Prices taking off many miles away from old hot spots

WASHINGTON — WASHINGTON -- If the 1980s were the go-go years for high profits on resales of houses in California, Boston, Washington and metropolitan New York, the 1990s have a radically different set of geographical hot spots: Try Portland, Ore., where sales values of existing homes have jumped by an average 63 percent since the beginning of the decade.

Or Salt Lake City (up 56 percent), Denver (up 45 percent), Tacoma, Wash. (up 40 percent) or Tucson, Ariz. (up 30 percent).


Or head for the heartland -- the once-maligned Rust Belt -- where housing-value appreciation this decade has far outpaced inflation. Cities such as Youngstown, Ohio, have seen jumps in average resale prices of 27 percent since 1990. Cleveland is up ** 26 percent, Detroit by 25 percent, and Chicago and Cincinnati each by 20 percent.

Contrast that with Los Angeles, where the average resale price of a house has dropped by 26.5 percent in the first half of the decade. Or Hartford, Conn., where values are still down by 15 percent from their 1990 peaks.


New York, Boston and Washington resale prices, on the other hand, are about where they were in 1990. Though their performances have been below the rate of inflation, all three markets nonetheless have seen rebounds from lower price levels several years ago.

These are just a few of the highlights of a unique, mid-decade temperature-taking by the only research organization that tracks dollar changes in resale values of individual homes across the country. The firm, Case Shiller Weiss Inc., of Cambridge, Mass., has more than 50 million sales transactions on specific homes in its database.

Using data compiled from the public records of courthouses in 90 of the largest real estate markets in the country, the firm analyzes "repeat sales" of individual properties -- including very likely your own home. A house that sold for $123,000 in mid-1991 and resold for $140,000 in February of this year would show up as a repeat sale for the first quarter of 1995.

By collecting information on hundreds of thousands of transactions a year -- every publicly recorded sale of a house in the 90 markets -- Case Shiller Weiss is able to calculate price and home value movements with a precision lacking in government or trade association price reports.

As a result, the Case Shiller Weiss database is used by many of the largest mortgage lenders, Wall Street investment banks and credit-rating agencies to keep track of the underlying values of real estate in specific markets.

A mortgage lender with a large portfolio in the suburbs of New York City, for example, would be encouraged to know that the market resale value of its collateral rose by 4 percent during the first quarter of 1995.

A lender active in Los Angeles might react similarly to Case Shiller Weiss' finding that resale values increased by nearly 1 percent in the first three months of this year -- a sign that that city's staggering slide in realty values may have turned around.

By far the strongest region halfway through the decade, according to Dr. Karl E. Case, founder of the research firm and a professor of economics at Wellesley College, has been the Mountain states.


Resale prices were up 3 percent in the second quarter of 1995 alone, he noted. Since 1990, the average price of an existing home in the region has jumped by 30 percent.

Why the extra-zesty performance? In part, according to Dr. Case, it's because the Mountain states "have benefited from California's misfortunes," with jobs, people and capital relocating from Southern California to Colorado, Utah, Nevada and Montana.

In addition, he says, the region started the 1990s with a relatively inexpensive housing stock -- allowing newcomers fleeing higher-cost areas to afford far more house for their dollar than where they came from. That process inevitably pushes up prices.

What's the bottom line of the Case Shiller Weiss study for home buyers and investors who want to pick the price-appreciation hot spots for the rest of the decade?

Allan Weiss, CEO of the research firm, has this cautionary advice:

If a market is in the midst of a roaring boom, you can be virtually certain that a reversal -- as in Southern California, Hawaii, Boston and elsewhere -- is just over the horizon.