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First Housing Markets to Heal?

First Housing Markets to Heal? Analyst Bets on Sacramento, Washington

The Wall Street Journal
April 28, 2009

With the latest S&P/Case Shiller report showing that home prices are declining less rapidly in some markets, some economists and analysts are gaining more confidence that a bottom is forming in the U.S. housing market.

So, when will the healing begin? It depends on where you live. Washington, DC. and Sacramento, Calif. are at the top of housing analyst John Burns’s list of markets that will recover first.

Mr. Burns says the new home supply in Sacramento has shrunk more than in nearly all the markets he tracks. Decreasing supply, combined with affordable home prices and mortgage availability, mean Sacramento is poised to rebound. One big spoiler could be California’s miserable employment picture.

Washington is also outpacing most other markets in nearing a bottom, as the area’s job growth from the federal government is helping boost housing demand While Mr. Burns predicts that prices of existing homes may fall in Washington an additional 5% to 10%, “sales volumes have likely stabilized already.”

Other markets at the top of Mr. Burns’ list include Denver and Raleigh, N C, which were not that overheated during the boom, and San Antonio, which has a solid economic base and extremely inexpensive housing.

The areas that could take the longest to recover include Ft. Myers and Point St. Lucie, Fla. which were rife with house flippers and subprime lending, and now have weak economies. New York City, which was one of the last markets to enter the downturn, will also lag many other cities in the housing recovery, Mr.. Burns predicts.