Residential Real Estate Appreciation/Depreciation Rate by Metropolitan Area Official (by OFHEO)

Office of Housing Enterprise Oversight (OFHEO), government sponsored organization that oversee Fannie and Freddie, has just announced Q4 2008 HPI (House Price Index) real estate appreciation/depreciation data by metropolitan area.

HPI monitor real estate price appreciation/depreciation by analyzing neighborhood's sales and refinance data. While median or average sales price price does not tells entire story, this "suppose" to show average appreciation/depreciation data.

Here is the ranking of 1 year appreciation (or more like depreciation) by metropolitan area.

- Top ranking metros are ones without real estate bubble and with healthy economy. Out of metros with 1 million + population, it ranks usual suspect cities such as Austin, Houston, Raleigh and Charlotte.

- As for declining markets, the worst areas are made up with Central Valley in California, Florida and Nevada (Las Vegas). This is result of speculations and overbuilding beyond its real demand and residents' income. It should be also noted that, in these markets, real estate price is declining -5% to -16% QUARTERLY. This means bottom is yet to come.

- While it is hard to see from this ranking, out of 292 metros, 135 metros has shown 0%+ appreciations in quarterly basis. I think it is sign of market stabilization in these 135 metros.

Rank	Top of Form Region Bottom of Form	1 Year	1 Quarter
1	Decatur, AL	6.58	1.78
2	Monroe, LA	6.29	2.92
3	Kingsport-Bristol-Bristol, TN-VA	6.26	4.02
4	Tuscaloosa, AL	4.84	0.87
5	Lubbock, TX	4.55	0.77
6	Austin-Round Rock, TX	4.44	-0.07
7	Yakima, WA	4.35	4.43
8	Montgomery, AL	4.06	3.25
9	Huntsville, AL	3.78	1.64
10	Houston-Sugar Land-Baytown, TX	3.72	0.03
11	Billings, MT	3.61	2.54
12	Rapid City, SD	3.6	0.91
13	Greenville-Mouldin-Easley, SC	3.23	1.05
15	Beaumont-Port Arthur, TX	3.14	2.61
14	Florence, SC	3.14	0.55
16	Anderson, SC	3.13	1.59
17	Boulder, CO	2.99	0.98
18	Raleigh-Cary, NC	2.96	0.05
19	Bismarck, ND	2.84	4.9
20	Syracuse, NY	2.82	-1.83
21	Fayetteville, NC	2.8	-1.88
22	Idaho Falls, ID	2.73	4.15
23	Bowling Green, KY	2.65	1.06
24	Roanoke, VA	2.39	0.78
25	Kennewick-Pasco-Richland, WA	2.3	1.73
26	Lafayette, IN	2.28	2.86
27	Sioux Falls, SD	2.15	1.4
28	Durham-Chapel Hill, NC	2.15	0.97
29	Columbia, MO	2.11	-0.51
30	La Crosse, WI-MN	2.02	1.96
31	Hickory-Lenoir-Morganton, NC	1.99	-1.33
32	Logan, UT-ID	1.92	0.47
33	Dallas-Plano-Irving, TX (MSAD)	1.86	0.17
35	Corpus Christi, TX	1.79	2.5
34	Lynchburg, VA	1.79	2.01
36	Charlotte-Gastonia-Concord, NC-SC	1.78	1.13
38	Wichita, KS	1.71	2.48
37	Buffalo-Niagara Falls, NY	1.71	-0.55
39	Jefferson City, MO	1.67	-0.67
