Amid housing bust, some markets still boom

Andrew Leventis, an economist with the federal agency, said that could partly be because people are buying second homes in those areas, driving up demand. The more rural locations may also simply be lagging the rest of the country in housing price increases.

Still, Leventis said the sharp increases could hurt first-time buyers and young families.

“There’s certainly pitfalls to high appreciation, and the pitfalls are for folks who aren’t in a home,” Leventis said.

Still, he notes that some of those sharp price increases are unlikely to be sustainable.

David Blitzer, managing director with Standard & Poor’s, also doesn’t expect the major metropolitan areas that are holding out, including Seattle and Portland, to escape the overall market doldrums. Instead, he thinks those cities are simply lagging the rest of the country.

“None of this should suggest that any city that looks good right now isn’t going to get stuck later on, because this decline is very pervasive,” he said.

Blitzer noted that Seattle may be lagging in part because it suffered sharply from the technology bust in 2000 and 2001, and thus recovered somewhat less quickly. Both Portland and Seattle also have seen housing prices rise sharply in part because there is limited space for housing, increasing demand.

On the other hand, Dallas and other Texas cities have seen their markets benefit from an abundance of land that has kept supplies healthy, said Jim Gaines, a research economist with the Real Estate Center at Texas A&M University.

Perhaps most importantly, Gaines said, the state did not see major spikes in home prices during the go-go years of the housing boom, when home prices doubled in just a few years in places like California and Florida.

“Since everything just didn’t go wild going up, it’s not going to go wild going down,” said Gaines, referring to Texas.

Gaines said he thinks the Dallas housing market could continue to hold up in 2007, but uncertainty about high-risk mortgages could hamper that.

Walt Molony, spokesman for the National Association of Realtors, said the wild spikes — and now drops — in pricey markets in California and Florida have in some ways distorted the entire housing picture. The Realtors are predicting that the national median house price will be down 0.7 percent for all of 2007, but Molony said he expects some less expensive areas in the Midwest and elsewhere to see prices stay flat or even rise slightly.

While there are some national trends affecting housing prices, such as mortgage rates, Molony noted that hometown factors always play a disproportionate role. A city with strong job growth, healthy population expansion and other reasurring economic indicators is likely to fare better, while cities with more troubling economic outlooks will have more problems.

“It all gets down to local market conditions,” Molony said.

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