Real Estate Depreciation — the Lowest of Lows in the U.S.
Recently, I wrote a blog post about areas in the U.S. where 2008 Q1 home values actually appreciated from 2007′s Q1 home values. This, unfortunately, is the counter post and it ain’t pretty.
Guess which area was the biggest loser? If you guessed California, you’re right. But, if you nailed it with a guess of Merced, CA, you’ve really been paying attention. According to our Q1 Home Value Report, the city of Merced, which is located smack dab in central California — about two hours from the Pacific Coast and two hours to Yosemite — dropped in value by 34 percent YoY in Q1 . Thirty-four percent! Even the second “help link” on the home page for the City of Merced Web site lists a link “I want to… avoid foreclosure” with the lead sentence stating, “Merced has one of the highest foreclosure rates in the nation. It’s estimated that one out of every 82 homeowners in Merced is having problems paying the mortgage.” Actually, it’s one in 66 households, according to a CNN article, but obviously, the city has a vested interest in making sure it citizens get the help they need in order to prevent a dwindling tax base, the West Nile Virus , or another Youngstown, Ohio.
As a matter of fact, the top six MSAs with the worst depreciation year-over-year in Q1 are all in California: Merced, Stockton, Modesto, Salinas, Riverside-San Bernadino-Ontario, and Madera. Vegas is the first non-California MSA that makes this depressing list. To add insult to injury, Vallejo, CA recently declared bankruptcy due to falling tax revenues, rising payroll expenses, and a bad housing market. As a matter of fact, out of the 160 MSAs we cover in this report, 129 have lost value. Here’s the top 10 list of biggest losers for Q1, YoY:
| Region | Zindex | YoY Change |
|---|---|---|
| Merced, CA | $187,500 | -34.0% |
| Stockton, CA | $244,000 | -33.5% |
| Modesto, CA | $222,500 | -30.1% |
| Salinas, CA | $454,000 | -27.7% |
| Riverside-San Bernardino-Ontario, CA | $287,500 | -26.0% |
| Madera, CA | $212,500 | -25.5% |
| Las Vegas-Paradise, NV | $215,500 | -25.2% |
| Vero Beach, FL | $159,500 | -24.9% |
| Punta Gorda, FL | $139,000 | -24.9% |
| Vallejo-Fairfield, CA | $336,500 | -24.4% |
In looking at the 5-year annualized change, Merced did not have any growth, meaning its value is right back to where it started five years ago. However, in looking at the 10-year annualized change, Merced is still ahead in value, holding a 7.2% home value gain since 1998. Whew. Of the top 10 MSAs that lost value, the MSA of Riverside-San Bernardino-Ontario appears to be the most promising since its held strong to its 5-year annualized value of 5.8% and its 10-year annualized value of 10.2%.
Now for the really bad news. In looking at depreciation over a 10-year time period, MSAs that have been flat or moved downward continue to be ones that are recognizable for hardships suffered during the demise of the auto industry or other manufactured goods in Michigan or Ohio:
| Region | Zindex | YoY Change | 5-yr | 10-yr |
|---|---|---|---|---|
| Jackson, MI | $101,500 | -18.8% | -3.8% | 1.5% |
| Detroit-Warren-Livonia, MI | $148,000 | -15.9% | -4.5% | 0.4% |
| Flint, MI | $77,000 | -12.9% | -2.8% | 0.1% |
| Muskegon-Norton Shores, MI | $78,500 | -11.2% | -1.7% | 1.4% |
| Toledo, OH | $99,500 | -10.4% | -1.5% | 1.8% |
| Grand Rapids-Wyoming, MI | $123,500 | -8.3% | -0.9% | 2.2% |
| Dayton, OH | $108,000 | -3.1% | 0.6% | 2.0% |
| Cleveland-Elyria-Mentor, OH | $124,000 | -7.7% | -1.5% | 1.7% |
| Springfield, OH | $94,500 | -4.1% | -0.1% | 2.0% |
| Canton-Massillon, OH | $110,500 | -3.4% | 0.2% | 1.9% |
