Magazine article Economic Trends

Wide Variation in House Price Decline across the Country

Magazine article Economic Trends

Wide Variation in House Price Decline across the Country

Article excerpt


Since the peak of the housing market, which occurred in mid-2006 according to the Case-Shiller 10-city and 20-city composite indices, housing markets across the United States have seen large declines in home prices. However, some areas have fared much worse than others.

We look at variation in the size of the price declines, both across different Metropolitan Statistical Areas (MSAs) and within each MSA. We measure the growth rates of housing prices over the past six years using repeat sales indices. The data cover March 2006 to March 2012, and we report all growth rates in real terms. The indices are computed using nondistressed transactions of attached (condo, townhome) and detached single-family homes.


Housing price growth rates for the 61 MSAs that had a population of one million or more in 2000 show a large amount of variation. While prices dropped by more than 50 percent in Las Vegas, Riverside, Sacramento, and Orlando, prices fell by less than 10 percent in Buffalo, Pittsburgh, Austin, and Oklahoma City. Some of the biggest declines have occurred in warm-weather MSAs that saw large increases in prices prior to the peak. Some of the smallest have been in places where the economy has been less adversely affected by the downturn, such as Texas and Oklahoma. Interestingly, there is quite a bit of variation in older northern MSAs. While prices have fallen by about 50 percent in Detroit and about 30 percent in Cleveland, they are down by much less in Rochester, Pittsburgh, and Buffalo.

While housing price growth rates have varied substantially across MSAs over the past six years (the standard deviation is about 14 percentage points), they varied much more during the boom period from 2000 to 2006. Depending on the price measure used, standard deviations of growth rates in those years were 33 to 42 percentage points.

In addition to variation in price declines at the MSA-level, there is also variation from neighborhood to neighborhood within each MSA. On average, housing price growth rates had a standard deviation of about 7.5 percentage points at the zip-code level within MSAs from 2006 to 2012 This is lower than the 14 percentage point standard deviation across MSAs from 2006-2012, and is also lower than the standard deviation at the zip-code level within MSAs from 2000-2006 (18 percentage points). …

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