The Hottest Markets For Housing This Decade

By Amy Hoak From The Wall Street Journal Online

Median home values rose 32% from 2000 to 2005, but homes in San Diego fared a lot better than the national estimate, according to U.S. Census Bureau data released Tuesday.

The median home value for San Diego homes, adjusted for inflation, rose 127% to $567,000 from $249,000, during the period. It was the largest increase among the country's biggest cities, according to the Bureau's American Community Survey. The survey covered 7,000 areas with a population of 65,000 or more.

Of the 15 largest cities surveyed, Los Angeles came in behind San Diego, with a median home-value increase of 110%, adjusted for inflation, followed by New York, with a rise of 79%.
Related Links The Census Bureau's American Community Survey

Of the 15 smallest cities surveyed, Boynton Beach, Fla., reigned with a real median home-value increase of 120%, followed by Folsom, Calif., where the median home value rose 100%, and Redondo Beach, Calif., with a 92% gain.

Although the survey quantifies some of the home-value gains seen in recent years, the findings aren't especially surprising. "Just about anyone who owns a home or has been in the market for one in the past few years knows first-hand how home values jumped from 2000 to 2005," said Census Bureau Director Louis Kincannon in a news release.

Perspective on recent declines
But the data put recent headlines about home price declines into perspective, said Charles Jolly, president of the San Diego Association of Realtors and a Realtor for more than 30 years.
Real estate reports that focus on recent losses are "comparing everything to last year," Jolly said. He said he's seen his share of ups and downs in the market; the current state of affairs is just another part of a cycle.

He gave an example of a particular San Diego property that sold in 2000 for $345,000 and would have sold for $745,000 in 2005. Today, it would probably sell for less than $700,000, he said.

Costs rise
The monthly cost of owning a home also rose during the first half of the decade, according to the survey. Homeowners' median monthly cost -- including mortgage payment and certain other costs, adjusted for inflation -- rose 5%, the survey found.

Among the largest cities, Detroit, Chicago and San Francisco experienced some of the greatest increases. The median monthly cost rose 24% in Detroit, 22% in Chicago and 20% in San Francisco.

Some smaller cities, such as Bryan, Texas, and Greenville, N.C., saw cost decreases of about 10%.

Rents on the rise
The median cost of renting a home also increased, jumping an inflation-adjusted 6.7% nationally between 2000 and 2005.

Large cities that experienced high jumps in the median cost of renting include San Diego, where costs rose 27%; Detroit, up 27%; and Los Angeles, up 16%.

Among the smallest cities surveyed, Redondo Beach, Calif., saw the median cost of renting increase 22%.

Real median rent cost decreased in some large cities, including San Jose, where rent costs fell 9%, and Dallas, where they dropped 3%.

Also, the survey found that more than two-thirds of the country's total occupied housing units were owner-occupied in 2005. That is, 74.3 million housing units were owner-occupied in 2005, up 4.5 million from 69.8 million owner-occupied units reported in the 2000 Census.

Largest 15 cities
Here's how home prices have fared, adjusted for inflation, in the biggest U.S. cities:

City 2000 home value 2005 home value Percent change
New York $250,746 $449,000 79%
Los Angeles 244,398 513,800 110%
Chicago 163,575 245,000 50%
Houston 87, 852 112,800 28%
Philadelphia 69,148 100,200 45%
Phoenix 121,292 184,300 52%
San Diego 249,386 566,700 127%
San Antonio, Texas 76,516 89,800 17%
Dallas 99,074 120,900 22%
San Jose, Calif. 425,657 625,40047%
Detroit 71,188 88,300 24%
Jacksonville, Fla. 95,333 144,600 52%
Indianapolis 109,503 117,900 7.7%
San Francisco 479,161 726,700 52%
Columbus, Ohio 112,337 132,100 18%

Source: U.S. Census Bureau's American Community Survey
Copyright © 2005 Dow Jones & Company, Inc. All Rights Reserved

Condo market: Hanging tough?

Worry, sure, but sales remain healthy; builders 'still bullish'

"Very good": At Metropolis, 8 W. Monroe St., 90% of the 170 units have been pre-sold, says developer Keith Giles.

What if they build it — condominiums in and around Chicago, that is — and nobody comes?

Amid a continuing binge in local condo construction, developers ponder this question as the residential real estate market — in the face of rising mortgage interest rates — begins to show signs of slowing.In white-hot cities such as Miami and Las Vegas, condo construction has gotten so far ahead of actual demand in recent months that bankers have stepped in and called a halt to high-profile projects before ground could be broken. With slowing appreciation rates and waning interest by speculators, some observers predict that a condo "correction" is on tap for Chicago next.Yet sales remain healthy so far, and there is no evidence of financial turmoil among builders. In fact, they are betting big that fears about the market are overblown.

