Seattle - Recession Proof?

America's Recession-Proof Cities

Joshua Zumbrun

Nationally, home prices are falling, unemployment is on the rise and the economy is expected to grow slowly--or even contract--in the first half of the year. But some cities are doing just fine. Take Oklahoma City, Okla. With falling unemployment, one of the country's strongest housing markets, and solid growth in agriculture, energy and manufacturing, it looks best positioned among the nation's largest metropolitan areas to ride out the current crisis.

San Antonio is right behind. It also features solid employment figures and affordable home prices that continue to rise. Its industries are growing; it can't hurt that the new AT&T (nyse: T - news - people ) was formed when San Antonio-based SBC Communications swallowed the old AT&T Corp. and BellSouth.

The others holding steady or improving include Austin, Texas; Houston; Charlotte, N.C.; Dallas; San Jose, Calif.; Raleigh, N.C.; Salt Lake City; and Seattle.
Behind The Numbers To find them, Forbes.com examined the country's 50 largest metros and looked at several key measures.

We examined unemployment data supplied by the U.S. Bureau of Labor Statistics for the year ending in February 2008 to see which areas are most adding or subtracting jobs. Next, we looked at the BLS data on job growth in non-farm payrolls, through February 2008, for construction, education and health services, financial activities, information, leisure and hospitality, manufacturing, natural resources and mining, professional and business services, trade, transportation and utilities, and the BLS's catch-all category, "other services."
We also took into account median home price data from the National Association of Realtors--from the fourth quarter of 2006 to the fourth quarter of 2007--to see which areas posted the largest annual gains. Our data don't account for the impact of declining sales in the first several months of this year.

Finally, our rankings were adjusted using data from a November 2007 report, "U.S. Metro Economies: The Mortgage Crisis," by the U.S. Conference of Mayors. It lists each city's estimated gross metropolitan product growth by projecting how rising foreclosures and falling home prices would affect overall levels of productivity in local economies.
Sunny Southern Skies Texas cities fared best under these measures. San Antonio, Austin, Houston and Dallas-Fort Worth have benefited from historically lower home prices, which have been affordable to a large segment of the population. The availability of land--and, in some cases, little zoning--helped keep prices in these cities low. Instead of competing for homes, Texans could move to a new subdivision a little farther out.

What's more, all four boast falling unemployment rates, with Austin dropping from 3.8% to 3.6% and San Antonio from 4.3% to 4%. Cities that are expected to see growth in non-farm payrolls include Raleigh, which is expected to see 7.4% growth in professional and business services and 6% growth in education and health. In Salt Lake City, where the median home price rose 2.5% and unemployment, at 3.1%, is below the 5.1% national average, growth in education and health services is expected to be 5.5%.

Some cities have seen increasing home prices but otherwise continue to struggle. Buffalo and Rochester, N.Y., have seen home price growth (from a low base) but still contend with high unemployment--around 6%--and slow-growing or shrinking industries.

And in the San Jose area, the median home sale price is over $830,000. That's 11% higher than it was in the fourth quarter of 2006, helping to land the area at No. 4 on our list. Problem is, that growth has since cooled, and it remains to be seen whether pricey homes coupled with a 5.3% unemployment rate will cause trouble for homeowners this year.

To be sure, even in the most resilient cities, the mortgage crisis has caused suffering. People everywhere got into bad mortgages. Similarly, even in the most battered cities, the majority of people are employed and making their mortgage payments. The extent of recession or resilience is very much in the eye of the beholder, and this list represents only one of many ways to take a snapshot of economies that are standing tall.

In his statements to Congress' Joint Economic Committee earlier this month, Federal Reserve Chairman Ben Bernanke predicted the economy would possibly move into recession in the first half of 2008 but begin to rebound in the second half.

If you're tired of waiting, these might be the best places to go.

