America's Fastest-Falling Neighborhoods
By Matthew Woolsey, Forbes.com
Jul 7th, 2009
These areas have witnessed the biggest year-over-year price drops.
Before the housing crash extended beyond foreclosure-ridden exurbs, the average homeowner used to (foolishly) believe that his neighborhood was immune. Today, even underwater homeowners merely take heart in knowing that other neighborhoods in the same city are worse off.
If you live in the leafy, mansion-filled Bel Air neighborhood of Los Angeles, where sales prices have declined 31% at the median to $1.5 million, you're probably comforted by the fact that you don't live in Glassell Park in East L.A. In that part of town, buyers counting on neighborhood improvement when they bought in the fringe area have seen median sales prices plummet 50% to $225,000 in the last year.
In Depth: America's Fastest-Falling Neighborhoods
It's the same story to the south, in San Diego. Sales prices are down 25% in University Heights, but homeowners there can say, "Better here than Horton Plaza." In that downtown, marina neighborhood, median sales prices are off year-over-year by 56%, to $612,500.
Behind the Numbers
Forbes looked at the 25 largest cities in America to determine which neighborhoods witnessed the biggest year-over-year price drops, according to data from Trulia.com, an online real-estate marketplace and data firm. A neighborhood had to be within the city limits, have at least 10 sales, and prices had to be above $150,000. Otherwise, our list would be a rundown of markets barely on life support, such as Briggs, Detroit, where prices over the last year are off 96% to a median price of $2,500.
It's not bad news everywhere. In San Antonio, Dallas and Houston no neighborhoods fit the bill. (Data were not available for Boston and Indianapolis, but both have taken their lumps: The former has been hit hard by excessive condo development; the latter has suffered from Midwestern economic decline due to the shuttering manufacturing base.) Around the rest of the country, however, the data say there's blood on the streets.
In Greenwich Village in New York, home to brownstone mansions, high fashion boutiques and more than a few specialty cupcake shops, sales prices dropped 45% from May 2008 to May 2009. But before you get too excited to live near former beat poets and artistic haunts now owned by the likes of Marc Jacobs, note that the price-per-square foot in the Village has only dropped 4%. That means most sales are for less expensive properties, not that resale prices have fallen off a cliff--at least not yet.
The Manhattan luxury market is down, as a whole--26% according to Jonathan Miller, president of Miller Samuel, a New York appraisal firm. Sales are flat, and listings have ballooned to record highs. "The overall number of sales were 50% below the same period last year as a result of the tightening of credit, rising unemployment and a recessionary economy," he says.
New York, as it turns out, is correcting just like everywhere else. In San Francisco's Cow Hollow, the high-end neighborhood that fills the slope between Pacific Heights and the Marina, prices are off 57% from this time last year.
In other cities, it's middle-class neighborhoods that have gone from robust to threadbare. Uptown, Ohio, prices are down 28%; Arlington Heights in Portland, Ore., is down by 40%; and Elizabeth in Charlotte, N.C., has fallen 37%.
In high-end neighborhoods like Cow Hollow, where the median price is $650,000, blame a slowdown in sales and climbing inventory. Sales in Cow Hollow are down 45% from last year. But the situation isn't dire there, the way it is in middle-class neighborhoods like Deer Valley, Phoenix. There, incomes are lower, and the median home price is only $232,000; a flood of low-priced foreclosures is wiping out the market. In Deer Valley, there are presently 295 homes for sale, and 468 foreclosure properties, according to RealtyTrac, an Irvine, Calif., foreclosure listing service. Both are suffering from market imbalances driving down prices, albeit from different causes.
The good news is that homebuyers, incentivized by low interest rates and government tax credits, are making it possible to sell otherwise unsellable properties. However, for expensive properties needing financing above $729,750, the max for government-sponsored loan purchases (as with the Village and Cow Hollow), there is no financing available. Jumbo loans, as they're known, are scarce and being offered a full interest point higher than conforming mortgages, according to MonitorBankRates.com, an online personal finance journal. Both sorts of markets are in deep trouble, though the rate of descent in foreclosure-ridden neighborhoods is much quicker.
"Foreclosure sales, short sales and first-time homebuyers taking advantage of tax credits is purely illusionary and hides the underlying problems of lending and inventory," says Anthony Sanders, a finance professor at George Mason University's Hall School of Management. "Plus, the jumbo and non-first-time market has to show volume."
The spring sales bump many had hoped for didn't materialize. According to the National Association of Realtors, pending sales activity only climbed 0.1% from April to May--not exactly a market rally.
There are too many sales in markets that are affordable to first-time buyers, driven by foreclosures and short sales, and too few sales in expensive parts of town thanks to a lack of financing and the impression that prices are coming down.
In neighborhoods rich and poor alike, it's going to be a long summer--with no sign of recovery on the horizon.