Home prices nearly doubled in Salt Lake City between 1992 and 1997, but they declined in Los Angeles. When you're selling dwellings, local economic trends are everything.
Things are looking up for America's realtors, but some realtors have to look farther than others. The happiest home sellers may be in (1) Salt Lake City, where the median price of a single-family home increased 92 percent between 1992 and 1997, according to inflation-adjusted figures from the National Association of Realtors (NAR). During that same period, the price of a home in (2) Los Angeles and southern California declined 4 percent. This map shows the rate of change for 170 metropolitan areas.
Five years ago, home prices in (3) Charleston, South Carolina froze when the town's naval shipyard closed. Over the next two years, the local unemployment rate rose to 6 percent and 2,000 homes went on the market. But many of the displaced workers stayed in town and started businesses, and local leaders found ways to attract new investors. Today, unemployment is at 3 percent, and home prices rose 44 percent between 1992 and 1997. "We expected a bad market, but in the last two years it has turned into a seller's market," says Charleston realtor Tina Williams.
Low mortgage rates, the stock-market boom, and strong consumer confidence are fueling residential real estate sales in most of America. Demographic trends also play a role. "Younger baby boomers are trading up to larger homes, older boomers are moving into smaller homes, and boomers' children are starting to buy their first homes," says Jason Altman, research economist for the NAR. "In some markets, more growth comes from immigrants."
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Homebuyers from Mexico were a bright spot during California's devastating recession. Of the 500,000 jobs lost in the state, 70 percent were in Los Angeles County, says Leslie Appleton-Young, chief economist for the California Association of Realtors (CAR). But the sour economy did not prevent immigrants from moving in so that the foreign-born are now half of L.A.'s first-time homebuyers.
While home prices in southern California are recovering, it's a seller's market up north. High-tech jobs pay well and are growing fast. That is the number-one reason why home prices in (4) San Francisco rose 29 percent between 1992 and 1997, despite the recession. They rose another 13 percent between March 1997 and March 1998, says the CAR.
Home sales are also booming in less exotic places. Prices rose 68 percent in (5) Detroit between 1992 and 1997, thanks to a strong recovery in the automobile industry and continuing growth in the suburbs. At the same time, there's trouble in paradise. The median price of a single-family home in (6) Honolulu increased 90 percent between 1987 and 1990, to a lofty $352,000, thanks to wealthy Asian buyers. But prices increased only 2 percent from 1990 to 1994, and they declined 15 percent between 1994 and 1997. "The state is in a recession with little or no job growth," says Harvey Shapiro of the Honolulu Board of Realtors.
Hard times also persist in markets where decades of out-migration have created a serious housing surplus. In (7) Niagara Falls, where the median home price increased just 15 percent, the city council is targeting foreclosed homes for demolition. The list is now at 70 houses and growing, says Louise Lascelle of the city's planning board.
How long will the good times last in the go-go markets? Again, it depends on local conditions. Salt Lake City's recent boom could go bust in two or three years, according to The Local Market Monitor in Wellesley, Massachusetts. But continued rises in home prices are expected in (8) Portland, Oregon, where prices rose 78 percent between 1992 and 1997, according to Clayton-Fillmore in Denver. One reason is Portland's strong economy. Another is its Urban Growth Boundary. Enacted in 1979 to reduce sprawl, the boundary also ensures that the demand for Portland housing nearly always exceeds supply.
(percent change in the median price of a single-family home for 170 U.S. metropolitan areas, 1992-97)
Source: National Association of Realtors, Washington, DC; telephone (202) 383-7518; Internet http://www.nar.org.