"We're still bullish on condos. We think metro Chicago is a solid marketplace," says Christopher Huecksteadt, a director with Metrostudy in Hoffman Estates, a research firm that tracks real estate trends in big cities around the country. "If we were adding new condo units to the market and they weren't selling, that would be cause for concern. But that's not happening here."

ndeed, developers appear to be flourishing. Keith Giles, co-owner of Frankel & Giles in Chicago, won't finish up work on Metropolis, his 16-story, 170-unit condo tower at 8 W. Monroe St., until late summer. But already more than 90% of the units, priced as high as $1.5 million, are sold.

"I think we'll be completely sold out by summer," Mr. Giles says. "

Last year was the best year for condo sales in the history of Chicago, and the market appears to still be very, very good."Some critics remain unconvinced, however. Cook County's population actually dropped by 73,000 people between 2000 and 2005, new Census Bureau data show. Freddie Mac, the nation's second-largest mortgage company, based in McLean, Va., predicts that overall U.S. home sales will drop 8% this year. In many cities, condo developers are facing critical overbuilding scenarios.In Miami, 25,000 condos are under construction and another 25,000 planned — in a market where about 2,500 units sold annually over the past decade.

"Chicago has been a fairly steady and stable market compared to Miami, but if home sales turn down this year at all, that could change," warns Jack McCabe, a residential real estate consultant based in Deerfield Beach, Fla. "I don't think there are enough high-income households in Chicago to support all the expensive condos being built. There is a good chance that Chicago is going to undergo some correction."

Other observers doubt that conclusion. In downtown Chicago, there were 8,162 new condo sales in 2005, according to Appraisal Research Counselors, up from 6,298 the year before. Gail L. Lissner, a vice-president at the research firm, estimates there are currently 8,400 more condos under construction, with 6,700 of those are pre-sold.

"Some of the condo units that don't have buyers yet won't be finished until 2007 and even 2008," Ms. Lissner says. "There is still plenty of time to get them sold."

After that, she has been able to identify another 4,150 condos planned but not under construction yet; more than half have been sold.Conclusion: Chicago has 12,500 condo units either under construction or proposed, reasonable considering last year's sales total and the long lead times on high-rise towers.

"We've had increasing sales and a low inventory of unsold condos," Ms. Lissner says. "That tells you supply and demand are in reasonably good balance."

New construction sales only tell part of the story, though. Has the supply of new product hurt resales of existing condos? There is, after all, now a pool of some 60,000 units downtown overall. But again, no danger signs: In January, condo resale prices in metro Chicago were up 9.1% over the year-earlier January, according to Metrostudy.

"The metro area added 50,000 new jobs last year, and we should add another 50,000 jobs this year," says Mr. Huecksteadt of Metrostudy. "That's keeping the housing market strong."

A few years ago the local condo market, as it was elsewhere, was propped up, in part, by "flippers."

Speculation, by some accounts, represented close to 20% of condo sales here at one time. Most experts figure the ratio is now below 12%. But the speculators haven't disappeared.Tim Duquette, a sales representative with Rubloff Residential Properties, recently put down a deposit on a $284,000 one-bedroom condo soon to break ground at 847 W. Jackson Blvd. Mr. Duquette figures he may rent out the unit for a while before he sells it.

"Monthly rental rates on condos are up 18% in the past 18 months," he says. "There is still great demand for condo living, and they do make a good investment."

Such talk is enough to encourage developers to forge ahead. Jameson Realty Group of Chicago is spending $80 million to build a 39-story, 34-unit condo tower at 50 E. Chestnut St.President Charles Huzenis had just eight units sold — prices range from $2.3 million to $3.1 million — before he broke ground early in March, but he figures to sell at least 15 or 20 more before the building is finished in late 2007. That will more than cover the cost of his construction loan.

"We've looked at the demographics, and the fact is, there are 160,000 people in Cook County with net worths of $1 million or more," he says. "There is enough wealth here to support this kind of condo construction. The demand is so good this spring that it's surprising even us."

Still, some developers worry about competition in hotbeds such as the South Loop. Russland Capital Group Inc. is hoping to break ground soon on a 28-story, 268-unit tower at 1400 S. Michigan Ave. So far, some 60% of the condos are sold.

"We'd like to get to 80% before we start construction," says Alexander Vaisman, a general partner in Russland. "The problem is, there are six or eight other condo buildings going up in the neighborhood. Sales are still good, but we're feeling some pressure from the competition."

©2006 by Crain Communications Inc.