6 housing markets that are hitting bottom

The U.S. housing market looks like a scorched landscape. Nationwide, home prices are down almost 32% from their 2006 peak. Many economists expect them to fall at least 5% more this year. Some predict even steeper declines. Even if home prices bottom later this year -- a big "if" for many markets -- they're not likely to rise much for several years, forecasters predict. "It'll take a long time for markets to recover," says Paul Dales, economist at Capital Economics. That's because millions of homes still face foreclosure. Lending standards are tight. Almost one-quarter of homeowners with mortgages are underwater, which means it will be tough for them to move up into nicer homes because they owe more than their current house is worth. Yet, even charred terrain sprouts green shoots eventually. And some areas have laid the groundwork for better days, according to an analysis for USA TODAY by real estate website Zillow.com. Of the nation's 100 largest metropolitan areas, Zillow identified six --Las Vegas; Fort Myers, Fla.; Stockton and Vallejo, Calif.; Hartford, Conn.; and Columbus, Ohio-- that show best what housing markets look like when they are bottoming out but not yet in recovery mode. To identify them, Zillow considered factors such asthe trajectory of home prices, housing affordability based on a ratio of prices to local incomes, and foreclosure rates. None of the six is seeing price gains, just lessening declines that are expected to continue. Their foreclosure rates have peaked, so the worst could be behind them. Homes in these markets also are becoming more affordable, relative to local incomes, than they were before the real estate boom and bust of the past decade. Investors in many of the markets say the housing deals won't get much better.

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