40	Lancaster, PA	1.64	0.68
41	Charleston, WV	1.63	1.31
42	Topeka, KS	1.63	0.52
43	Rochester, MN	1.56	2.35
44	Fort Wayne, IN	1.53	-0.35
45	Columbia, SC	1.46	0.41
46	Waterloo-Cedar Falls, IA	1.44	0.75
47	Scranton-Wilkes-Barre, PA	1.41	2.52
48	Athens-Clarke County, GA	1.32	2.09
49	Asheville, NC	1.31	0.58
50	Wausau, WI	1.3	1.71
51	Wenatchee-East Wenatchee, WA	1.24	3.22
52	Nashville-Davidson--Murfreesboro--Franklin, TN	1.24	0.7
53	Little Rock-North Little Rock-Conway, AR	1.21	1.49
54	Fort Worth-Arlington, TX (MSAD)	1.21	1.14
55	Harrisburg-Carlisle, PA	1.17	1
56	Bloomington-Normal, IL	1.16	1.14
57	Huntington-Ashland, WV-KY-OH	1.06	-1.04
58	Houma-Bayou Cane-Thibodaux, LA	1.04	0.08
59	Pittsburgh, PA	0.97	-0.09
60	Elkhart-Goshen, IN	0.86	1.49
61	Davenport-Moline-Rock Island, IA-IL	0.85	1.8
63	Fargo, ND-MN	0.82	0.68
62	Shreveport-Bossier City, LA	0.82	-1.45
64	Springfield, OH	0.8	4.64
65	Louisville-Jefferson County, KY-IN	0.8	0.79
66	Birmingham-Hoover, AL	0.75	-0.2
67	Springfield, IL	0.74	1.42
68	Columbus, IN	0.74	1.41
69	Sioux City, IA-NE-SD	0.7	2.23
70	Cedar Rapids, IA	0.69	0.51
71	Knoxville, TN	0.69	-0.02
72	Bloomington, IN	0.64	-0.4
73	Lima, OH	0.62	1.33
74	Fort Smith, AR-OK	0.61	-1.1
75	Lincoln, NE	0.6	-0.4
76	Dubuque, IA	0.57	0.04
78	Tulsa, OK	0.55	-0.99
77	Grand Junction, CO	0.55	-2.75
79	Blacksburg-Christiansburg-Radford, VA	0.49	-1.18
80	Jackson, MS	0.47	2.51
81	Ames, IA	0.43	0.52
82	Savannah, GA	0.33	0.93
83	Decatur, IL	0.32	-0.68
84	Duluth, MN-WI	0.26	1.28
85	Eau Claire, WI	0.22	1.16
86	Rochester, NY	0.2	0.84
87	Amarillo, TX	0.06	-0.87
88	Peoria, IL	0.03	-0.36
89	Columbus, GA-AL	-0.01	0.59
90	Lexington-Fayette, KY	-0.05	-1.53
91	Fort Collins-Loveland, CO	-0.09	0.48
92	Anchorage, AK	-0.1	-0.41
93	Joplin, MO	-0.11	0.12
94	Kokomo, IN	-0.12	4.82
95	South Bend-Mishawaka, IN-MI	-0.13	0.27
96	Cheyenne, WY	-0.13	0
97	Augusta-Richmond County, GA-SC	-0.14	-2.2
98	Burlington, NC	-0.15	1.48
99	Pueblo, CO	-0.25	3.92
100	Baton Rouge, LA	-0.3	-0.68
101	Champaign-Urbana, IL	-0.31	0.83
102	Oklahoma City, OK	-0.34	-1.06
103	Winston-Salem, NC	-0.35	2.68
105	El Paso, TX	-0.41	-0.29
104	Kankakee-Bradley, IL	-0.41	-1.01
106	Youngstown-Warren-Boardman, OH-PA	-0.6	3.24
108	Terre Haute, IN	-0.62	-0.11
107	Oshkosh-Neenah, WI	-0.62	-0.28
109	Bellingham, WA	-0.63	1.62
110	Omaha-Council Bluffs, NE-IA	-0.67	1.19
111	Denver-Aurora-Broomfield, CO	-0.71	0.77
112	Columbus, OH	-0.74	1.27
113	Greensboro-High Point, NC	-0.75	-1.49
114	Mobile, AL	-0.78	-3.74
115	Michigan City-La Porte, IN	-0.8	0.6
116	Madison, WI	-0.81	1.21
117	Racine, WI	-0.85	1.85
118	Rockford, IL	-0.87	0.91
119	Anderson, IN	-0.89	-0.09
121	Lafayette, LA	-0.9	1.27
