A Tale of Four Cities

LOS ANGELESPrices are on the mend in Los Angeles, which has a tight supply of homes. Residential values rose 2.2% in the third quarter over the previous second quarter, according to the Standard & Poor's/Case-Shiller index. The improvement is giving sellers confidence to bump up asking prices. The owner of a one-bedroom condo increased his listing in December to $429,000, from $379,000. Still, the recovery in L.A. could hit the skids next year if unemployment there goes higher than the current 12%. The cash-strapped state government continues to lay off local workers. The city also faces a tide of foreclosures when borrowers' payments balloon on risky adjustable rate mortgages. "The recent appreciation in L.A. is temporary and will start going down toward the end of this year as the selling season ends," says John Burns, a real estate consultant.

ATLANTAIn 2009, Georgia had more bank failures than any other state, with many centered around the capital. The busted lenders provided loans to the developers that fueled the building craze. That's wreaking havoc on housing: By yearend prices are expected to be down 36% from their peak in 2006. "We still have a fair amount of pain to come in terms of bank failures and ripple effects," says Dorsey Farr, a principal at French Wolf & Farr, an Atlanta investment adviser. "I don't think we're out of the woods." The seller of a four-bedroom brick home in the upscale Buckhead neighborhood has cut the listing from $525,000 in September to $460,000.

DALLASLike much of Texas, Dallas has had it easy. Prices have fallen just 11%, vs. 23% for the rest of the country, and may rebound in 2010 thanks to a strong job market. The metro area is home to AT&T (T) and semiconductor-maker Texas Instruments (TXN), which recently opened a chip plant in a suburb. "Dallas looks poised to have a reasonable degree of employment stabilization in 2010," says Jim Gaines, a research economist for the Real Estate Center at Texas A&M University. "That would firm up demand for housing even after the home-buyer credit expires."

NEW YORKNew York was one of the last real estate markets to stumble, and it's likely to be one of the last to bounce back. That's because the local economy didn't slump until 2008, after the collapse of investment bank Lehman. Now the pain has spread from the financial sector to retail, tourism, and other industries. And home values remain high, even relative to the area's inflated salaries. Prices in New York and surrounding suburbs are expected to fall another 18%. One pressure point: a flood of new listings. Developers in Manhattan are sitting on thousands of luxury condos, waiting for prices to perk up. Wall Street and its big bonuses could help ease the pain. Says Jonathan Miller, CEO of appraiser Miller Samuel: "I see the bonuses tempering the downside rather than generating a burst of activity."

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