View the entire article at http://www.forbes.com/2008/04/29/cities-recession-places-forbeslife-cx_jz_0429realestate.html

Best Cities for Home Sellers

By Matt Woolsey, Forbes Magazine

Though luxury home buyers took a big bite out of the Big Apple last year--properties in the Plaza Hotel and condos along Central Park West sold for record prices and the city posted new highs in price per square foot and median sales price--2008 hasn't been as kind to sellers.

There is plenty of new construction, especially on the West Side and in the outer boroughs. But vacancies are on the rise. That's bad news, especially when the job market takes a pounding.A loosening market, job losses and new construction projects adding to an already growing inventory lands New York, typically a strong market, No. 21 on our list of best cities for home sellers.

"What happens is that people tend to look at prices as a barometer of the health of the market," says Jonathan Miller, president of Miller Samuel, a Manhattan appraisal company. "But it's really how many people are in the market, and what you're seeing now are people dropping out because of affordability or because they can't get credit."

West coast sellers are faring better. In San Jose, Calif., No. 1 on our list, tough regulatory measures make it difficult to overbuild. New home construction dropped 63% last year, while jobs grew by 1.2%. Home vacancies, which were already low at 1.6%, fell to a national bottom at 0.8%, helping make San Jose one of the country's tightest markets.

Farther north, San Francisco's conforming loan limit jumped from $417,000 to the maximum $729,750, which makes getting credit a simpler affair for many of the city's home buyers. In 2006, the market felt a softening that pushed vacancy rates up to 2.4%, but a 56% cut in construction has cut vacancy rates in half. The increased access to credit, thanks to the new Fannie Mae and Freddie Mac limits, and the lack of available properties plays to sellers' interests.

Behind The Numbers To find the other cities on our list, we looked at the country's 40 largest metro areas and assessed how friendly conditions are expected to be for sellers this year. Each city was ranked by its 2007 unsold vacancy rate, calculated by the U.S. Census American Housing Survey, and how much the market had tightened or loosened when compared with 2006 conditions.

Then we looked at construction starts, as tracked by the National Association of Home Builders, to see if building starts would compound or alleviate vacancy woes. Next was job creation, from the Bureau of Labor Statistics, as a way to measure the local economy's ability to absorb or offset housing losses.

Last, we factored in the degree to which new conforming loan limits from Freddie Mac and Fannie Mae will improve each market's lending conditions. When Freddie and Fannie get more involved, lenders get the implicit backing of the Federal Government, something that softens the risks that have slowed lending elsewhere, as jumbo, or nonconforming loans, can be expensive losses.

"There is still an unwillingness on the behalf of lenders to bear the higher risks of jumbos given the potential loss severity," says Anthony Sanders, a professor of finance at Arizona State University. "Recent price declines are scaring investors and lenders alike."

San Jose and San Francisco came out on top because they fit the profile of a sellers' market--low inventory rates that were still shrinking, good job creation, a large scale cutback in new home construction and a boost in the credit market from new Fannie and Freddie loan limits.

But one look at the rest of the spots on our list will remind you that the term "seller's market" is relative. Many, like Denver, have experienced consecutive quarterly price declines. Prices here dropped 6.3% last year, according to the National Association of Realtors. Seventh-place Denver also has a 3% unsold vacancy rate. Still a 2% jump in new jobs and a 49% cut in construction are reasons to be optimistic about the next year or two.

Seattle has experienced similar construction rate cuts. The city went through its own bust in 2002 and 2003, as the result of mass overbuilding. Since homes take a few years to finish, when construction rates plummet, as they did in Seattle from 2003-2005, it takes years before those adjustments are felt. By 2006, Seattle had the lowest vacancy rate in the country, and wasn't as prone to the price adjustments felt elsewhere, making it our 10th best sellers market today.

While job growth, new construction and vacancy rates and access to credit are important barometers, the bottom line is this: When there are more buyers chasing property than sellers looking to unload, that means a relatively quicker sale, which in this market is the best that can be expected, even if it's a small or flat price gain.