Bulletproof housing markets get hit
The mortgage meltdown has finally gotten to Seattle, Charlotte and and other cities where prices had been holding up.
| Special Report |
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NEW YORK (CNNMoney.com) -- Some of the last, best housing markets - the ones that continued to climb even as the rest of the country cratered - have turned south lately.
Seattle, Portland Ore., Charlotte, NC, and Salt Lake City all posted home price gains during 2007, even as more than half of the 150 markets tracked by the National Association of Realtors registered declines. Now they've joined the losers.
"What the numbers are saying is that the trend is broadening out," said Michael Larson, a real estate analyst with Weiss Research. "[The downturn started with] the markets that had flown the highest. When the speculative bubble popped, those got hit first. These [bulletproof] markets are now getting hit for traditional economic reasons."
In Charlotte, prices have fallen about 3.4%, through February, from their August, 2007 peak, according to the S&P Case/Shiller Home Price Index.
Seattle recorded a loss of 6.5% from its July peak ,and Portland prices dropped about 5% during the same period. Salt Lake City saw a decline of about 7% in the fourth quarter of 2007, compared to the third quarter.
Unlike bubble markets such as San Francisco and Miami, these areas actually remained affordable for most residents despite years of price appreciation.
For example, the median home price in Seattle, the most expensive of the four, was $370,000 in February. And about a quarter of all homes sold there during the last three months of 2007 were affordable to families earning the area's median household income of nearly $76,000, according to the Housing Opportunity Index from Wells Fargo (WFC, Fortune 500) and the National Association of Home Builders.
In Portland 28.8% of homes sold were affordable in the last quarter of last year; in Salt Lake City the figure was 35.4% and in Charlotte it was 62.9%. Compare that with Miami, where only 13% of homes sold were affordable for most people, or San Francisco where only 7.9% of homes fell into that category.
Each of these bulletproof markets has whethered the housing crisis better than most cities, and will likely recover more quickly than others thanks to their own unique characteristics.
All of them avoided the speculative runup that fueled so many bubble cities, but their local economies are perhaps the biggest factor in keeping them afloat. In Seattle, software and aerospace jobs have kept things humming, while high-tech and telecom have done the same for Portland, and banking and tech companies have boosted Charlotte.
And they all have geography on their side as well. Charlotte, which is home to the headquarters of Bank of America (BAC, Fortune 500) and Wachovia (WB, Fortune 500), has also seen an influx of retirees from the north who moved to Florida and then left the Sunshine State after property taxes and insurance soared in the wake of severe hurricanes. The trend is dubbed the 'halfback' phenomenon since the retirees are moving halfway back to where they started.
Similarly, Californians escaping the crush and the high cost of living there invaded the Pacific Northwest, according to Lennox Scott, CEO of John L. Scott Real Estate, one of the largest brokers in the area.
That migration changed Seattle, making it a destination city.
"Because of its environment, job growth and a very vibrant downtown, people now just want to live in Seattle," said Scott, who has seen an influx of creative-class types including artists, writers and web developers.
Portland has experienced a similar phenomenon on a smaller scale; it consistently finishes high on surveys of most livable cities.
Both towns have also pursued policies of managed growth, limiting the land that can be developed, which has also helped housing prices hold up. "We don't have the ability to expand supply easily," said Scott, "especially in the affordable price ranges."
Salt Lake City has fewer such restrictions, but steep growth in its population, which is up about 14% since the 2000 census, has kept housing demand high.
Now the credit crunch that has made getting a mortgage harder for everyone is hitting even the strongest markets.
"What's driving housing activity everywhere today is national forces," said Patrick Newport, a real estate economist with Global Insight, a consulting group. Indeed, U.S. foreclosures spiked 112% in the first three months of 2008.
But the fundamental local conditions that have helped keep these relatively strong should help them bounce back sooner than most. 
