Realtor.com's Quarterly Turnaround Towns Report measures the strength of the recovery in the nation's large housing markets. The site ranked the markets with the biggest declines in inventory and inventory age, and the biggest increases in home prices, as markets leading the nation's recovery in growth and demand. 24/7 Wall St. reviewed the eight metropolitan areas that were, according to Realtor.com's rank, among the hottest markets in the country at the beginning of the year, but as of the third quarter have cooled down considerably.
Many of these markets were among the hardest hit by the housing crisis. Cities like Lakeland, Fla., Reno, Nev., and Bakersfield, Calif., had homes lose more than half their value during the collapse. As Alison Schwartz, vice president at Realtor.com, explained, it is not surprising that these markets were among the hottest at the beginning of this year. "Markets that were significantly impacted by the housing crisis have further to accelerate in order to get back to equilibrium conditions — whereas, markets that were less affected by the housing crisis have less room for acceleration."
It appears, however, that the rapid recovery in these markets has slowed.
One of the most obvious indicators of a cooling housing market is a slowing of home price growth. In places like Ventura, Calif., and Orlando, Fla., home prices rose by roughly 25% last year. But in the most recent quarter, prices rose by just 2.1% and 0.5%, respectively. In all but one of the hot housing markets that are now cooling off, home prices were up 7% or more in the second qua! rter of this year. Last quarter, however, most rose only 2% or less. In Orlando, home prices climbed 10% in the second quarter but did not grow at all last quarter.
The change in the number of homes for sale is also a good indicator of a slowing market. Areas with high demand are likely to see homes scooped off the market faster than they can be added. Most of these housing markets entered the year strong by this measure. Half of them saw the number of homes on the market drop by more than 20%, compared to the beginning of 2012. In Ventura, the decline was more than 40%. In the most recent quarter, however, inventory rose by at least 10% in all but one of the eight markets. In Ventura, inventory grew by 43%.
Homes in these markets sold very quickly at the beginning of this year, but as these markets have cooled off, it is taking longer to sell a property. In the first quarter of 2013, the median inventory age in these eight metropolitan areas was barely a month. In most of these markets now, that figure has risen to more than 60 days. In the Florida metro areas of Lakeland-Winter Haven and Sarasota-Bradenton, the time it takes to sell a home has roughly tripled since the beginning of the year.
To identify the hot housing markets that are cooling off, 24/7 Wall St. reviewed the markets that were in the top 25 for Realtor.com's Quarterly Turnaround Town Report rank as of the first quarter of 2013, but fell at least 25 spots by the third quarter of 2013. To rank higher in the turnaround town report, a market needed to have a relatively large increase in median list price and relatively large decreases in inventory and median inventory age. We excluded those markets where home prices rose more than 3% in the most recent quarter. All ranks are out of the 146 large metropolitan areas considered by Realtor.com.
These are the hot housing markets that are cooling down.
1. Ventura, Calif.
> Median home price: $500,000 (5th highest)
> Quarter-over-quarter change: 2.1% (! 45th high! est)
> Year-over-year change: 25.3% (12th highest)
> Median days in inventory: 52 (18th lowest)
Between the first quarters of 2012 and 2013, the median list price for a home in Ventura, already one of the most expensive housing markets in the country, rose by nearly $100,000 to just under $450,000. Between the first and the second quarter of this year, prices rose by 9.1%, but the market appears to have cooled off, and prices were up only 2.1% last quarter. The number of unsold homes on the market jumped between the first and third quarters, from 2,079 to 3,706. Over that same period, the time it took to sell a home increased by more than 60%.
2. Minneapolis-St. Paul, Minn.-Wis.
> Median home price: $220,000 (53rd highest)
> Quarter-over-quarter change: 0.0% (71st lowest)
> Year-over-year change: 17.0% (21st highest)
> Median days in inventory: 51 (tied for 11th lowest)
During the first quarter of 2013, a typical home in Minneapolis sold in just 27 days. This marked a decline from 163 days just one year before. However, by the third quarter, the figure was up to 51 days. At the same time, inventory has risen: In the first quarter, just over 11,000 homes were up for sale; by the third quarter, the number of properties available rose to more than 15,400. Although the Twin Cities' housing market has cooled off a bit, new home construction in the area has recently picked up.
3. Orlando, Fla.
> Median home price: $178,900 (65th lowest)
> Quarter-over-quarter change: 0.5% (65th highest)
> Year-over-year change: 19.4% (17th highest)
> Median days in inventory: 67 (44th lowest)
In the first quarter of 2013, a typical Orlando home lasted only 25 days on the market, down from 162 days in the same quarter of 2012. However, demand for homes in the area tapered off as the year went on. By the third quarter, the median selling time for a home had risen to 67 days. Despite the increase in inventory, however, home prices rem! ain fairl! y strong. As of the most recent quarter, prices are still up more than19% year-over-year, down only slightly from 25% since the first quarter.
24/7 WALL ST.: See the rest of 8 hot housing markets that are cooling down
24/7 Wall St. is a USA TODAY content partner offering financial news and commentary. Its content is produced independently of USA TODAY.
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