Rise of the forgotten housing markets

'Best of' lists reveal surprising trend for 'underdog' cities

By Inman News Feed
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'Best of' lists reveal surprising trend for 'underdog' cities

Steve Bergsman
Inman News

Earlier this year and last, a number of publications and Web sites attempted to make statistical sense of the country's housing markets by publishing lists: the best housing markets, the worst real estate markets, America's strongest housing markets, etc.

After scrutinizing a number of these charts, I finally came to the conclusion that the turmoil in the real estate, mortgage, credit and financial markets over the past three years has turned urban demography upside down. Whatever you thought you knew about growth, metro expansion plans and cities that attract the most move-ins is probably widely incorrect at this point in time.

Take my city of Mesa, Ariz., for example. When I moved here in the 1970s the city counted about 70,000 people. Today, its population rests somewhere between 460,000 and 500,000, larger than Kansas City, Pittsburgh, St. Louis and many older metros in the Midwest and East that we think of as "big cities."

In the 1990s, Mesa was the fastest-growing city in the country. For 2009, the big question about the city's population was whether it dipped for the first time in decades. The same question holds for the neighboring burg of Phoenix.

While cities like Mesa and Phoenix, and for all practical purposes numerous other metros across the South and West were growing, older cities in the Northeast and Midwest stagnated or declined. That was the pattern for the 50 years leading up to the subprime blow-up in 2007 and subsequent recession that still lingers despite what the government tells us.

So, the oddity of all the lists put together about last year's demographics is really how topsy-turvy everything became.

Let's start with the Forbes magazine list of America's 25 Strongest Housing Markets, which was based on a Moody's Economy.com compilation of the country's real estate markets that were nearest to recovery a year ago and expected to be active, although not necessarily vibrant, during 2010 and 2011.

This list was simply based on housing prices, and according to Forbes no metro area would see any increase in housing prices before the end of 2009. However, a number of cities are verging on forward movement for 2010 and 2011 in regard to housing prices, and that made them standouts.

Almost all cities on this list has one thing in common: they missed the boom. When the rest of the country went mad for housing, creating frothy, bubbly markets, the single-family markets in these cities were flatter than an open bottle of champagne the day after New Year's.

But, in our inverted world, the have-nots have become the haves, so the Forbes list of "strongest housing markets" includes cities such as Syracuse and Rochester, N.Y.; Pittsburgh; Buffalo, N.Y.; El Paso, Texas; Little Rock, Ark.; and even New Orleans, which has benefited from the vaults of money dumped into the Big Easy after Hurricane Katrina destroyed almost everything. Even the New Orleans "Aints" made it to the Super Bowl.

In the first quarter, Irvine, Calif.-based RealtyTrac issued a report on metro area foreclosure rates for 2009. Of the 200 largest cities in the country, the five cities with the lowest foreclosure rates were: Tuscaloosa, Ala., College Station-Bryan, Texas; Fayetteville, N.C.; Syracuse, N.Y.; and Charleston, W.Va.

The Forbes list considered only metros of more than 500,000 people, but also about a year ago, a columnist for SmarterSpend.com put together a couple of lists on the best and worst housing markets. This columnist simply looked at average housing-price change per metro area -- and she included markets smaller than 500,000 people.

Her list of the top housing markets also included markets that no one ever considers a "best" in anything: Bozeman, Mont.; Logan, Utah; Morgantown, W. Va.; Trenton, N.J.; Lander, Wyo.; Fargo, N.D.; Billings, Mont.; Bloomington, Ill.; Minot, N.D.; and Paducah, Ky., among others

I'm not sure when Trenton was last listed as a leader in anything, other than incidents of crime. What I noticed in the top 25 of the SmarterSpend.com list was a large number of smaller cities in places like Montana, West Virginia, Oklahoma and the Dakotas.

As the columnist noted, Montana, South Dakota and Missouri didn't participate in "America's mortgage blunder," and most of the cities in these states were still registering upward momentum in housing prices.

The list that I thought was most interesting, only because it can be assumed to be predicative, was the one put together by Hanley Wood Market Intelligence and the trade publication Builder. It was also done about a year ago. Called the healthiest housing markets, it was a survey based on building permits.

Now I have no idea if everything that was permitted was actually built, but these Top 10 cities looked strong one year ago, according to the data points that were important to Builder: Washington, D.C.; Fayetteville, Ark.; Indianapolis; Seattle; Raleigh, N.C.; and the Texas cities of Dallas, San Antonio, Fort Worth, Austin and Houston.

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