The strongest and weakest housing markets
By Melissa Wirkus
It is an undeniable fact that the housing
market is slowing down all across the nation, although
some areas are fairing better than others. Some markets
are continuing to thrive while others are barely surviving
the downturn.
There are some characteristics that many of the cities
that are doing well have in common. An August 31, 2006
article from Business Week Online, “The strongest,
weakest U.S. housing markets,” looks into what
makes some markets do better than others when times
are slow.
“Over the next year or so, as the real estate
market begins to soften, where will home prices remain
highest? Potential buyers should look for more than
beachfront location, nearby golf courses, or even good
schools to determine whether their investment will be
a smart one. The best thing to find? A strong local
economy.”
“A quick glance at housing data from the U.S.
census shows that the metro areas that are home
to healthy technology, manufacturing, entertainment,
or financial-services
companies, as well as big employers like top universities,
enjoy equally healthy property values.”
Some examples of cities with extremely strong local
economies that translate into strong housing markets
are San Jose, Anaheim and San Francisco. Not only do
these cities have a lot of local economic growth, but
they also have home prices that are amongst the highest
in the nation.
All of these elements go hand-in-hand. “At $744,500,
the San Jose/Sunnyvale/Santa Clara (Calif.) metropolitan
statistical area has the highest median home sales price
in the country, according to the National Association
of Realtors. The reason, says Mark Zandi, chief economist
for Moody's Economy.com, is that ‘these local
economies are among the nation's most productive. Housing
values are driven by the activity on the land.’”
Anywhere in California is most likely going to be more
expensive than the median prices in states in the Midwest.
San Jose boasts some of the highest prices
in the nation, while an area in Illinois known as Danville
holds the title as the least expensive area in the U.S.
with a median price of a measly $67,000.
Places that are already struggling economically will
be the most affected by the slowing market.
“While that indicates the real estate market should
hold its value in the near term in areas like Silicon
Valley, other, less economically fortunate places will
be especially hard hit. As struggling corporate giants
such as Corning and General Motors lay off workers,
local housing prices in areas such as Elmira, N.Y.,
or Youngstown, Ohio — GM maintains a large factory
in nearby Lordstown — which are already depressed,
will fall even further.”
For the most part, we are looking at a buyer’s
market, even though we have yet to see prices drop drastically
anywhere in the U.S.
“The upside — for buyers, at least —
is that even in strong areas like San Mateo, prices
will begin to level out, especially as interest rates
continue to inch up and real wages fail to increase.
What does that mean? Well, it's pretty simple. At the
extreme ends of the real estate scale, areas with high
employment and high median incomes will do better than
places with low employment and low median incomes. There's
nothing surprising about it, and it's pretty much always
been like that.”