What Crash? Home Prices Rising in Half of U.S.

If you live in Florida, Las Vegas or California, you probably see a meltdown in your local real estate market.

But in nearly half of the country’s 150 metropolitan markets, the median home price rose in the fourth quarter last year, the National Association of Realtors reports. The exact count was 73 rising markets and 77 falling ones.

The biggest gains came in small cities. The Cumberland area of Maryland and West Virginia topped the list with a 19 percent jump from a year ago, to a median price of $116,600.

Next was Yakima, Wash., up 18 percent to $170,600, followed by the Binghamton, N.Y. area, up 14.8 percent to $110,000.

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"I would call them back-country cities,” Robert Shiller, the Yale University professor who made himself famous predicting the bursting of the 1990s stock bubble and the 2002-2005 real estate bubble, tells The New York Times.

"They are just going through normal growth, and they are out of the bubble picture.”

Some big cities have been able to withstand the real estate crunch as well: Manhattan, San Francisco and San Jose, for example.

"This proves what my friend Alan Greenspan always said: real estate is a regional, not a national business,” David Jones, a veteran Wall Street economist who is now chairman of Investors’ Security Trust Bank in Fort Myers, FL, tells MoneyNews.com. "You see so often the S&P/Case-Shiller Index, which measures the 20 biggest markets, and you think that home prices are falling everywhere in the country,” Jones says.

"This National Association of Realtors report proves otherwise.”

The Case-Shiller index fell almost 8 percent in November from a year earlier, according to the latest data available.

The positive real estate picture in much of the country lends credence to the view that any recession will be mild and brief.

Jones, for instance, thinks the economy entered recession in December and will rebound in August, with only one quarter of negative GDP growth during that period (the current quarter).

"To the extent that in almost half of the country’s regions, home prices aren’t falling, that means housing will bottom in the third quarter and be much less of a drag going forward,” Jones says.

"That could lead us to a milder and shorter recession than would otherwise have been the case.”

Some analysts argue that with the volume of home sales declining, especially at the low end of the market, the rising prices in some regions are deceptive, because they only measure the sales of expensive homes.

But real estate bulls point out that jumbo mortgages, those larger than $417,000, have essentially been frozen by banks. So they think home sales volume at the high end of the market is lower than it would normally be.

Thus, the realtors’ survey masks strength rather than weakness, the bulls argue.

In the Spokane, Wash. area the median home price increased 2.6 percent last year, of example.

"Call me back next year, and we’ll probably have a 3 to 5 percent increase in 2008,” Rob Higgins, executive vice president of the Spokane Association of Realtors, told The New York Times.

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