Housing Price Boom Strengthens, Spreads to New Markets by Kenneth R. Harney
Who says the housing boom is losing steam? The latest federal housing price appreciation study, released last Thursday, documents the reverse: The boom is stronger than ever, and appears to be spreading to areas that haven't seen double-digit price inflation in recent years. Nationwide, according to the Office of Federal Housing Enterprise Oversight (OFHEO), which tracks prices in over 265 major markets, the average home gained a stunning 13.4 percent in resale value between the second quarter of 2004 and the same period in 2005. Even more significant, said the agency, is the sudden appearance of historically high rates of housing price inflation in dozens of areas that have rarely if ever experienced it. Take Prescott, Arizona, for example. Never an inflationary hot spot, houses in Prescott jumped in resale value by nearly 29 percent on average during the 12 months covered by the study. The second quarter gain was even more extraordinary: a 10.1 percent average increase in three months. That translates out to an annualized average inflation rate of 40.4 percent. Take Martinsburg, West Virginia as another example. Though easily a 90 minute drive from Washington D.C., Martinsburg and Maryland panhandle neighbor Hagerstown are attracting "affordability" home buyers willing to put up with long commutes in exchange for lower housing prices and "small town" settings. The result: Home values have begun soaring -- up nearly 25 percent on average during the 12 months covered by the OFHEO study. Other examples of previously quiet markets now catching fire: - Coeur d'Alene, Idaho: up 29 percent last year
- St George, Utah: up 28.3 percent
- Olympia, Washington: up 18.7 percent
- Albany-Troy, New York: up 18.2 percent
- Fargo, North Dakota and Missoula, Montana: both up by approximately 10 percent -- far beyond their recent performances
Though each market has its own underlying dynamics, the pattern is the same: Moderate existing prices attract buyers from high-inflation, high cost areas who see good value for their real estate dollars in places like these. Californians, for example, look at property in Arizona and see far bigger square footage and bigger lots for lower costs than they'd ever pay back home. Retirees from New York and New Jersey see the same. Their purchases in and around Prescott are contributing to that market's growing boom. On a national basis, according to the new OFHEO study, the East and West coasts continue to sizzle. California homes jumped by an average 25.2 percent from 2004-2005; Florida homes appreciated at 24.5 percent. Washington DC home values rose by 24 percent on average, while Maryland experienced a 23 percent average gain. Naples, Florida topped the metro area rankings with a white hot 35.6 percent average home value gain. Other highlights of the new federal price data: - 25 states, including the District of Columbia, had double-digit increases for the 12 months. Thirty of the 265 largest metropolitan markets posted annual gains of 25 percent or higher, and 51 markets had appreciation rates of 20 percent or more.
- No major market in the U.S. experienced a housing price devaluation during the year, but a handful saw minimal growth. These include Mansfield, Ohio (up by just 0.44 percent), Lafayette, Indian, (up 0.91 percent), Kokomo, Indiana (1.08 percent), and Greeley, Colorado (1.9 percent).
Patrick Lawler, OFHEO chief economist, said that "low interest rates and the apparent impact of speculative investing" were among the key forces pushing up housing prices. The 13.4 percent average gain nationwide was the highest recorded in 25 years. Lawler added that although "there is no evidence here of prices topping out," gains of this magnitude "are unsustainable." (The full OFHEO study can be found at Ofheo.gov.) |
