The bursting of the housing bubble shattered one of the most widely held misconceptions among buyers: home prices can’t fall. For far too long, homeowners counted their profits before the ink was dry, while analysts expected a new era of prosperity. As we now know, home prices can indeed fall. In fact, some areas of the country suffered from declining prices well before the financial crisis.
Zillow Research recently analyzed the past thirty-five years of housing data to find which markets homeowners were mostly likely to incur a loss upon selling their homes. The firm chained its Zillow Home Value Index (ZHVI) to the FHFA Home Price Index, and observed changes in median values over 117 rolling five-year periods since the end of 1979. Out of the fifty largest housing markets in America, the riskiest metro areas were found in New England.
“Some of the most risky areas may come as a bit of a surprise, as they aren’t known as places that were hardest-hit after the most recent housing bubble,” explains Zillow. “While the measure of percent of negative returns identifies the metro areas where home values more consistently declined, it does not give extra weight to places that saw extreme declines post-bubble.”
Let’s take a look at the ten riskiest housing markets in America, based on likelihood of negative returns during the rolling five-year periods. In the case of ties between markets, those with the bigger drop in their worst years were ranked as riskier.