Real Estate

Where houses sell

SALEM, Ore. — Aside from being Oregon's capital city, Salem doesn't have much to boast about. Most downtown restaurants close by 7 p.m. and Lefty's — the only cool bar in town, according to local college students — is known for its karaoke fund-raisers.

But the real estate market here is buzzing. For-sale signs litter front yards and the local paper is fat with ads for homes.

The community of 150,000 or so souls is a prime example of an overlooked phenomenon in the country's overheated housing market: While demand for homes has nose-dived from Florida to California, some smaller metropolitan pockets continue to thrive.

Sleepy towns such as Salem, Ore.; Wenatchee, Wash.; and Provo-Orem, Utah, may lack glamor but they are among the few places in the country where housing prices are growing at double-digit rates, according to a recent federal study.

Experts say population growth and job growth are one reason.

Local factors — such as proximity to ski slopes, mountain bike trails, or nearby cities — also are helping some Western markets escape one of the nation's worst housing downturns in years. And most of these smallto midsized cities weren't a part of the original housing boom and speculation that followed, so many of them are still playing catch-up.

"The Pacific Northwest was a little bit late coming to the party," said Andrew Leventis, an economist with a federal housing agency. "The extreme appreciation over the past five or six years in the country only just began in the Northwest a few years ago."

In Wenatchee, a city of 30,000 east of the Cascade Mountains, homes appreciated an average of 25 percent between the first quarter of 2006 and the first quarter of 2007, according to a recent study by the Office of Federal Housing Enterprise Oversight.

The agency tracks average home appreciation for mortgages and refinancings not greater than $417,000, on single-family properties.

Bob Seltzer, a local real estate agent, said the boom there is being fueled by an influx of retirees from rain-plagued Seattle who are looking for warmer weather.

"The economy here does not support high-paying jobs," said Seltzer. But "people can come from Seattle and buy an equivalent house for half the price."

But it's not just the Pacific Northwest that's seeing double-digit home appreciation. While some of the worst hit housing markets include cities in California, Nevada and Arizona, many of the remaining strong markets also are clustered west of the Rocky Mountains.

West of Rockies looking good

Fifteen out of 20 metropolitan areas with the highest rates of home appreciation in the country were in Washington, Idaho, Utah, Oregon, Colorado and New Mexico, according to the federal study, which looked at markets with at least 15,000 transactions over the last 10 years.

Between the first quarters of 2006 and 2007, homes in Salem appreciated 13.4 percent, 14.5 percent in Boise-Nampa, Idaho, and 16.8 percent in Grand Junction, Colo.

Nationwide house prices, based on sales and refinancing data, rose only 0.5 percent the first quarter of this year above the fourth quarter of last year — the lowest rate in the past decade, according to the federal study.

Meanwhile, Oregon had 10.77 percent growth in home price appreciation over the past year.

"Our corner of the world has really held up pretty well," said John Mitchell, an economist for U.S. Bancorp, based in Portland.

"We've got very strong population growth, we've got good employment growth and we didn't have the kind of speculation you saw elsewhere."

Still, some observers caution smaller Western markets are far from immune from the same forces that have tanked housing markets across the country.

"It's pretty plain to me that the same patterns that have played out in all these other inflated markets are playing out in the Northwest," said Ben Jones, a consultant who runs www.thehousingbubbleblog. com. "It's almost unavoidable. They (builders) are going to continue to build until there is no longer any profit in it."