The national housing market is by most measures recovering at a healthy clip. Home prices in some of the hardest-hit markets -- places like Reno, Nev., and Phoenix, Ariz. -- were up by more than 30% in the third quarter of this year, compared to the same period last year. But while many cities have seen housing market activity heat up, others that were recently among the hottest in the nation have cooled off.
Realtor.com’s Quarterly Turnaround Towns Report measures the strength of the recovery in the nation’s large housing markets. The site ranked the markets with the biggest declines in inventory and inventory age, and the biggest increases in home prices, as markets leading the nation’s recovery in growth and demand. 24/7 Wall St. reviewed the eight metropolitan areas that were, according to Realtor.com’s rank, among the hottest markets in the country at the beginning of the year, but as of the third quarter have cooled down considerably.
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Many of these markets were among the hardest hit by the housing crisis. Cities like Lakeland, Fla., Reno, Nev., and Bakersfield, Calif., had homes lose more than half their value during the collapse. As Alison Schwartz, vice president at Realtor.com, explained, it is not surprising that these markets were among the hottest at the beginning of this year. “Markets that were significantly impacted by the housing crisis have further to accelerate in order to get back to equilibrium conditions -- whereas, markets that were less affected by the housing crisis have less room for acceleration.”
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It appears, however, that the rapid recovery in these markets has slowed.
One of the most obvious indicators of a cooling housing market is a slowing of home price growth. In places like Ventura, Calif., and Orlando, Fla., home prices rose by roughly 25% last year. But in the most recent quarter, prices rose by just 2.1% and 0.5%, respectively. In all but one of the hot housing markets that are now cooling off, home prices were up 7% or more in the second quarter of this year. Last quarter, however, most rose only 2% or less. In Orlando, home prices climbed 10% in the second quarter but did not grow at all last quarter.
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The change in the number of homes for sale is also a good indicator of a slowing market. Areas with high demand are likely to see homes scooped off the market faster than they can be added. Most of these housing markets entered the year strong by this measure. Half of them saw the number of homes on the market drop by more than 20%, compared to the beginning of 2012. In Ventura, the decline was more than 40%. In the most recent quarter, however, inventory rose by at least 10% in all but one of the eight markets. In Ventura, inventory grew by 43%.
Homes in these markets sold very quickly at the beginning of this year, but as these markets have cooled off, it is taking longer to sell a property. In the first quarter of 2013, the median inventory age in these eight metropolitan areas was barely a month. In most of these markets now, that figure has risen to more than 60 days. In the Florida metro areas of Lakeland-Winter Haven and Sarasota-Bradenton, the time it takes to sell a home has roughly tripled since the beginning of the year.
To identify the hot housing markets that are cooling off, 24/7 Wall St. reviewed the markets that were in the top 25 for Realtor.com’s Quarterly Turnaround Town Report rank as of the first quarter of 2013, but fell at least 25 spots by the third quarter of 2013. To rank higher in the turnaround town report, a market needed to have a relatively large increase in median list price and relatively large decreases in inventory and median inventory age. We excluded those markets where home prices rose more than 3% in the most recent quarter. All ranks are out of the 146 large metropolitan areas considered by Realtor.com.
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These are the hot housing markets that are cooling down.
8. Bakersfield, Calif.
> Median home price: $174,900 (57th lowest)
> Quarter-over-quarter change: 1.7% (54th highest)
> Year-over-year change: 24.9% (14th highest)
> Median days in inventory: 51 (tied for 11th lowest)
Based on figures from June and July of this year, the Bakersfield Californian observed signs of cooling within the local housing market, which, until recently, had been a leader in the housing recovery. According to the Californian, rising mortgage rates and less activity by investors are contributing to the cool down. Between the beginning of 2012 and the start of this year, home prices were up more than 20%. Between the first and second quarters of this year, home prices climbed an additional 11%. Since then, however, the median list price has leveled off, increasing by only 1.7%. At the start of the year, demand for homes in the area was high, with half of all properties selling in fewer than 20 days, the fifth shortest time of all large housing markets. As of the third quarter, the time needed to finalize a home sale had risen to 51 days.
7. Tampa-St. Petersburg-Clearwater, Fla.
> Median home price: $164,000 (43rd lowest)
> Quarter-over-quarter change: 2.5% (33rd highest)
> Year-over-year change: 17.2% (19th highest)
> Median days in inventory: 81 (64th highest)
As of the first quarter of 2013, the Tampa-St. Petersburg-Clearwater area’s inventory was shrinking, with the number of homes on the market dropping nearly 20% from the year before. The number of homes for sale increased slightly in the second quarter, then jumped considerably in the third quarter, up from 16,459 to more than 18,000. Compared with the beginning of the year, when half of all homes in the area sold in less than a month, it took more than twice that long to finalize a sale in the third quarter. There are other signs that Tampa Bay is seeing a drop in home demand. SunTrust, a bank holding company, as well as J.P. Morgan Chase, recently announced layoffs in the region due to decreased demand for mortgages.
