Some Cities are Dodging Housing Slide

Typically, their local economies are still producing new jobs and healthy income growth because of factors like rising crop prices (as in Bismarck, N.D.) or local oil booms (Midland, Tex.) or an influx of second-home buyers (Sun Valley, Idaho).

“In 2008, I see momentum growing in Middle America for prices to stabilize and increase, given the historic mortgage rates,” said Lawrence Yun, chief economist for the Realtors. But he added, “If we go into a recession, it’s possible some markets will reverse themselves.”

Austin is a good example of a real estate market that was slow and steady for years and now appears to be taking off. Austin’s high-tech industries are attracting well-heeled buyers from cities where real estate is far more expensive.

Sales prices for existing homes barely moved from 2001 to 2005, when the markets in a handful of superstar cities were on fire. But last year, the median price for a single family home rose 6.4 percent, to $185,000. It was the second consecutive strong year.

“I have to calm my buyer clients down,” said Mark Minchew, an Austin Realtor, “so they don’t pay too much.”

The fly in the ointment for these cities is declining sales volumes, which prompt some experts to argue that median prices are presenting an unduly rosy picture. If fewer houses sell, but the ones that do sell are at the high end of the range, that can skew median prices.

“In the markets that are doing better, lots of people are not selling their houses, so you don’t see the prices going down because they are not selling for a lower price,” said Todd Sinai, a real estate professor at the University of Pennsylvania. “The market is doing a lot worse than what the median prices would show.”

Still, in many of the cities where prices are strongest, local Realtors contend that volume drop-offs have been modest, just a few percentage points.

Mr. Clark is one Austin home seller with a happy tale. When a recruiter called him late last year with an enticing executive health care job in Fort Worth, Mr. Clark thought twice about trying to sell a house he had bought only a year before.

“I was concerned after my relocation package ran out I would have to carry either two mortgages or a mortgage and apartment rent,” he recalled. Instead he sold the house for a profit, and only $10,000 below his asking price. “A weight was taken off our shoulders,” he said.

Mike Colpitts, the editor of Housing Predictor, an online housing forecaster, says that the market is still slowing and that some smaller cities will be hit. He projects that only 60 of the 251 markets in the United States that he monitors will show price appreciation in 2008. “The housing market is real sad, and getting sadder,” he said.

Realtors in medium and small cities contend the median price figures may actually underestimate market sentiment, because the issuance of large mortgages has frozen up in recent weeks because of problems on Wall Street. In the view of these Realtors, it is the high-end sales that are stalled in smaller cities, skewing the median price data downward.

“Call me back next year, and we’ll probably have a 3 percent to 5 percent price increase in 2008,” said Rob Higgins, executive vice president for the Spokane Association of Realtors. The median price for a home sold in Spokane was up 2.6 percent in 2007.

In Salem, Ore, “everything is going up, even the lower-income homes,” said Marlene Scully, executive vice president of the Salem Association of Realtors. Realtor data for the metro area that includes Salem showed a 3.6 percent increase for the year.

Ms. Scully noted that of the houses that were listed in 2007, 97.6 percent sold for the listed price, “which tells me there is a strong market because if there weren’t, the sellers would have to negotiate down.”