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Five Factors That Impact Housing Markets.by James Brooks Local government leaders could not have predicted the seizing up of the mortgage finance system or the severity of the foreclosure crisis. What they can do going forward, however, is look to the places where the housing market remains basically stable, learn what factors contributed to that stability and decide what resources to employ that will improve conditions in the medium- and longer-term. Affordability: Places where the cost of living — prices for food, utilities, entertainment and taxes — remains moderate have seen housing prices hold steady and continue to attract new residents. Cities such as Austin, Texas, Ann Arbor, Mich., and Minneapolis have median home prices that are only three times the median family income; below the national average. Contrast these communities to places such as Los Angeles, New York and San Francisco where median home prices are six to seven times higher than median income. Young Buyers and Immigrants: Recent Census figures point to much less mobility by Americans since the end of World War II. Young people, who tend to be single, without children and new to the housing market, buck this trend and are gravitating to Salt Lake City, Colorado Springs, Colo., and San Antonio. Similarly, immigrants from outside the U.S., who continue to arrive in numbers not seen since the 1990s, are moving to several locations that were heretofore not known as “gateway” cities. Nashville, Tenn., Columbia, S.C., and Raleigh, N.C., have experienced home sales stability because of the demands by these new residents. Livability: Defined as places that mix residential, retail and commercial, these bastions of the “new urbanism” are in many cases classic suburban communities that have acquired an urban feel. Saratoga Springs, N.Y., and Gaithersburg, Md., are examples of this virtue. Real estate prices benefit from the fact that homes, shops and entertainment opportunities are in close proximity to one another. Balanced Supply and Demand: Cities where housing construction far outpaced local demand have been hardest hit by the foreclosure crisis. In places where there were limits on available land or where new development other than infill was not permitted, such as Dallas, Seattle, Denver and Portland, Ore., there was no bubble to burst. According to the National Association of Realtors, a city like Seattle has a five-month inventory of excess homes available, compared with a national average of nine months. Some of the hardest hit communities have a 40-month excess housing supply on the market. Job Growth: In cities where job creation continues to increase, such as Omaha, Neb., Sioux Falls, S.D., McAllen, Texas, and Grand Junction, Colo., the market for housing remains solid. Lots of factors contribute to employment growth. Cities such as Omaha have been active drivers of economic development and can boast high-tech fiber optic networks, a strong power grid, a business friendly tax code, responsible lending practices that curbed speculation and an abundance of land available for development. Some of the worst abuses of predatory lending and the implosion of the automobile industry have taken an unfair and unanticipated toll on many communities. Full recovery in many places may take a decade or more. But while local government can’t control all the conditions that influence economic cycles, these examples can give them a field of reference about the kinds of policies that can be put into place before the next recession. Details: To learn more about NLC’s Center for Research and Innovation’s work on housing and foreclosure issues, contact the author at brooks@nlc.org. This article is being reprinted with the permission from the author and National League of Cities. To read this article and related articles. Libraries:Parks:
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