6 housing boomtowns that haven't come back

They were the boomtowns of the Great Housing Bubble, Sun Belt meccas for thousands of families wanting to live the American Dream on easy credit and little money down.

But then came the housing bust and the Great Recession, wrecking more than just their dreams. In some hard-hit cities, more than half of the homes were worth less than the balances on their mortgages.

Now, eight to nine years after the peak, some former boomtowns have begun to recover. Unemployment is falling and home prices are posting double-digit percentage increases.

Miami has come roaring back amid strong foreign and investor buying. Las Vegas may draw a record 40-million visitors this year. Universal Studios Orlando has added a wildly popular new attraction. "Harry Potter has been our shale-oil fields," said Sean Snaith, director of the University of Central Florida's Institute for Economic Competitiveness in Orlando.

But in other areas, despite housing prices well off their lows, recovery remains elusive. These former boomtowns are now zombie cities, the housing bubble's walking dead.

"People's perception is that these areas are coming back," said Zillow's chief economist Stan Humphries. "They could be on a tear, but they're still in a big hole."

They're concentrated in California and Florida, where property prices were bid up the most. Often they relied too heavily on one industry: home construction itself.

"The more dependent on construction an area was, the harder it was hit," said Snaith of UCF.

Six former boomtowns all have home prices that are still 35% to 42% below their peak, vs. a national average of 10%, and all have unemployment rates well above the national average of 5.9%.

Paste BN measured their distress in a Housing Bust Index that took the difference between current housing prices and their bubble peak, and added the difference between current seasonally adjusted unemployment rates and the lowest unemployment rate in each market.

The six "zombie cities" include four in California's Central Valley and two in the Sunshine State.​

Located between I-5 to the west and Yosemite National Park and Death Valley to the east, Modesto, Stockton, Fresno and Bakersfield were the ultimate housing boomtowns.

"The boom was insane. Those prices were no measure of how valuable those cities were to live in," said Stephen Levy, director of the Center for Continuing Study of the California Economy in Palo Alto. "Those economies were based on construction and when you take that away you have pretty dull economies."

Indeed, home prices in both Stockton and Modesto remain more than 40% off their peaks, and unemployment topped 10% in September. Fresno and Bakersfield weren't far behind. Stockton filed for bankruptcy in 2012.

And the Central Valley has been plagued by a drought of Biblical dimensions, threatening to turn the USA's orchard and vegetable garden into a new Dust Bowl.

Among former Florida boomtowns, Lakeland, located between Tampa and Orlando, had little to fall back on when home construction crashed.

Melbourne, on Florida's East Coast, has been hit hard by the end of the space shuttle program, added Snaith of UCF.

All six former boomtowns face a long, arduous climb back.

"We'll get back to peak prices nationally in three to four years," said Humphries of Zillow. "A market like Modesto, which is down 42% from its peak, may take eight to 10 years."

That would mean nearly two decades of pain for cities that once had nowhere to go but up.

Howard R. Gold is a MarketWatch columnist and founder and editor of GoldenEgg Investing , which offers simple, low-cost, low-risk retirement investing plans. Follow him on Twitter @howardrgold.