Micro-Booms Defy the Downturn
Although real estate sales and prices are flat or down in dozens of metropolitan areas, micro-markets within them are performing differently, with prices and sales up over last year and plenty of buyers still wanting to move in.
Call them real estate oases -- neighborhoods and Zip codes that defy national and regional downturns and remain in demand as long as the local economy keeps generating jobs and rising incomes. Housing analysts say they can be found in most major markets whose local economies display moderate to strong fundamentals.
As a group, these strong micro-markets share some key characteristics. They are often:
· Close-in, established neighborhoods convenient to the urban center's employment and cultural attractions. They don't require residents to make long commutes, sit in traffic for hours or worry about gas prices.
· Above median income -- often well above -- with home prices to match. Typically, these are not first-time-buyer markets, nor do they have a lot of new subdivision construction. Residents' education levels exceed regional norms, local school systems are highly regarded, and crime rates generally are low.
· Prime, not subprime, mortgage territories, with little to none of the negative neighborhood impacts of rising foreclosures caused by payment-shock loans going sour.
A few examples: In the Washington area, the Zip codes 20815 (Bethesda-Chevy Chase) and 20015 (an adjoining portion of Northwest Washington) are avoiding most of the down-market trends in the larger metropolitan area. In the 20815 Zip code, headlines about housing-market distress don't capture what's happening on the ground.
Dollar volume of sales was up 22 percent from June 2006 to June 2007, the average selling price was up 11.5 percent, and the median price was up 6 percent, according to multiple-listing-service data provided by Dale Mattison, a broker with Long & Foster. The only hints of strain, he said, have been in the number of total houses on the market -- up 9.7 percent -- and average days on the market, which increased to 47 from last year's 33.
Just across the D.C. line in the 20015 Zip code, the average sale price increased 6.6 percent and the median price 3.5 percent from June to June, though total dollar volume was down 2.5 percent.
Contrast these two micro-markets' performances with that of the District as a whole, where dollar volume was down more than 16 percent, the average sale price fell 6.8 percent and the median price dropped 3.5 percent.
And look at Florida: In the Miami area, a number of oases exist. Close-in communities such as Coral Gables are handling the downturn far better than more distant, lower-cost communities such as Homestead and Florida City, which have experienced extensive new construction in recent years.
Maurice J. Veissi, owner of Veissi & Associates Realtors of Miami, tapped into multiple-listing-service statistics and found that Coral Gables' average sale prices rose from $1.2 million in January to about $1.4 million in June. In Homestead, the average sale price has remained flat -- about $320,000 -- while prices in Florida City have declined. Inventories of unsold homes in the latter two areas exceed three years' worth, according to Veissi.
"In my 38 years in real estate," he said, "I have never seen a market where more expensive properties have stayed relatively healthy while entry-level houses are the toughest to sell."
Other areas where similar patterns can be found include San Francisco, where highly regarded in-town neighborhoods such as Pacific Heights and the Marina continue to outperform the metropolitan area and the state as a whole, with nearly 8 percent median price gains for the first six months of the year, according to John Asdourian of McGuire Real Estate.
In the Los Angeles area, close-in "high-end neighborhoods are more robust at the moment than entry-level," said Pat "Ziggy" Zicarelli, chief executive of Style Realty of Tarzana. Moderately priced and distant communities -- especially those where many buyers used creative financing to purchase more than they could afford -- "are really struggling" and are experiencing price declines, sometimes in the double-digit percentages for the first six months of the year.
The bottom line? Real estate value patterns and sales performances are uniquely localized -- right down to Zip codes, neighborhoods and even streets. In the current national correction after the unprecedented boom years of 2001-05, even adjacent micro-markets may be performing differently.
Smart buyers and sellers know that and adjust their strategies -- on pricing, timing and bargaining -- with a micro-perspective, no matter what the metropolitan headlines may be.
Kenneth R. Harney's e-mail address is KenHarney@earthlink.net.