The poster children of the housing bust are back.
Last week, Realtor.com released its August “Hotness Index,” ranking metro areas on how many days a listing in that area stays on the market, as well as how many web page views it receives.
(News Corp, which owns MarketWatch, publisher of this article, also owns Realtor.com, the listing website of the National Association of Realtors.)
Studding August’s top ten are names familiar from the housing bubble and the municipal distress that resulted when it burst: Vallejo and Stockton, two California cities that filed for Chapter 9 bankruptcy, as well as Modesto, Sacramento, and Fresno, which had hard times of their own.
Rank Market Median days on market
1 Vallejo-Fairfield, CA 37
2 Dallas-Fort Worth-Arlington, TX 41
3 Denver-Aurora-Lakewood, CO 36
4 San Francisco-Oakland-Hayward, CA 33
5 Stockton-Lodi, CA 38
6 San Diego-Carlsbad, CA 43
7 Columbus, OH 46
8 Waco, TX 47
9 Detroit-Warren-Dearborn, MI 46
10 Sacramento-Roseville-Arden-Arcade, CA 45
11 Fort Wayne, IN 48
12 Yuba City, CA 47
13 Modesto, CA 40
14 San Jose-Sunnyvale-Santa Clara, CA 33
15 Fresno, CA 47
16 Colorado Springs, CO 44
17 Santa Cruz-Watsonville, CA 48
18 Kennewick-Richland, WA 40
19 Santa Rosa, CA 51
20 Nashville-Davidson-Murfreesboro-Franklin, TN 39
A decade ago, California’s “Central Valley” was the epitome of “drive until you qualify,” a run-up of demand for housing at the outermost point from a job hub where homes become affordable.
Real estate markets there are benefiting once again from the booming job market in San Francisco and San Jose, where prices are notching new record highs. Prices in Vallejo, Stockton, Fresno, Sacramento and Modesto sank by about two-thirds, nearly double the national average, and are still well below the peaks they set during the bubble.
But the hard-luck cases swelled, and then burst, because of overbuilding, said Jonathan Smoke, chief economist for Realtor.com. “We were building homes that if not for speculation, no one would occupy.”
In fact, Smoke said, “We have the opposite problem now.” Housing starts rose to the second-highest rate since the recession in July,
While there’s always the risk of an economic downturn that wipes out jobs and then hits the housing market, Smoke said, “I don’t think there’s a significant fear that the Silicon Valley/Bay Area is likely to see job losses. It’s more that they can’t keep the pace of growth going because of the lack of housing.”
Smoke calls secondary metro areas near major hubs “spillover” cities. It’s a phenomenon that’s seen beyond California, in places like Providence, Rhode Island, and Portland, Maine, as Boston becomes pricey.
There’s another signal that outsize demand isn’t inflating a bubble this time around, Smoke said. Beyond cyclical job losses, a major factor that weighs on local housing markets is when the population shrinks over a long period of time, like in Detroit. But places like Columbus, which had been losing population for years, are re-appearing on Realtor.com’s index of hottest metros. “They’re not losing young people now,” he said.
In August, Columbus hit number-seven on the hotness list. Not far behind it, at number-nine, was Detroit. In fact, several other metros that have struggled, from Harrisburg, Pennsylvania, to Central Falls, Rhode Island, are all improving in terms of “hotness” compared to a year ago, Smoke said.