Since Standard & Poor’s downgraded the United States’ credit rating, the financial markets have ping-ponged hundreds of points per day, dropping to 2008 levels only to inch back up. The July jobs report highlights a national unemployment rate still stubbornly fixed above 9 percent. Housing continues to flounder and millions of homeowners watch their home equity shrink further each month. None of this is reassuring news for Americans.
Yet a smattering of cities have managed to wrangle up the modest beginnings of a real estate rebound this year. Take Bay City, Mich., for example. It lands on our list of recession-resistant cities for real estate. Despite a 9.9 percent unemployment rate, according to the Bureau of Labor Statistics, the Great Lakes Bay area has logged seven consecutive months of rising home values. The median home price for the area is $80,100 — an inexpensive price tag that also recently helped land Bay City on Forbes’ Best places to live cheaply list.
“The Bay City market has stabilized and increased slightly over the past year,” explains Renee Harvey, a Saginaw, Mich.-based real estate broker with Keller Williams Realty. She says the average Bay City sale price last summer was $68,976; this year it was $69,108. Harvey chalks up the slight uptick to the local presence of corporate giants like Dow Chemical Company and the fact that lenders and Realtors in the area have been more effectively mitigating distressed properties: “We are selling more traditional properties and much fewer distressed properties.”
Forbes.com slideshow: Recession-resistant cities for real estate
Bay City isn’t the only small- to mid-sized metropolis with a hopeful housing market. It’s joined by fellow Michigan metropolis, Battle Creek, with a 0.6 percent price gain in the first quarter and a 5.2 percent gain in the second; Pueblo, Colo., with a 2.5 percent price gain in the first quarter and a 5.5 percent price gain in the second; and Champaign-Urbana, Ill., with a 0.5 percent rise in the first quarter and a 1.2 percent rise in the second.
The folks at Zillow.com, a Seattle-based real estate data company, helped us compile this recession-resistant list. It reflects the 25 cities welcoming steady home price gains each consecutive month since the start of 2011. These are not places where the economy as a whole is necessarily rebounding; they are places where, regardless of unemployment rates and other economic woes, real estate markets are showing some positive improvement.
To calculate home prices in these cities, Zillow crunched numbers for 154 U.S. metro areas, accounting for home values on local single-family houses, condos and apartments, at all prices. Using data through June of this year, median home prices, list prices vs. final sale prices on homes sold, price cuts on for-sale homes, tax assessment records, and local rental prices were all assessed for this list. Both homes that have graced the market in recent years and homes that have not were included. Foreclosure activity and its effect on non-distressed home values was noted, but foreclosures and bank-owned properties themselves were not included in the calculations.
There are some surprising results. Florida, one of the states to suffer most from the real estate boom and bust, contributes six cities to our list — more than any other state. “The Florida metro areas have really paid their dues, coming off quite a lot since 2006 in terms of home values,” explains Svenja Gudell, an economist at Zillow. “We are finally seeing those numbers start to stabilize.”
Fort Myers looking good
Take Fort Myers. The Sunshine State’s retirement haven, where home prices tumbled 58.6 percent from their 2006 peak, had a 2.9 percent appreciation rate in the first quarter and a 3.7 percent rate during the second. Those numbers have been steadily inching back up since November of 2010, following the home price dip felt throughout the U.S. (including in many of the cities that grace this list) after the first-time home buyer tax credits expired. In spite of that dip, homes in Fort Myers have appreciated 3.8 percent from June of 2010 to June of 2011.
“We are starting to see some organic growth that can’t be traced back to tax credits, whereas in 2010 we saw some home value appreciation simply because of them,” explains Gudell. She notes that the lack of tax incentives allows for a more thorough look at how the markets are moving without an artificial boost from Uncle Sam.
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Municipalities where housing bubbles never arose in the first place are faring well. Housing prices in cities such as former coal capital Pittsburgh, Midwestern hub Oklahoma City, Rocky Mountain stronghold Boulder and college boom town Durham, N.C., have come off less than 7 percent from the 2006 peak.
Despite the hopeful signs of market stabilization in these metro areas, housing data remains mixed for much of the country. “Nationally we are still experiencing home value depreciations on a year-over-year basis as well as a quarter-over-quarter basis,” asserts Gudell, noting that 73.4 percent of homes across the country have lost value in the past year. National home prices dropped 6.2 percent year over year and 0.4 percent from the first to second quarters. They have fallen 28.8 percent since June 2006.
Given the renewed volatility of the economy, all homes — even in cities that topped our list — face vulnerability value-wise. “Given the uncertainty in the stock market and the economy, people will feel uncertain and may delay buying a home which ultimately will depress prices further,” cautions Gudell (a sentiment echoed even by Realtors in better-off cities, like Harvey). “I think the upcoming months will be a story of consumer confidence and how that affects housing.”