The housing crisis which has famously ravaged Florida and the Southwest, is delivering a new wave of distress to communities once thought to be immune, where the housing boom was relatively restrained. In the last year, home prices in Seattle had a bigger decline than in Las Vegas. Minneapolis dropped more than Miami, and Atlanta fared worse than Phoenix.
As with previous recessions and bubble markets, where builders, buyers and banks ran wild, the areas with the greatest extremes usually feel the first and largest affects of the economic downturn and areas of relative restraint feel far lesser pain. This economic downturn has been no different, except now, those areas that had been previously immune are now being tormented by the same housing problems as their famous brethren.
“When I go out and talk to people around town, they say, ‘Wow, I thought we were going to have a 12 percent correction and call it a day,’ ” said Stan Humphries, chief economist for the housing site Zillow, which is based in Seattle. “But this thing just keeps on going.”
Seattle is down about 31 percent from its mid-2007 peak and, according to Zillow’s calculations, still has as much as 10 percent to fall. Mr. Humphries estimates the rest of the country will drop a further 5 and 7 percent.
At the peak, a downturn in real estate in Seattle was nearly unthinkable. In September 2006, after prices started falling in many parts of the country but were still increasing here, The Seattle Times noted that the last time prices in the city dropped on a quarterly basis was during the severe recession of 1982.
Even a risk index from PMI Mortgage Insurance gave the odds of Seattle prices dropping at a negligible 11 percent.
But this economic downturn has broken all the rules.
“We’re at a period near the bottom but with more volatility than we normally see at this point,” said David Stiff, chief economist of Fiserv. “This sort of double dip is unprecedented for housing.”
Welcome to the party.
Tags: housing crisis, recessions, housing bubbles, economic downturn, real estate, double dip
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