Is Your Local Housing Market on the Verge of Collapse?

The housing market has been in the news on and off for the past few years, largely due to record-low mortgage rates, an increase in foreclosures and falling home prices. While most markets across the United States have seen fewer ups than downs since the financial crisis and national housing market collapse, there are some that have suffered more than others.

Recently, MSNBC.com put together a list of housing markets that are in greater danger of collapsing than others. Amidst their struggles, what would it take for these markets to avoid falling apart? Are lawmakers working on ways to save them before it’s too late?

10 Markets in Danger of Collapse

Using data from the Fiserv Case-Shiller Indexes, which tracks real estate activity in 380 cities, the following cities were forecast to have the largest percent price drop between the first quarter of 2011 and the first quarter of 2012, making them the most vulnerable for collapse:

1. Fort Lauderdale, Fla. (11.1 percent drop expected): Home values in Fort Lauderdale have dropped nearly 50 percent since 2006 when prices reached their peak. Then in 2009, prices dropped an additional 28 percent.

Unfortunately, values are expected to continue dropping in this area in the next few years. Between 2011 and 2012, the expected decline is 11.1 percent and between 2012 and 2013, the expected drop is an additional 8.7 percent. While this is deemed the best housing market on the list, it is indeed one feared for collapse.

2. Bethesda, Md. (11.5 percent drop expected): This extremely wealthy area in Maryland has suffered immensely since the financial crisis. While it has the highest median family income in the country ($114,100) and the fifth highest median home price ($417,000) the values are dropping dramatically. In fact, Case-Shiller projects that home values will drop by more than $60,000 next year.

3. Salinas, Calif. (11.8 percent drop expected): In this small coastal city located south of San Jose, home values have dropped more than 61 percent, marking the fourth largest decline of all major American cities. Because layoffs are expected to continue in the coming months, home values are projected to drop an additional 11.8 percent by Q1 2012.

4. El Centro, Calif. (12.1 percent drop expected): Unlike Bethesda, which is one of the most expensive areas in the country, El Centro is known to be one of the poorest cities. With unemployment at an unbelievable 28.6 percent, home values have plummeted more than 50 percent between 2006 and 2011. Unfortunately, more drops are expected in the area by the first quarter of 2012.

5. Miami, Fla. (13 percent drop expected): In Miami, where it is cheaper to buy than rent of home, the possibility of market collapse is high thanks to a 13.4 percent unemployment rate and home value drops in the ballpark of 50 percent since 2006.

With more depreciation expected, median home values sitting at $175,000 are expected to drop 13 percent by 2012 then an additional 10.1 percent in the following year.

6. Merced, Calif. (13.2 percent drop expected): Merced, Calif. lost 46.1 percent of its housing value in 2008, which was the second-greatest depreciation in home value for a city since at least 1980.

Now the unemployment rate in the city is 18.6 percent. The inability for some to pay mortgages is driving values down so much that prices are expected to plummet and additional 13.2 percent by next year.

7. Detroit, Mich. (13.4 percent drop expected): Detroit currently has the lowest median home prices in the nation at an unbelievable $42,000, leaving thousands of homeowners with underwater mortgages. Unemployment is still high at 12.7 percent meaning more home value drops are expected. By quarter one of 2012, home values are projected to drop an additional 13.4 percent.

8. Las Vegas, Nev. (13.9 percent drop expected): Like Miami, Las Vegas has been in the news for quite some time thanks to its struggling market. What’s ironic is that it was a centerpiece of growth in the first half of the 2000s.

However, since 2008, its home values have dropped 42.3 percent. Worse, they are expected to plummet an additional 20.2 percent by Q1 2013.

9. Riverside-San Bernardino, Calif. (15.6 percent drop expected): It’s no secret California’s economy has been struggling for several years. In fact, this is the fourth city in the state to land on this list.

Both home and rental vacancies Riverside-San Bernardino in particular are high, forcing home values downward. In addition to the 55 percent drop seen since 2005, experts predict prices will plummet an additional 15.6 percent–or $30,000.

10. Naples, Fla. (16.6 percent drop expected): Naples represents the third city in Florida to make this list. Unfortunately, it is the city most likely on the verge of collapse.

With unemployment at 10.5 percent and homes losing 55 percent of their value (with an additional 16.6 percent expected drop by Q1 2012), many have a great deal of concern for the market’s ability to survive.

Because all of the cities on this list are expected to see home values plummet in the next few months and years, recovery is looking less and less like an option for them–at least for the foreseeable future. So does the government have any plans to save them?

Can the Government Save These Markets from Collapse?

Ever since we witnessed the housing bubble burst several years ago, the federal government has come up with plans to save the market from collapse.

It has started a number of programs, including a more recent one from the FHA that would allow jobless homeowners to miss mortgage payments for one year.

President Barack Obama also announced in August that he was directing a small team of advisors to develop a proposal that would keep the government playing a major role in the nation’s mortgage market and also provide homeowners with a loan subsidy to assist with payments.

On a smaller scale, cities have been making their own attempts to avoid collapse. For instance, in Detroit, Mayor Dave Bing has offered incentives to bring buyers back to abandoned neighborhoods: Police officers willing to buy among 100 abandoned homes in the city will receive $150,000 for renovations and only need a $1,000 down payment.

The city is also offering $2,500 to college graduates to rent or $20,000 to buy in a separate program.

Unfortunately, despite efforts to provide mortgage assistance and force banks–largely the cause of the housing market crash–into settlement deals to help borrowers keep their homes, it seems they haven’t made much impact to stop widespread foreclosures and underwater mortgages.

With millions of dollars being given away around the country to save U.S. housing markets, it’s unnerving that so many cities still face uncertain futures. The only thing we can hope is that the sad aftereffects of the housing crash can teach major companies lessons in overvaluing properties, products and services that create these bubbles. The likelihood of this happening, however, is not great.

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