The Housing Chronicles Blog: A tale of two (types of ) cities

Friday, February 15, 2008

A tale of two (types of ) cities

Tired of hearing about the housing bust in your area? Then you might consider moving to Austin, TX (great music scene!), Yakima, Washington (apples), Salem, Mass. (witch trials) or Grand Forks, ND (few people). In all of these areas -- and others across the country that didn't participate in the boom- and bust cycle, the markets remain pretty healthy. Damn them! From a New York Times piece:

In the America of big-city housing markets, especially on the coasts and in the struggling industrial Midwest, the huge run-up in values in recent years has given way to big drops in prices and sales volume. Millions of people owe more than their houses are worth.

But in the other America, specifically in small cities like Austin; Grand Forks, N.D.; Yakima, Wash.; and Salem, Mass., the available evidence suggests the real estate market is holding up. Prices there never boomed as crazily as they did in the big cities, and now, even though volume is down almost everywhere, prices in many of these towns are firm or rising...

Many people are aware that a handful of big-city markets, like Manhattan and San Francisco, have largely resisted the real estate slide. It is less widely known that the same thing is true in scores of smaller markets.

“I would call them backcountry cities,” said Robert J. Shiller, an economist at Yale University and an expert on real estate markets who predicted the bursting of both the housing and stock market bubbles of recent years. “They are just going through normal growth, and they are out of the bubble picture.”

In figures released on Thursday covering 150 metropolitan areas, the National Association of Realtors said that median home prices were falling in 77 markets — but rising in 73.

Real estate statistics must be interpreted with caution, especially when sales volumes are declining, as they are all over the country. But an analysis by The New York Times of three distinct data sets — mortgage data from the government, sales figures from the Realtors’ group and courthouse records from a company called DataQuick — produced a list of 17 metropolitan areas where all three sources of information agree that prices were still rising as of late last year, the most recent figures available.

For another 43 cities, two data sets, from the Realtors and the government, suggested that prices were still rising late in the year. DataQuick could provide no information on those cities...

Economists say small and medium cities, especially those where land availability is not a constraint on growth, have done better than the nation as a whole because they have followed more traditional economic patterns. New-home prices in most of these places still reflect, more or less, the cost of the labor and materials used to build the houses, in addition to a profit margin...

Generally, the markets that are showing strength do not have the bulging housing inventories of larger cities, because there was relatively little speculative building during the early part of this decade. Most of the towns have only modest exposure to the subprime loan crisis. And falling mortgage rates are buoying these markets...

Realtors in medium and small cities contend the median price figures may actually underestimate market sentiment, because the issuance of large mortgages has frozen up in recent weeks because of problems on Wall Street. In the view of these Realtors, it is the high-end sales that are stalled in smaller cities, skewing the median price data downward...

Of course then there's this guy:

Mike Colpitts, the editor of Housing Predictor, an online housing forecaster, says that the market is still slowing and that some smaller cities will be hit. He projects that only 60 of the 251 markets in the United States that he monitors will show price appreciation in 2008. “The housing market is real sad, and getting sadder,” he said.

Thanks, Mike!

No comments: