Monday, April 12, 2010

Kansas City Home Prices Will Return to Peak in 2013 (KC Business Journal)

Home prices in the Kansas City market are expected to return to their 2007 peak by the third quarter of 2013 — much sooner than rebounds are expected in bubble states such as California, Florida and Nevada.

That’s according to a new analysis of historical home-price data and forecasts by Fiserv Inc. (NASDAQ: FISV), a Brookfield, Wis., financial services technology company.

According to the analysis, home prices in the Kansas City market reached a peak in the second quarter of 2007 and will hit a trough in the third quarter of 2011 before returning to the previous peak in 2013.

Home prices in the area are projected to fall 6.6 percent from peak to trough, a much less precipitous fall than in markets such as Orlando, Fla., where a 59.9 percent plummet is forecast.

The Fiserv analysis echoes what residential brokers in the Kansas City market have been saying for months about both the relative health of the local market and the more dismal situation in bubble markets.



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The analysis indicates the markets that experienced the greatest price bubble, including certain metro areas in California, Florida, Arizona and Nevada, won’t see home prices return to peak levels until 2025 or later. Many other markets, including large urban centers in the Northeast and industrial Midwest, may need to wait a decade or more until prices return to their market peaks.

“Nationally, Fiserv Case-Shiller data points to a further 7 percent decline in home prices through the end of this year, with a prolonged recovery beginning early in 2011. In many markets, the emphasis is on the word ‘prolonged,’” David Stiff, Fiserv’s chief economist, said in a release Thursday. “We see several powerful forces in the market that will severely hinder the housing recoveries of many metro areas.”

Although the bubble markets have received the greatest attention, there are other dynamics affecting the pace of home price recovery in other regions, the release said. High levels of unemployment and the steep decline in manufacturing jobs have reduced housing demand and prices in many metro areas in the industrial Midwest, including Michigan, Indiana and Ohio.

A protracted recovery in home prices also is expected in many urban neighborhoods where rampant predatory lending caused home prices to rise rapidly from very low levels during the bubble years. These markets include neighborhoods in cities such as Minneapolis, Memphis and Chicago.

“The picture is not uniformly grim,” Stiff continued. “In fact, our analysis projects that some markets are poised for a relatively fast recovery, including some areas that never experienced large declines in prices.”

Stiff said a number of trends have defined the housing market in recent months, including signs of strength that emerged in the third and fourth quarters of 2009. Home sales grew dramatically last year, from 4.5 million units in January to 6.5 million units in November, the largest gain since 2006. This was attributed to lower prices, almost record-low mortgage interest rates and the $8,000 tax credit for first-time home buyers. Another factor that temporarily slowed the erosion of home prices has been financial institutions’ inability to effectively sell homes with distressed mortgages.



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