was headquartered in Seattle – collapsed in 2008. Job losses followed, and individuals who wanted a mortgage faced two problems: tighter requirements (as was the case nationally) and fewer local lenders to choose from, she says.

Experts say buyer demand hasn’t recovered since.

As of late, foreclosures have been rising. Roughly 12,820 homes received foreclosure filings (the first step in a foreclosure process) last month, up  18% from a year ago, according to RealtyTrac.

Getty Images
Queen Anne Hill and the Space Needle

Copyright 2018 Dow Jones & Company, Inc. All Rights Reserved
This copy is for your personal, non-commercial use only. Distribution and use of this material are governed by our Subscriber Agreement and by copyright law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit