Boomer’s Blog

Despite ongoing troubles in the U.S. housing market, some areas post green lights for investors looking for relatively high and fast price gains in the next year. According to Money magazine, these markets have what it takes to make for solid real estate investments (REI). (Additional data provided by Wikipedia and the U.S. Census Bureau.)

1. McAllen, Texas:

• U.S. Census data for 2003 estimated the city’s population to be 116,500.
• 12-month forecast: 4 percent
• Median home price: $109,000
• One-year price change: 2.1 percent
• Five-year price change: 23.3 percent
• Change in foreclosure rate: 23 percent

2. Rochester, N.Y.

• U.S. Census data for 2003 estimated the city’s population to be 216,000.
• 12-month forecast: 2.7 percent
• Median home price: $121,000
• One year price change: 3.4 percent
• Five year price change: 20.1 percent
• Change in foreclosure rate: 5 percent

3. Birmingham, Ala.:

• U.S. Census data for 2003 estimated the city’s population to be 236,600.
• 12-month forecast: 2.7 percent
• Median home price: $156,000
• One year price change: 2.9 percent
• Five year price change: 29.4 percent
• Change in foreclosure rate: 20 percent

4. Syracuse, N.Y.:

• U.S. Census data for 2003 estimated the city’s population to be 144,000.
• 12-month forecast: 2.6 percent
• Median home price: $126,000
• One year price change: 0.8 percent
• Five year price change: 29.5 percent
• Change in foreclosure rate: 27 percent

5. Buffalo and Niagara Falls, N.Y.:

• U.S. Census data for 2003 estimated Buffalo’s population to be 285,000; Niagara Falls to be 54,000.
• 12-month forecast: 2.4 percent
• Median home price: $105,000
• One year price change: 1.6 percent
• Five year price change: 24.5 percent
• Change in foreclosure rate: 14 percent

6. New Orleans, La.:

• U.S. Census data for 2003 estimated the population to be 469,000.
• 12-month forecast: 2.2 percent
• Median home price: $158,000
• One year price change: 1 percent
• Five year price change: 43.7 percent
• Change in foreclosure rate: 49 percent

7. Scranton, Pa.:

• U.S. Census data for 2003 estimated the population to be 74,300.
• 12-month forecast: 2.2 percent
• Median home price: $128,000
• One year price change: 7.2 percent
• Five year price change: 41.1 percent
• Change in foreclosure rate: 8 percent

8. Grand Rapids, Mich.:

• U.S. Census data for 2003 estimated the population to be 195,600.
• 12-month forecast: 1.9 percent
• Median home price: $124,000
• One year price change: -3 percent
• Five year price change: 8.3 percent
• Change in foreclosure rate: 37 percent

9. Baton Rouge, La.:

• U.S. Census data for 2003 estimated the population to be 225,100.
• 12-month forecast: 1.9 percent
• Median home price: $170,000
• One year price change: 5.7 percent
• Five year price change: 38.3 percent
• Change in foreclosure rate: 14 percent

10. El Paso, Texas:

• U.S. Census data for 2003 estimated the population to be 584,100.
• 12-month forecast: 1.8 percent
• Median home price: $134,000
• One year price change: 6.9 percent
• Five year price change: 51.9 percent
• Change in foreclosure rate: 32 percent

Federal Reserve Chairman Ben Bernanke has announced his approval of a new plan by the U.S. Congress to help stall the foreclosure rate for homeowners now drowning in debt. The legislation was drafted to help distressed homeowners, and is now snaking its way through the House of Representatives. House Financial Services Committee Chairman Barney Frank of Mass is the bill’s author and original sponsor.

If enacted, the legislation would allow the Federal Housing Administration (FHA) to back as much as $300 billion in refinanced loans for homeowners facing foreclosure. Critics say that the legislation would unfairly punish homeowners who didn’t overextend their finances. Bernanke says that finding ways to avoid preventable foreclosures currently makes for sound public policy. And his support may help Frank find Congressional support for the measure.

The Fed chairman says that there is a strong economic case for trying to avoid the price drops and other economic hardships imposed by the booming foreclosure rate. The costs of foreclosure, he says, may extend well beyond the borrower and the lender. He also has observed that clusters of foreclosures can destabilize communities, reduce the property values of nearby homes, and lower municipal tax revenues. Foreclosures, as we’ve seen, also can drive house prices lower.

MarketWatch reports that one tactic favored by the White House is to reform the FHA and allow it it to increase the scale of its lending. Another approach would be to give stronger powers to the federal government to oversee the affairs of Fannie Mae and Freddie Mac. Bernanke supports these measures and has said that Fannie Mae and Freddie Mac should be used to mitigate the damage of the housing market downturn, and be allowed to do so in a safe and sound manner.

Last week the Fed cut interest rates another quarter of one percentage point to 2 percent.

As home sales and prices drop across much of the United States, many sellers are resorting to fire-sale pricing and bargain hunters are seizing the hot real estate investment opportunities.

The national median home price dropped to $195,900 in February, down from $213,500 for the same period in 2007, acording to RealtyTrac. In the meantime, cities in three of the five states with the nation’s highest total foreclosure rates top CNNMoney.com’s rankings of the best places to invest in housing.

Georgia’s Atlanta Area

• Georgia’s total of 11,047 foreclosures fuels the nation’s fourth-highest overall foreclosure rate, says RealtyTrac. One in every 351 Georgia households received a foreclosure filing in March — ranking its foreclosure rate No. 6 in the nation.
• According to CNNMoney.com, rampant home building in the Atlanta area has stalled, which should start to reduce the area’s large supply of vacant housing and propel prices upward.

Ohio’s Cincinnati and Cleveland Areas

• RealtyTrac’s most recent report says that Ohio’s total of 11,273 foreclosures give the state the third highest foreclosure rate in the U.S.
• One in every 448 Ohio households received a foreclosure filing in March — earning a seventh place spot in total foreclosures rankings by state.

CNNMoney.com ranks these cities as the third and fourth best places to buy houses in today’s market, forecasting that:

• Cincinnatti’s manufacturing-heavy economy should rise as the dollar falls: Commercial construction and high-end developments are on the rise.
• Cleveland’s foreclosure boom seems to be slowing, thanks to programs to help troubled borrowers. Prices have stabilized and appear poised to rise.

Michigan’s Detroit Area

• In February, RealtyTrac reported that Detroit had nearly 5 percent of the city’s households were entering some stage of foreclosure, at a rate 4.8 times the national average.
• With an average price-to-rent (P/R) ratio of 15, a buyer theoretically annually gains almost 7 percent of the purchase, CNNMoney.com reports. The average P/R ratio for Detroit’s 30 biggest markets: 23.

Texas’ Houston Area

• Texas’ foreclosure filings were reported on 10,700 properties in March, marking a 13 percent decrease from the previous month and a 16 percent drop from foreclosures reported for the same period in 2007, RealtyTrac reports. In February, a decline in the state’s foreclosures dropped Texas to the fifth place spot for total foreclosures among the states.
• In Houston, soaring oil prices will support and help to stabilize real estate prices. In Q4 2007, prices here were up 1.4 percent — the fastest of all the metro areas CNNMoney.com analyzed.