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Housing recovery is all about timing and location

By J.W. Elphinstone / Associated Press

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NEW YORK » If you bought a home in San Francisco in the past year, it might feel like the housing slump is over. Bay Area home prices have shot up 18 percent in the past year.

But someone next door who bought in 2006 may have suffered a 35 percent loss in value. And if you're a Las Vegas homeowner, there's been no good news in four years.

The latest report on home prices confirms that real estate is all about timing and location.

Nationally, home values rose 1.3 percent in May from April, according to the Standard & Poor's/Case-Shiller 20-city home price index released yesterday.

And 19 of 20 cities showed price gains month over month.

Honolulu is not among the cities in the survey. However, for the first half of the year, the median sale price for Oahu homes was up 2.6 percent to $585,000, according to the Honolulu Board of Realtors.

Conditions are hardly uniform across the country. Some cities, such as San Francisco and Washington, have less area to build out and better job markets, so they have suffered less or in some cases recovered more quickly. Even cities like Phoenix and Las Vegas, which endured some of the worst losses after the housing bubble burst, are seeing vastly different trends over the past year.

"Generally, in any recovery, there is always parts of the country that lead the way and certain parts that lag behind," said Jonathan Basile, vice president of economics at Credit Suisse. "To understand why, you have to look at the economies of those areas and how much building went on to help determine why one outperforms and others underperforms."

Take Las Vegas, Phoenix and Miami. Home values soared in all three cities during the early part of the last decade, then plummeted in the last few years. All three have struggled with high foreclosures.

Yet over the past year, while home prices rose 7.2 percent in Phoenix, they ticked up only 1.2 percent in the Miami and fell 6.5 percent in Las Vegas.

Part of the reason is that Phoenix has a healthier job market than the other two cities. Its metro area had an 8.7 percent unemployment rate in May, one point lower than the national average.

Las Vegas, meanwhile, had a 14.1 percent unemployment rate in May, while Miami had an 11.2 percent rate. That left fewer households in position to take advantage of government tax credits for homebuyers that expired in April and the lowest mortgage rates in decades.

Prices in Las Vegas have lost more than half their value since peaking in August 2006. And the long-term picture isn't rosy, either. Home values there have risen a mere 2 percent since 2000, according to S&P/Case-Shiller.

Miami home prices are up 46 percent since the beginning of the decade but just 1 percent over the past year.

Of all cities, San Francisco has shown the sharpest turnaround. After values plunged 46 percent to their low in March of last year, they have regained 21 percent, the best performance in the S&P/Case-Shiller report.

Most economists don't expect the price increases to last through the year. And many predict prices will fall through the rest of the year. A high number of foreclosures will continue to weigh on prices in many areas, and job uncertainty and tight credit are still keeping many would-be buyers sidelined.

"I bet in six months, 15 to 20 cities will have falling prices," said IHS Global Insight economist Patrick Newport. He predicts prices will fall a further 6 percent to 8 percent before turning around next year.

The pain, though, likely won't be equally shared.






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