Monday, November 26, 2007

It Ain't All Bad

According to this article, there are some areas in the US where property prices are appreciating--even now. Median home sale prices have gone up in Salt Lake City, UT; Beaumont-Port Arthur, TX; Salem, OR; Farmington, NM; Spokane, WA; and Allentown, PA.

The article cites several reasons for growth in these areas. First of all, they didn't experience the rapid appreciation of other states, like California and Nevada, so they didn't rise much to begin with. Secondly, there is a strong job market, which, of course, brings people (hence, buyers) to the area. The third reason is explained as "the sun," i.e., long stretches of good weather. Huh? I guess places like California, Nevada, Arizona, and Florida don't fall under the first and second reasons, so the third one alone doesn't qualify. Otherwise, they'd be looking pretty right about now.

Let's look at Salt Lake City. Utah is typically more affordable than other places, and, as prices rise there and drop elsewhere, the median price gap is becoming smaller. The article states that the median price in Salt Lake City is $10,000 more than the rest of the country. Although housing permits are down this year, and there are many high-end homes on the market there, the demand for affordable housing in Salt Lake City is still high. Also, commercial construction is up 40% and the apartment vacancy rates are less than 2% (Doh! We should have bought there instead of OH and KY!).

The article emphasizes that the latest stats are no guarantee that the drop in prices won't affect these areas. It may be that, since they took much longer to appreciate, they may be behind in the quagmire. It reminds me of when my family moved from L.A. to Apple Valley (high desert San Bernardino about 1 1/2 hours east). Things moved real slow up in AV, but the LA trends and pop culture would catch on up there eventually. I think it's the same in the appreciating areas. However, they took longer and didn't rise as much as the places hurting now. So, if there is, indeed, a downfall coming for them, it may not be significant. Since there are jobs and the houses are still affordable, I don't see why things would slow down for them at this point in time.

Just to ensure that you don't get an upbeat and optimistic impression about real estate, the last paragraph of the article partly reads, "The devastating drop in real estate in parts of Florida, California and Michigan have made potential homeowners skittish in general (so don't expect the buyers in these markets to be shopping for homes in WA, UT, PA, NM, TX, or OR any time soon). A whole layer of subprime borrowers are facing financial ruin and foreclosure (thanks for the reminder, yet again). It's difficult to envision a scenario that sees them rejoining the real estate market in a meaningful way anytime soon (not that there are any other buyers out there)."