Some Localities Are Bucking The Gloomy National Trend

Posted by Jim DeBellis on June 20th, 2011

It might be raining in a hundred cities across the nation, but that doesn’t mean that the sun can’t shine in your hometown.  The only place that a “national housing market” really exists is in a printout of statistical data.  The fact is that each local housing market is really it’s own universe, as demonstrated by the success of several individual markets today.

Take the case of Cambridge, Massachusetts.  Home prices there are down just 8.6 percent from the peak in 2006, compared to a 33% average drop nationwide.  Sure, it has Harvard and MIT, and that probably contributes to the stability of home prices there, especially when coupled with the fact that they didn’t see the run-up in bubble values that were common in Florida, California, and other places that are now suffering the most.  Denton, Texas, also a college town, reports that home prices are down just 7.4 percent there, and there are nice towns and cities in Florida, California and other hard-hit states that are doing just fine too.

Many of the towns and cities that are nearing recovery do share some common traits.  Several are sites of the most recession-proof industry of all – government, including colleges, military bases, government offices, and so forth.  Others have a stable business climate or major industry (or private college), which also gives them an employment rate far above the national average as well as a much lower foreclosure rate.

High employment and a low foreclosure rate are not the only signs to look at in your area to determine if you have a better-than-average shot at an accelerated economic and housing recovery.  Rents are also a good indicator of the comparative health of your local market.  Look at what two or three-bedroom single-family homes are renting for, and then figure out the annual rent.  If the sale price of similar homes is less than fifteen times the annual rent, you might be in a healthy market.  Where prices are still running well-above that amount (like the “least affordable housing market of New York, where prices are 39 times annual rents), there might still be a lot more downside ahead for home values before the market recovers.

Of course, rents are getting stronger every month in this current investor’s market, so that multiplier may have to be updated frequently for a while.  But just remember that the national gloom and doom reports don’t necessarily mean that the forecast in your town or neighborhood might not be for clearing skies with a chance of sunshine.