WITH HOUSING sales at near-record levels in many parts of the country, the first signs of hyperinflation in home values are beginning to appear.
Hyperinflation -- real estate sales price gains that on an annualized percentage-rate basis are far beyond the national rate of inflation in the cost of all goods and services -- can be seen in the latest national study of 105 major home resale markets. Although seven of the top 15 high-appreciation markets are located in California, the top three aren't necessarily where you'd predict.
First in the nation for price gains on resales of existing homes from the first quarter of 1997 through the first quarter of 1998: Naples, Fla., where values were up by a stunning 21.7 percent. Second is metropolitan Boulder-Longmont, Colo., with 20.2 percent. The third most hyperinflationary market for resale homes in the past year was Jersey City, N.J., where values jumped by 19.9 percent.
The new housing appreciation numbers come from a comprehensive study by Experian, an Anaheim, Calif.-based real estate information firm that tracks values in all major markets in the country where courthouse real estate recordation data is publicly available.
Experian tracks values using a "repeat-sales" statistical model that examines changes in the recorded sales prices for homes in its huge database. The repeat-sales approach -- focusing on a national sample of nearly 5 million homes -- is viewed by major lending institutions and federal regulators as a more accurate index than standard median or average sales price measures. Fannie Mae, Freddie Mac and the Office of Federal Housing Enterprise Oversight all use the repeat-sales approach to understand what's really happening in home resale markets.
The latest study documents the big rebounds under way in several large California markets.
San Francisco resales were up 19.8 percent during the year, while its neighbor across the bay, Oakland, registered a 17.7 percent gain. The Santa Cruz metropolitan area jumped by 17 percent; San Diego was up by 16.3 percent; Orange County was up by 13 percent.
Experian's official in charge of the study, Dr. Nima Nattagh, noted that part of what's happening in California -- especially in the southern half -- represents a "catch-up" reversal of the property value declines experienced earlier in the decade. Even with the latest rebound, Nattagh said, a home bought in Orange County, Calif., in the early 1990s is probably still worth 10 percent less than the purchase price.
The same phenomenon may be at work in markets such as Jersey City, where home prices had been depressed earlier in the 1990s, but are now considered attractive by financial industry yuppies working across the Hudson in Manhattan.
Other high-flying metropolitan areas ranked among the top 30 real estate gainers: Colorado Springs (15.1 percent); San Jose, Calif. (11.9 percent); Ann Arbor, Mich. (11.9 percent); Seattle-Bellevue-Everett, Wash. (9.6 percent); Detroit (9.3 percent); Charlotte-Gastonia-
Rock Hill, N.C. (8.9 percent); Santa Rosa, Calif. (8.4 percent); Boston (8.1 percent); Salem, Ore. (7.7 percent); Denver (7.7 percent); Los Angeles-Long Beach (6.7 percent); Sarasota-Bradenton, Fla. (6.5 percent); Tampa-St. Petersburg-Clearwater, Fla. (6.4 percent); and Raleigh-Durham-Chapel Hill, N.C. (6.3 percent).
At the opposite end of the spectrum, home values in 15 major metropolitan areas lost ground during the past year.
The worst resale housing market in the country, down 9.6 percent, was Pittsfield, Mass., a small industrial city in the Berkshire foothills suffering from serious employment losses. Tallahassee, Fla., was next, with a 6.4 percent decline. Bakersfield, Calif., was down by 4.9 percent, Baltimore by 4 percent, Reading, Pa., by 3.6 percent, and Pittsburgh by 3.5 percent. Hartford, Conn., still confronting economic problems, saw resale values drop by 0.7 percent.
Among major markets with resale appreciation that was nearly flat during the year were the Washington-Maryland-Virginia metropolitan area (up by 0.2 percent); Cleveland (up 0.4 percent); Tucson, Ariz. (up 0.5 percent); Phoenix and Oklahoma City (up 0.6 percent); and Richmond, Va. (up 1.2 percent).
More than two dozen markets outperformed the overall national inflation rate -- now approximately 2.3 percent -- including Chicago (up 2.8 percent); Fresno, Calif., and Syracuse, N.Y. (both up 2.9 percent); Louisville, Ky. (3.5 percent); Orlando, Fla., and Lexington, Ky. (both up 3.9 percent); Minneapolis-St. Paul (4.1 percent); Las Vegas (4.4 percent); Omaha, Neb. (4.4 percent); Miami (5.1 percent); Sacramento, Calif. (6 percent); St. Louis (6.1 percent), and the New York metropolitan area (6.2 percent).
Perhaps ironically, Nattagh says the real housing market winners are those with moderate, steady inflation from year-to-year. Hyperinflation, he says, "begins to have counterproductive effects on the local economy, making houses less affordable for workers," and the market increasingly costly for employers.
So if your home is growing in resale value by only 3 percent to 5 percent, don't fret. You're doing better than inflation. And your local market isn't pricing itself into trouble.
Pub Date: 6/07/98