Biggest Metros With the Best Long-Term Real Estate

Best Performers

For many U.S. residents burned by the housing bust, the notion that real estate can not only tread water but actually increase in value might seem a fairy tale. It’s not. A Businessweek.com analysis of home sales data from the National Association of Realtors shows that in 18 of the nation’s 25 biggest metro areas, home prices grew in value between 1990 and 2010. In one area the change in real dollar price was as much as 85 percent, a return applying only to those who bought homes as a long-term investment, not for easy money flipping real estate. Seven of these metros lost value—generally the result of overbuilding during the real estate boom. Despite recent housing woes, real estate remains one of the best investments the average American can make. And unlike a stock certificate, it provides a place to live.

1. Portland-Vancouver-Beaverton, Ore.-Wash.

990 Price: $130,590 ($78,200 in 1990 dollars)
2010 Price: $242,100
Change in Real Dollars: +85.4 percent
Population: 2,241,841
Year Home Prices Peaked: 2007

Notwithstanding recent declines, Portland area home prices (adjusted for inflation) remain significantly higher than 1990 levels. The median price rose quickly from 2004 through 2007, peaked at about $311,000 (in 2010 dollars) in 2007, and has since dropped by about 22 percent. Moody’s Economy.com and Fiserv predict prices will reach their trough in fourth-quarter 2011.

2. Baltimore-Towson, Md.
 
1990 Price: $152,300 ($91,200 in 1990 dollars)
2010 Price: $257,100
Change in Real Dollars: +68.8 percent
Population: 2,690,886
Year Home Prices Peaked: 2007

From 2000 through 2005, Baltimore area home prices skyrocketed. The growth rate in nominal prices increased from 3.4 percent year-on-year in 2001 to 20.6 percent in 2004 and 22.3 percent in 2005, according to price data from the National Association of Realtors. In 2007, the median home price peaked at $301,412 (in 2010 dollars). Since then, prices have fallen about 14.7 percent. While well above 1990 levels, prices are expected to continue falling and should bottom in third-quarter 2011, predict Fiserv and Moody’s Economy.com.

3. Denver-Aurora-Broomfield, Colo.
 
1990 Price: $144,290 ($86,400 in 1990 dollars)
2010 Price: $238,500
Change in Real Dollars: +65.3 percent
Population: 2,552,195
Year Home Prices Peaked: 2006

Metro Denver housing prices grew fastest from 1999 through 2001, when nominal prices increased at double-digit rates, according to a report by the Metro Denver Economic Development Corp., a regional economic development group. Since reaching a peak in 2006 at $270,340 (in 2010 dollars), the median home price has fallen nearly 11.8 percent in real terms. Moody’s Economy.com and Fiserv expect prices in Denver to reach a trough in third-quarter 2011.

4. Seattle-Tacoma-Bellevue, Wash.
 
1990 Price: $204,240 ($122,300 in 1990 dollars)
2010 Price: $308,200
Change in Real Dollars: +50.9 percent
Population: 3,407,848
Year Home Prices Peaked: 2007

Home prices in Seattle have grown significantly over the last 20 years. The metro area’s housing market exploded in the late 1990s as the population grew. Nominal price increases slowed in 2002 and 2003, but jumped to 19 percent in 2004, 11 percent in 2005, and 14 percent in 2006, show NAR data. Prices peaked in 2007 at $407,607 (in 2010 dollars). Adjusted for inflation, prices are now about 24.4 percent below that level.

5. New York-Northern New Jersey-Long Island, N.Y.-N.J.-Pa.
 
1990 Price: $285,070 ($170,700 in 1990 dollars)
2010 Price: $404,100
Change in Real Dollars: +41.8 percent
Population: 19,069,796
Year Home Prices Peaked: 2007

Inflation-adjusted home prices in metro New York were stable through most of the 1990s and started rising rapidly in the early 2000s. The median sale price peaked in 2007 at $494,840 (in 2010 dollars)—about 73.6 percent above 1990 levels in real terms—and has since dropped by about 18.3 percent. Fiserv and Moody’s Economy.com expect prices in the area to bottom in 2011.