6. Sarasota-Bradenton, Fla.
> Median home price: $239,900 (40th highest)
> Quarter-over-quarter change: -2.1% (23rd lowest)
> Year-over-year change: 9.6% (48th highest)
> Median days in inventory: 91 (39th highest)
Between the beginning of 2012 and the start of this year, median home price in the Sarasota area rose by more than 30%, among the largest increases of any major metropolitan area. Prices continued to climb over the first half of the year, but by the end of the third quarter, the median list price actually dropped -- from $245,000 in the second quarter to $239,900. According to the Florida Association of Realtors, about half of the foreclosed homes in the Sarasota area are not for sale because the previous owners are still living there. These homes can distort inventory numbers and drag down prices.
5. Lakeland-Winter Haven, Fla.
> Median home price: $139,000 (14th lowest)
> Quarter-over-quarter change: 3.0% (27th highest)
> Year-over-year change: 15.8% (24th highest)
> Median days in inventory: 92 (34th highest)
As of the first quarter of this year, home inventory in the Lakeland-Winter Haven area was down 84.8% from the year before -- one of the biggest declines in the country. Since the end of the third quarter, however, the number of homes on the market has risen by more than 15%, suggesting a cool down in buyer demand. Further, the median time it took to finalize a home sale has nearly tripled -- from about one month in the first quarter of this year to more than 90 days in the third quarter.
4. Portland-Vancouver, Ore.-Wash.
> Median home price: $259,900 (31st highest)
> Quarter-over-quarter change: 2.0% (47th highest)
> Year-over-year change: 8.3% (57th highest)
> Median days in inventory: 70 (55th lowest)
At the start of 2012, roughly half of all home sales in the Portland-Vancouver area took more than seven months to finalize. A year later, this figure had dropped to just 27 days, one of the most dramatic declines of the large housing markets. The boom has since subsided slightly, however, with a typical home remaining on the market for more than two months in the third quarter. At the same time, the number of homes on the market has increased for the first time in more than a year. Despite the cool down, there are signs the market remains very healthy. Local news reports, for example, note foreclosure rates in Portland are lower than they have been for years.
3. Orlando, Fla.
> Median home price: $178,900 (65th lowest)
> Quarter-over-quarter change: 0.5% (65th highest)
> Year-over-year change: 19.4% (17th highest)
> Median days in inventory: 67 (44th lowest)
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In the first quarter of 2013, a typical Orlando home lasted only 25 days on the market, down from 162 days in the same quarter of 2012. However, demand for homes in the area tapered off as the year went on. By the third quarter, the median selling time for a home had risen to 67 days. Despite the increase in inventory, however, home prices remain fairly strong. As of the most recent quarter, prices are still up more than19% year-over-year, down only slightly from 25% since the first quarter.
2. Minneapolis-St. Paul, Minn.-Wis.
> Median home price: $220,000 (53rd highest)
> Quarter-over-quarter change: 0.0% (71st lowest)
> Year-over-year change: 17.0% (21st highest)
> Median days in inventory: 51 (tied for 11th lowest)
During the first quarter of 2013, a typical home in Minneapolis sold in just 27 days. This marked a decline from 163 days just one year before. However, by the third quarter, the figure was up to 51 days. At the same time, inventory has risen: In the first quarter, just over 11,000 homes were up for sale; by the third quarter, the number of properties available rose to more than 15,400. Although the Twin Cities’ housing market has cooled off a bit, new home construction in the area has recently picked up.
1. Ventura, Calif.
> Median home price: $500,000 (5th highest)
> Quarter-over-quarter change: 2.1% (45th highest)
> Year-over-year change: 25.3% (12th highest)
> Median days in inventory: 52 (18th lowest)
Between the first quarters of 2012 and 2013, the median list price for a home in Ventura, already one of the most expensive housing markets in the country, rose by nearly $100,000 to just under $450,000. Between the first and the second quarter of this year, prices rose by 9.1%, but the market appears to have cooled off, and prices were up only 2.1% last quarter. The number of unsold homes on the market jumped between the first and third quarters, from 2,079 to 3,706. Over that same period, the time it took to sell a home increased by more than 60%.