Leave it to the steady Midwesterners. This broad-shouldered city has basically maintained its upward-trending real estate prices for more than 20 years. Sure, Chicago-area home owners haven't experienced the heady increases that coastal residents have. But, they also haven't had as big dips and dead spots.
Boston hasn't seen an utter crash in the past 25 years, but after the stock market sank in 1987 the Northeastern real estate market took a hit. In Boston, prices dipped and then stagnated for a few years in the early 1990s. But they've certainly made a comeback. Out of all the cities we looked at, the OFHEO price index was highest for Boston--it still doesn't hold a candle to the S&P 500.
It's thought of as a one-industry town, and everyone knows that the Midwest has been hit hard by manufacturing declines. But you wouldn't know that Detroit had seen any troubles looking at home prices over the last 25 years. Although there was a dip in the early 1980s (when coastal cities were booming), prices have risen steadily ever since.
California's real estate prices have trended upwards over the past several years, and in Los Angeles real estate rose more than 25% just in 2004. But the last quarter century has certainly been a bumpy ride. The 1980s real estate boom came to a sobering end with a bust. If you bought a house for about $260,000 in 1990, and it tracked the OFHEO index closely, six years later you would only be able to sell it for about $200,000.
The capital city hasn't seen a lot of drama when it comes to home prices. After a solid stretch of rising values, things flattened out in the late 1980s--and stayed there until about five years ago. But in recent months, the increases have been startling. According to OFHEO data, prices rose nearly 50% from 2002 to 2004.
"Yes, prices are high," says Kirk Henckels, senior vice president at real estate brokerage Stribling & Associates. "They're higher in London, and they're getting higher in Paris." These days, New York's real estate prices seem to trend endlessly skyward. And, according to the FDIC study, New York hasn't experienced a bust in the past few decades. But remember this: Housing prices fell 6% between the end of 1989 and the end of 1990, after a major real estate run-up was terminated by the stock market crash. Home prices stayed flat for an entire decade.
Being oil-rich can be a boon--until there's an energy bust. Dallas home prices climbed in the early 1980s, but took a swan dive in 1986. In an example of where local economic conditions can lead to a housing bust, oil prices went down, and took housing prices along for the ride. The Dallas-Plano-Irving market has since recovered, but has not seen the levels that other cities have--which could be a good thing.
In the 1920s, Miami's real estate market was an incredible bubble, recounts Robert J. Shiller, an economics professor of Yale University, and the author of Irrational Exuberance, which studies the U.S. stock market in historical terms. People saw Miami as a "glamour city" and rushed in to buy before land ran out, only to suffer from the crash. Are there parallels with today's celebrity-rich Miami? According to a report by Raymond James & Associates, investment and speculation accounts for as much as 85% of condo sales in downtown Miami.
In the early 1980s, Houston was the poster child for housing crashes. When oil prices collapsed, the local economy went, as did jobs and home prices. Residential properties dropped 25% over a couple of years, and people looking to flee the city had to wait a month just to get a U-Haul. Prices have had a healthy recovery since then--maybe too healthy should oil tank once more.
Philadelphia's real estate market over the last quarter century has been a toned-down version of the markets in the mega-metropolises. Home prices rose steadily in the 1980s housing boom, then flattened out around 1989. They bounced within a narrow band for another ten years, neither dropping nor rising dramatically. Until lately, that is. Between 2002 and 2004, home prices went up 37%. Developers are responding to the demand--more than 15,000 housing units are being proposed in the city this year, according to the Philadelphia Daily News.
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