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How Far Have the Most Expensive U.S. Real Estate Markets Fallen?
6 Apr 07
As the country enters the second phase of the housing correction and looks toward a stabilization, we observe how the most expensive real estate markets in the country have fared during the last year.
The housing correction that began in late 2005 has caused real estate price declines for the first time since the early 1990s. However, some real estate markets have remained resilient despite one-and-a-half years of downward pressure. Others were so expensive to begin with that, in spite of sizeable price declines, they retain the most expensive real estate in the country.Most Expensive Metros, 2005Q4 | (Median price of existing single-family home) | San Jose-Sunnyvale-Santa Clara | $724,619 | Santa Cruz-Watsonville | $680,742 | San Francisco-Oakland-Fremont | $677,210 | Santa Barbara-Santa Maria | $672,763 | Salinas | $642,723 |
The table above shows that, at the peak of the housing boom, the most expensive metros in terms of real estate were all in California. Yet, in the fourth quarter of 2005, all these areas had an affordability ratio of less than 100, meaning property there was not affordable to an average resident. As the housing correction progressed, more than half of the areas on the top-five list experienced housing price declines. Year/Year Price Changes, 2006Q4 | (Median price of existing single-family home) | San Jose-Sunnyvale-Santa Clara | 3.3% | Santa Cruz-Watsonville | -0.1% | San Francisco-Oakland-Fremont | 1.0% | Santa Barbara-Santa Maria | -5.0% | Salinas | -0.1% |
Yet, property prices in these metros were so high in late 2005 that they remain the most expensive and least affordable cities in the country. Most Expensive Metros, 2006Q4 | (Median price of existing single-family home) | San Jose-Sunnyvale- Santa Clara | $748,773 | San Francisco-Oakland-Fremont | $684,223 | Santa Cruz-Watsonville | $680,332 | Salinas | $641,977 | Santa Barbara-Santa Maria | $638,928 |
A slowing economy, low affordability, and a nationally soft real estate market will not allow these cities to come out of the housing downturn very soon. We expect the metros on this list to continue seeing falling real estate prices throughout 2007 and into early 2008. The good news it that falling prices will result in an increase in affordability during the same time frame. by Larissa Duzhansky
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