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Stabilizing housing prices on the basis of national averages mask regional differences. Most markets have declined slightly, and the remaining markets are flat or rising significantly. An optimistic assessment is that recovery in these markets is the early sign of a broader recovery soon to come.
The chart below focuses on four states that have been among the hardest-hit in the nation. It shows trends for investor grade property values. These trends are examples of what’s going on elsewhere in the US: declining markets are not declining as fast, while some rebounding markets are rebounding rather quickly. California investor grade property prices have risen 20% since the beginning of the year, while Florida, Nevada and Arizona are either slowing down or flattening. There are anecdotes of bidding wars for properties in San Diego, and a significant jump in investor participation in the Bay area.
The next chart tells the same story for all 379 US markets that we cover: while most markets are declining in value, those that are rising (21% of cities) are rising faster, thereby neutralizing average US losses (bringing total weighted average price increase to 0.2%). Stated differently, nearly three-fourths of cities experienced price declines, at an average of 5% per quarter. But 21% of markets climbed by 10%, so few markets climbing at higher rates caused the US average change slightly positive (+0.2%).
Some of the larger gains may be a short-term bounce, but we believe a gradual return to widespread sustainable growth is imminent in the coming quarters. We are not predicting, however, that prices will return to the earlier highs of the bubble, as the high point was the result of a market fever that drove prices up to irrational levels.
