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Home Prices May Decline over the Next Year
By
Jeanette Joy Fisher
As America's economy begins to
cool, a number of economists have begun to predict only modest gains in the
prices of single-family homes during the next year. The consensus is that
home prices will rise between 3 and 4%, which is a respectable increase, but
well below the 10% nationwide average over the past five years.
Ironically, the biggest
slowdowns are likely to take place in the areas of the country that have
seen the hottest real estate markets over that five-year period, including
New York, Los Angeles, and Las Vegas. However, the real estate price
slowdown is expected to reach many other parts of the country over the
course of the next year, as well.
In an interesting twist, a
number of real estate markets that have been slow over the past five years
will begin to see upturns as the affordability of their home prices begins
to catch the eye of buyers unwilling to pay the rapidly rising prices they
see in other areas. In fact, a number of the areas that are predicted to see
the most rapid price rises may surprise you. For instance, five of the top
ten cities are located in Washington State, led by Wenatchee, which is
expected to see a 16% gain over the next year. The nation's fast-rising real
estate prices are expected to occur in Panama City, Florida, at 21%.
Surprisingly, El Centro is the only California city listed among the top ten
markets, which should raise a number of eyebrows.
Those double-digit increases
are again respectable, but nowhere near the 20% average increase for
America's top ten fastest rising home prices over the past five years.
The other four Washington
cities and their rates of increase are: Mount Vernon (14%), Yakima (13%),
Olympia (13%), and Spokane (12%). Two other Florida cities made the top ten
list: Lakeland (14%) and Ocala (13%). Rounding out the top ten was
Flagstaff, Arizona (12%).
Some areas of the country that
have been quite hot over the past several years may actually begin to
experience price declines, such as Santa Barbara, California, which may see
a 3% decrease in its average home price. Las Vegas may also experience a
similar price decline over the next year.
The slowest gaining areas of
the country over the past five years have been in the Midwest and South, and
especially in Ohio and Indiana, which contributed five of the slowest
American real estate markets during the period from 2001-2005. For instance,
Lafayette, Indiana, averaged just 2.3% annually over that time, which
represented an increase of only 10% of the gains experienced by the nation's
hottest real estate markets. The largest city among the bottom ten markets
was Memphis, Tennessee, according to the Census Bureau, with a population of
about 700,000.
Whatever the statistics above
stated, it should be pointed out that many successful investors make a lot
of money in the those cities labeled "the bottom ten." No matter what
happens in the home market, smart investors know how to make money in real
estate.
All in all, real estate prices
should rise somewhat, unless you happen to live in one of those areas that
has been red hot since 2001, but don't expect to see the spectacular
increases you've seen over the past five years.
Copyright © 2006 Jeanette J.
Fisher
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