6. Miami-Fort Lauderdale-Pompano Beach, Fla.
 
1990 Price: $152,140 ($91,100 in 1990 dollars)
2010 Price: $214,800
Change in Real Dollars: +41.2 percent
Population: 5,547,051
Year Home Prices Peaked: 2006

Metro Miami home sale prices soared for years, growing by 164.4 percent from 1990 through 2006 in real dollars. In recent years, however, nominal prices dropped quickly, coming down 22 percent year-on-year in 2008 and 25.9 percent in 2009. In third-quarter 2010, Miami had the country’s seventh-highest metro foreclosure rate, at 2.42, according to RealtyTrac. Fiserv and Moody’s Economy.com do not expect the Miami market to reach its trough until 2012.

7. Washington-Arlington-Alexandria, D.C.-Va.-Md.-W.Va.
 
1990 Price: $246,160 ($147,400 in 1990 dollars)
2010 Price: $338,600
Change in Real Dollars: +37.6 percent
Population: 5,476,241
Year Home Prices Peaked: 2006

Washington area home sale prices grew by nearly 90 percent in real terms between 1990 and 2006, when they peaked at $467,000 (in 2010 dollars). They have since fallen 27.5 percent and Fiserv and Moody’s Economy.com expect continued decreases in 2011. Still, the area remains one of the country’s strongest metro economies because government staffing demand keeps unemployment low.

8. Boston-Cambridge-Quincy, Mass.-N.H.

1990 Price: $267,030 ($159,900 in 1990 dollars)
2010 Price: $366,500
Change in Real Dollars: +37.2 percent
Population: 4,588,680
Year Home Prices Peaked: 2005

“Metro Boston’s housing market was affected by the real estate bubble earlier—and less severely— than other metro areas around the country” and sale price declines have brought homes to historic affordability levels, according to a 2009 paper by the Concord Group, a real estate consultancy. Prices peaked in 2005 at $462,160 (in 2010 dollars) and have since dropped a total of 20.7 percent. Despite the fall, home sale prices have still increased in real dollars over the last 20 years.

9. San Francisco-Oakland-Fremont, Calif.
 
1990 Price: $433,030 ($259,300 in 1990 dollars)
2010 Price: $588,900
Change in Real Dollars: +36 percent
Population: 4,317,853
Year Home Prices Peaked: 2007

San Francisco housing prices rose in the 1990s during the tech boom. In the past decade, the fastest growth occurred in 2004 and 2005, when nominal prices increased by 15 percent and 11.5 percent, respectively. In 2007, prices peaked at $847,873 (in 2010 dollars). While prices are now 30.5 percent below peak, they remain well above 1990 rates and have been increasing recently. In third-quarter 2010, the nominal median sale price was up 9.4 percent year-on-year, according to data from the NAR.

10. Houston-Sugar Land-Baytown, Tex.
 
1990 Price: $118,070 ($70,700 in 1990 dollars)
2010 Price: $158,900
Change in Real Dollars: +34.6 percent
Population: 5,867,489
Year Home Prices Peaked: 2007

While home prices shot up and then plunged over the last decade in most parts of the country, the Houston market has been stable: The greatest fluctuation in the last decade was an 8.5 percent year-on-year nominal price increase in 2002. A recent survey by the Brookings Institution and the London School of Economics and Political Science ranks Houston fifteenth among U.S. metros for recovery from the recession, reported the Houston Chronicle.

Antoine E. Pirson, MBA, CCRM, CCIM (candidate)
R.E. Broker and Investment Advisor
Caldecott Properties
apirson@caldecott.com
5251 Broadway, Oakland, CA 94618
Office: (510) 594 2400 x 234
www.investmentpropertyfirst.com
Fax: (510) 594 2424
Lic Nr: 01372814

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One Response to “Biggest Metros With the Best Long-Term Real Estate”

  1. Lisa Pomme Says:

    comparing prices of houses in 1990 to those in 2010 makes the gain meaningless. I am sure that you are aware that the percentage increase goes into the negatives once you add in the inflation factor.

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