May's Case Shiller report was more positive than April's, probably due to a last minute rush for the federal tax credit that expired April 30th. 15 of the 20 metro-areas reported showed improvement, while 7 of the metro areas are still reporting negative annual growth rates.
Las Vegas posted a new index low of -56% from its peak in August 2006, effectively canceling any price gains it had posted since 2000. Detroit home prices are now at levels last seen in late 1994. Overall, average home prices across the United States are back to 2003 levels.
At Real Wealth Network, we like to buy low and cash flow or sell high. Now's the time to get bargains, but where?
Fiserv, Inc. just released its analysis of home price trends based on the Case-Shiller Indexes. The analysis shows U.S. single-family home prices rose an average of 2 percent in the first quarter of 2010 over the year-ago quarter. This marks the first year-over-year national gain since 2006. However, the stronger markets are carrying most of the gains.
The overall increase was driven by strong price increases in San Francisco Bay Area, San Diego and Washington, D.C. The largest gains were in the San Francisco Bay area, where San Jose home values were up 17.2 percent.
Prices were actually lower in 303 of the 384 metro areas compared to the first quarter of last year. Detroit, Las Vegas and many small Florida markets continued to plummet, with double-digit declines. Provo, Salt Lake City and St. George, markets that historically perform well, posted declines of 13.3 percent, 9.9 percent and 17.5 percent, respectively.
This data tells us that even though some areas have had major price declines and are more affordable than ever, the ride downhill might not be over.
The Fiserv Case-Shiller Indexes forecast that average single-family home prices will fall another 4.9 percent over the next 12 months. But remember, there's no such thing as a national housing market, only local.That's like quoting a national weather forecast.
Steep home price declines are expected to continue in markets that have been hurt most by the housing crisis. From the first quarter of 2010 through the first quarter of 2011, average home prices in Nevada, Arizona and Florida are projected to decline 11.1 percent, 10.8 percent and 8.8 percent, respectively.
At Real Wealth Network, we've been warning investors for years that the former bubble markets are the most troubled and will continue to be for some time. Investors jumping into NV, AZ and FL may have found great deals, but the deals will likely get even better next year and perhaps into 2012. Additionally, with so much distressed property, there's more vacant homes and more homeowners trying to sell or rent their properties. That's too much competition for our taste.
California is a former bubble market but seems to be performing well, according to the data. However, we believe the price increases are not all due to appreciation, but rather a higher priced property now in distress. Prime, Alt A and Option Arm loans are now resetting, and there's a lot more of them than the subprime. More than half of all option ARMS are i CA. While certain pockets of CA will always be in demand, we still recommend using caution before buying to hold rental property. More foreclosures are coming.
So where do we recommend investing?
Dallas and Cleveland showed gains in the first quarter and are expected to continue their upward trends. Kansas City and Indianapolis are expected to stabilize. These linear markets never had a bubble and never had a burst. Homeowners didn't lose their nest egg or their "ATM" equity lines. Living expenses are affordable, allowing for more dollars to hit the local economy. The local governments are not losing out on property tax revenue that forces layoffs and budget deficits. And most importantly, the cash flow is still better than the risky markets.
What will you do with this information? What's your next move as an investor? Share your comments below.
Tags: California, Cleveland, Dallas, Detroit, Existing Home Sales, Florida, Indianapolis, Kansas City, Las Vegas, Market Indicators, S&P/Case-Shiller
Check out Indianapolis. While many investors are being directed to Dallas other prime market continue to give the best Return on Investment. Indianapolis investment properties consistently offers great deals.
Thanks, Christine. We like Indianapolis too and have a great wholesale property expert we refer members to there. The cash flow is fantastic. At Real Wealth Network, many of our members prefer warmer climates. That's why we like to make sure we are offering a good variety of areas to meet our various members needs.