The recent recession has created new declining cities and increased difficulties for cities already in decline, according to a Mortgage Bankers Association (MBA) study.
A key finding from the study cites that some cities may not re-attain home price peaks for a number of years. It also predicted that some neighborhoods could cease to be economically viable.
"The primary goal of [the study] is to offer insights on the potential future evolution of real estate markets in cities that are in the midst of a severe and persistent economic decline," said James R. Follain, senior fellow of the Rockefeller Institute of Government, which conducted the study for the MBA. "The future viability of these areas may be threatened by recent economic events. This is a critical point that should be well understood by potential homebuyers and lenders who want to avoid places plagued by high foreclosures, vacancies and a deteriorating housing stock due to deferred maintenance.
"Though the pace and extent of the overall economic recovery of these markets is still far from certain, many places will likely resume growth and fully recover within the next decade or so," said Michael Fratantoni, MBA vice president of research and economics. "This will likely not to be the case for all metropolitan areas, however. Even among those metro areas with relatively brighter long-run prospects for growth, certain segments or submarkets within them may remain well below the peaks reached at the height of the boom for many years to come."
Key findings from the study include:
• Substantial home price deterioration occurs in markets that suffer significant declines in population or employment.
• The impacts among neighborhoods or smaller cities within metropolitan areas experiencing substantial overall decline are likely to be widely disparate and could well threaten the sustainability or long-term viability of some previously stable neighborhoods.
• Both homebuyers and lenders will have a tendency to avoid places plagued by high foreclosures, vacancies and a deteriorating quality of the housing stock due to deferred maintenance.
