Best and Worst Housing Markets of 2011

Based on year-over-year home price declines, Tulsa takes the prize for the best housing market.

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It's easy to get caught up in all the doom and gloom hanging over the housing market: Home prices are still falling, experts predict more foreclosures on the way, and millions of Americans have underwater mortgages.

To be sure, there are no shortages of challenges when it comes to the housing market. Still, some cities have managed to ride out the bumpy real estate ride and have posted some pretty good statistics this past year.

Here's a look at the top five metro markets based on year-over-year price changes:

Metro Area Home Value Year-Over-Year Price Change (Oct. 2010 to Oct. 2011 Peak Fall From Peak
Tulsa, Okla. $101,000
6.2 percent
October 2011 0 percent
Oklahoma City, Okla. $105,900
3.1 percent
October 2011 0 percent
Lincoln, Neb. $127,400
2.7 percent
February 2006 -2.7 percent
Honolulu, Hawaii $474,200
1.3 percent
April 2007 -7.9 percent
Madison, Wis. $192,400
1.3 percent
February 2007 -6.2 percent

Source: Zillow, based on year-over-year price changes

Why have these cities fared so well? It comes down to a few factors, including a strong local economy, good employment prospects, and maybe most important, the lack of a big housing run-up in the boom years.

Oklahoma City, Okla., featured in a previous blog post as the most "economically secure" metro area, was again near the top of the list of "best" housing markets.

"Oklahoma City is a poster child, a touchstone that we keep going back to throughout the housing recession for markets that have bucked the trend," says Stan Humphries, chief economist at real estate website Zillow. "Because it did not participate in the housing run-up is why it's held its value so well in the recession, because it didn't get overpriced."

The same is true for Tulsa, Okla., Lincoln, Neb., and Madison, Wis. "These heartland markets are really your steady eddies," Humphries says, adding that Tulsa and Oklahoma City also benefit employment-wise from being in the energy belt, an industry that has held up well during the recession.

Honolulu is a slightly different case and remains a hot market because it's an attractive place to live. The island city did see a significant building run-up and out of the top five metros had the largest price declines off of peak, but continued demand for property there both from the United States and abroad has kept Honolulu's housing market relatively stable.

"Tulsa, Oklahoma City, and Madison are seeing organic demand in the market, so it's really dependent on their own economic vitality," Humphries says. "Honolulu and L.A., New York, and D.C. are seeing a lot of both domestic interest and hefty international buying interest."

"Germans, Spaniards, and Chinese nationals really want to take advantage of lower prices and they're not going to want to move to the heartland," he adds.

While markets such as Honolulu and Madison have fared well, there's the other side of the story as well: markets that have taken the brunt of the housing meltdown and continue to slog through a long and tough recovery.

Here's a look at the bottom five metro markets based on year-over-year price changes:

Metro Area Home Value Year-Over-Year Price Change (Oct. 2010 to Oct. 2011) Peak Fall From Peak
Gainesville, Ga. $111,300
-17.2 percent
June 2007 -31.3 percent
Atlanta, Ga. $109,700
-14.7 percent
June 2007 -37.6 percent
Medford, Ore. $158,200
-14.2 percent
February 2006 -45 percent
Chico, Calif. $169,300
-14 percent
December 2005 -43.4 percent
Mobile, Ala. $78,200
-12.8 percent
April 2008 -20.6 percent

Source: Zillow, based on year-over-year price changes

Two Georgia markets top the "worst" list, a testament to the myriad economic difficulties the state has faced. Georgia has had a fairly high number of bank failures, a legacy of the building run-up in those communities in the boom years. As residential and commercial projects went under, so did the community banks that invested heavily in them.

Georgia has also been hit hard by the foreclosure epidemic, which has created a vicious cycle. More foreclosures mean lower home prices, and lower home prices mean more foreclosures as more homeowners find themselves with underwater loans.

California, arguably the epicenter of the sub-prime market collapse, is another state still struggling to recover from the housing meltdown. Chico has mirrored many of the trends typical of California, and home prices remain more than 43 percent off of their December 2005 peak.

"If you look at the worst five compared to the best five, there's a pretty strong correlation with the fall from peak and current year-over-year decline," Humphries says. "That has to do with that vicious cycle of home value declines leading to foreclosures cycling back into more home value declines."

mhandley@usnews.com

Twitter: @mmhandley