Where Not to Buy a Home Right Now

It’s more or less impossible to time the market, as you’re going to buy a home when you’re going to buy one. But there’s no doubt that the housing market has peaked and is even poised to decline in many parts of the U.S. By now, it should come as no surprise that the California housing market stands as the most likely to slide.

These 10 overvalued cities have run their course, according to CNN Money, and home prices are expected to drop over the next year. So if you’re in the market for a home and aren’t sure where to settle, you might want to think it through before picking one of these bubble hotspots:

1. STOCKTON, CA

Median home price: $360,000
Home price appreciation (2004-2005): 30.00%
One-year Market forecast: -9.7%

A huge price run-up in the past few years seems to be an outgrowth of the booming home markets all over California. But this agricultural-support city seems to have little reason for high housing prices otherwise. It has mostly low-paying industries and ample space for new development.

2. MERCED, CA

Median home price: $318,000
Home price appreciation (2004-2005): 34.70%
One-year Market forecast: -8.9%

This is a small, sleepy San Joaquin Valley town that has also benefited from the general run up of California home prices. One big positive factor Merced has going for it is the opening of the 10th campus of the University of California, so perhaps the home mortgage demand won’t evaporate altogether.

3. RENO/SPARKS, NV

Median home price: $300,000
Home price appreciation (2004-2005): 24.40%
One-year Market forecast: -8.9%

Casinos and divorce were the bedrock of Reno’s economy. Now you can get a game (or part ways with your spouse) nearly everywhere. No other industry has arisen to take gaming’s place as the economic driver, and many of the old downtown casinos have been reborn as condos, depriving the city of job sites and adding to its elastic housing stock.

4. FRESNO, CA

Median home price: $264,000
Home price appreciation (2004-2005): 26.90%
One-year Market forecast: -7.9%

Yet another valley city with an economic base of low-paid agricultural industry workers, Fresno real estate rang up impressive price hikes during the boom. Today, potential for growth seems very limited. The landscape is mostly uninspiring, the weather unfavorable and the amenities negligible. Not exactly a combination of factors that make you want to rush out and pay a fortune for a home loan.

5. VALLEJO/FAIRFIELD, CA

Median home price: $412,000
Home price appreciation (2004-2005): 18.40%
One-year Market forecast: -7.8%

For more than 100 years, the economic engine for this area was a naval shipyard. It closed 10 years ago. The Victorian and Craftsman houses left behind in downtown Vallejo have proven a magnet for San Franciscans, but slow economic growth won’t support the double digit price increases it experienced from 2000-2005.

6. LAS VEGAS, NV

Median home price: $260,000
Home price appreciation (2004-2005): 11.20%
One-year Market forecast: -7.1%

Much of the Las Vegas market’s appreciation of recent years can be attributed to buying for investment. Now that has slowed and housing in the gaming Mecca must rely on the city’s economy. The booming job market consists mostly of middle- and low-paying jobs, however, providing little to attract big money beyond the tables. That, combined with lots of space, makes it unlikely for the Nevada mortgage market to further soar.

7. BAKERSFIELD, CA

Median home price: $282,000
Home price appreciation (2004-2005): 42.80%
One-year Market forecast: -6.6%

Oil wells, cotton fields and pecan and almond growers, as well as country-western music, make this valley city seem like an outpost of southeastern Texas rather than the left coast. It shares with that area many of the factors that work against high real estate prices: low-paying jobs, hot summers, uninspiring scenery and plenty of room to expand. In other words, don’t expect California mortgage demand to be booming here for long.

8. SACRAMENTO, CA

Median home price: $339,000
Home price appreciation (2004-2005): 19.80%
One-year Market forecast: -6.4%

California’s capital has the reputation of a place where the living is unexciting. An erstwhile agricultural town that has outgrown its origins, Sac has transformed its outlying tomato fields into tract house developments. Searing heat, choking smog and a lack of cultural life don’t help attract affluent buyers. Even the governor lives in SoCal.

9. WASHINGTON, D.C.

Median home price: $380,000
Home price appreciation (2004-2005): 16.90%
One-year Market forecast: -6.3%

Prices in D.C. have run up quite a bit over the past few years; probably beyond the city’s ability to sustain. Many of the big money earners long ago decamped for points east (Maryland shore) or west (Fairfax County) leaving behind moderate income earners and the poor. The residents cannot afford to pay any more for housing than they already are shelling out.

10. TUCSON, AZ

Median home price: $174,500
Home price appreciation (2004-2005): 22.00%
One-year Market forecast: -6.2%

Arizona mortgage costs in this desert city are not too bad, but they’re quite a bit higher than the average working person can afford. The city’s demographics, which include many baby boomers and retirees on fixed incomes and a large immigrant population, as well as miles of developable land, make it unlikely that prices will go up.