Uneven Recovery: Negative Equity, Distressed Sales to Blame

Uneven Recovery: Negative Equity, Distressed Sales to BlameA new index that ranks the metropolitan areas on the high end of the housing recovery illustrates the uneven impact of distressed sales and “underwater” mortgages.
RealtyTrac’s first-ever Housing Market Recovery Index (Housing MRI) found that markets in upstate New York, southwest Florida and the Bay Area of Northern California are leading the recovery.
Meanwhile, markets in northern Maryland, southeast Pennsylvania and downstate Illinois are lagging the furthest behind in the recovery.
The index was calculated based on seven different factors: unemployment rate, underwater loans percentage, foreclosure activity percent change from peak, distressed sales percent of total sales, institutional investors share of total sales, cash purchases share of total sales, and median home price percent change after hitting bottom.
“The U.S. housing market has clearly shifted to recovery mode over the past 18 months, with home prices consistently rising and  foreclosures falling closer to pre-housing bubble levels,” said Daren Blomquist, vice president at RealtyTrac.
However, the elements of distress that has plagued the housing market over the past seven years continue to linger, including a high percentage of underwater borrowers and distressed sales. This lingering distress is creating an uneven pace of recovery across different local markets, Blomquist said.
The seven factors were indexed for each market with national averages as a baseline, and all seven indexes were averaged to calculate a total recovery index.
RealtyTrac ranked 100 major U.S. metros based on this total recovery index, but data is available for more than 900 metro areas nationwide.
“Median home prices have bottomed and are now rising in all 100 ranked markets,” Blomquist noted. “Likewise, foreclosure activity is past its peak in all 100 ranked markets — although foreclosure numbers have been rebounding recently in some areas where a more lengthy judicial process created a backlog of pent-up foreclosure activity.”
Of the top 20 markets leading the real estate recovery, Rochester, N.Y., topped the list   thanks to below-average unemployment, underwater and distressed sales percentages, combined with above-average drops in foreclosure activity and increases in home prices.
Similar strong numbers in another upstate New York metro, Albany, helped that market post the third highest recovery index, slightly behind the southwest Florida market of Cape Coral-Fort Myers, one of the hardest-hit markets in the last seven years.
Recovery in the Cape-Coral-Fort Myers market is being driven by strong home price increases, which are being fueled by a high percentage of cash and institutional investor purchases, along with sharp decreases in foreclosure activity. The Cape Coral-Fort Myers ranked second on the list, despite an above-average percentage of underwater homeowners and distressed sales.
Two markets in the Bay Area of Northern California ranked among the top 5 markets leading the recovery: San Jose at No. 4 and San Francisco at No. 5. Both these markets outperformed the nation for unemployment rate, underwater percentage, foreclosure activity decrease since peak, and median price increase from the bottom of the market.
Below are RealtyTrac‘s top 10 recovering markets:
Uneven Recovery: Negative Equity, Distressed Sales to Blame

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