Wait long enough, and many difference in residential real-estate prices get arbitraged away. That’s one takeaway, at least down to the metropolitan area, from this week’s data release from the Federal Housing Finance Agency (FHFA). It shows several instances of catch-up by areas of the country that have been less favored in recent decades. Maybe people still do move about America to seize on the “dream” of home ownership?
(A quick caveat: These FHFA numbers do not drill further down into zip codes or even towns. At that level, disparities in valuations can persist or even enlarge over longer stretches. The rich neighborhoods tend to stay that way.)
The FHFA release catches prices through the first quarter of 2024, comparing them back a few months, a year, five years, and since 1991. The last basis takes us back to the later days of the savings & loan crisis, so we can helpfully see the whole housing boom of the last 30-plus years. Longer time periods also help to correct for blips, such as the extreme days of the Covid lockdowns, although greater leeway for remote work is still doubtless a factor in recent trends.
So where do we see top price appreciations over the latest year? Would you believe, Allentown, Pa.? It’s number one, at 16%–and has a respectable 5-year gain of nearly 74%, vs. a U.S. average of 59%. You would not be wrong in thinking that the Allentown area has been a long laggard: up 228% since 1991, while American homes as a whole rose by 316%, or better than four-fold, in nominal prices.
Other metro areas that are making up for lost time include Rochester, N.Y., Camden, Buffalo and El Paso. Slowdowns, on the other hand, are evident over one- and five-year spans in San Francisco, Austin and Colorado Springs. So the larger snow to sun belt shifts occurring nationally (or as others would put it, blue to red) do not consistently hold.
Not everything evens out, even in 33 years. Wide price-appreciation gaps have persisted among losers: Honolulu (once a great winner), New Orleans and Fresno, for examples. Winners can continue to roll: Charleston, S.C., Miami and Fort Lauderdale, and San Diego. But broadly speaking, nowhere grows to the sky or sinks to pits of despond. The great multi-decade housing boom has lifted Salt Lake City by better than 675% and Hartford, Ct, by not quite 150%. Nobody went broke on equity alone, even if others really cashed in.
The FHFA also breaks down the nation by states, which is less precise but can yield political talking points. For the record, top recent and even 5-year gainers have been clumped in the Northeast (Vermont is hot!), with pandemic exceptions including Florida, South Carolina and the Mountain West. I must say, this surprised me. Also, it should be noted that the District of Columbia appears to be faring poorly in the big-government Biden presidency–it was the only “state” to decline in the latest year, and its homes appreciated less than 19% in the last five. But it had a good run through the Clinton, Bush 43 and Obama terms.
Many nonpolitical considerations account for these movements, but regression to a mean may be the most important. You have to live somewhere, and you likely wish to have “more” where you can. Perhaps my former Forbes colleague Rich Karlgaard had it right back in the early Aughts, when he published his book Life 2.0: How People Across America Are Transforming Their Lives by Finding the Where of Their Happiness.
Of course, it still helps to be able to pilot your own plane, as Rich did. Driving to Allentown, after all, is not that pleasant with all the trucks. –5/29/24
Tim W. Ferguson 