120	Burlington-South Burlington, VT	-0.9	-0.14
122	Appleton, WI	-0.94	3.07
123	Fond du Lac, WI	-0.96	1.33
124	Missoula, MT	-0.99	-0.17
125	Chattanooga, TN-GA	-1.03	-2.25
126	Mansfield, OH	-1.08	-1.37
128	New Orleans-Metairie-Kenner, LA	-1.1	0.92
129	St. Louis, MO-IL	-1.1	0.6
127	Springfield, MO	-1.1	-0.28
130	Indianapolis-Carmel, IN	-1.14	-0.62
131	Erie, PA	-1.16	-1.74
132	Lawrence, KS	-1.21	-0.45
133	Albany-Schenectady-Troy, NY	-1.22	-1.05
134	Mankato-North Mankato, MN	-1.25	-1.86
135	Spokane, WA	-1.26	0.41
136	York-Hanover, PA	-1.37	-0.5
137	Green Bay, WI	-1.38	1.31
138	Des Moines-West Des Moines, IA	-1.48	1.2
139	St. Cloud, MN	-1.49	0.02
140	Sheboygan, WI	-1.52	1.35
141	Ogden-Clearfield, UT	-1.54	0.21
142	San Antonio, TX	-1.62	-1.65
143	Iowa City, IA	-1.63	0.85
144	Gary, IN (MSAD)	-1.71	0.1
145	Philadelphia, PA (MSAD)	-1.72	0.25
146	Colorado Springs, CO	-1.79	1.13
147	Cincinnati-Middletown, OH-KY-IN	-1.87	-0.16
148	Milwaukee-Waukesha-West Allis, WI	-1.91	0.57
149	Charleston-North Charleston-Summerville, SC	-1.94	-1.67
150	Niles-Benton Harbor, MI	-1.96	3.99
151	Richmond, VA	-2	-0.81
152	Albuquerque, NM	-2.18	-0.92
153	Evansville, IN-KY	-2.29	-1.9
154	Salem, OR	-2.32	0.51
155	Dayton, OH	-2.34	-0.62
156	Reading, PA	-2.34	-0.74
157	Portland-South Portland-Biddeford, ME	-2.45	-0.38
158	Kansas City, MO-KS	-2.47	0.1
159	Hartford-West Hartford-East Hartford, CT	-2.6	0.18
160	Ocean City, NJ	-2.66	5.24
161	Cambridge-Newton-Framingham, MA (MSAD)	-2.67	0.6
162	Memphis, TN-MS-AR	-2.89	-1.07
163	Virginia Beach-Norfolk-Newport News, VA-NC	-2.98	-0.69
164	Olympia, WA	-3.01	0.02
165	Fayetteville-Springdale-Rogers, AR-MO	-3.04	0.38
166	Eugene-Springfield, OR	-3.2	0.09
167	Honolulu, HI	-3.27	-1.89
168	Spartanburg, SC	-3.28	-4.49
169	Las Cruces, NM	-3.29	-1.42
170	Gainesville, GA	-3.34	-3.09
171	Salt Lake City, UT	-3.37	-0.72
172	Jackson, MI	-3.4	8.76
173	Boston-Quincy, MA (MSAD)	-3.42	0.81
174	Janesville, WI	-3.6	0.63
175	Canton-Massillon, OH	-3.64	0.6
176	Charlottesville, VA	-3.79	-1.9
177	Atlanta-Sandy Springs-Marietta, GA	-3.82	-1.09
178	Lake County-Kenosha County, IL-WI (MSAD)	-3.89	-0.37
179	Cleveland-Elyria-Mentor, OH	-3.94	0.92
180	Akron, OH	-4.01	0.18
181	Battle Creek, MI	-4.06	0.08
182	Macon, GA	-4.12	-5.66
183	Allentown-Bethlehem-Easton, PA-NJ	-4.13	-0.9
184	Chicago-Naperville-Joliet, IL (MSAD)	-4.26	0.01
185	Kalamazoo-Portage, MI	-4.32	-0.33
186	Santa Fe, NM	-4.35	-1.38
187	Peabody, MA (MSAD)	-4.4	0.93
188	Camden, NJ (MSAD)	-4.41	-0.78
190	Toledo, OH	-4.45	1.57
189	Coeur d'Alene, ID	-4.45	-1.7
191	Provo-Orem, UT	-4.54	-0.8
192	Norwich-New London, CT	-4.55	-0.67
193	Wilmington, DE-MD-NJ (MSAD)	-4.62	-1.83
194	Grand Rapids-Wyoming, MI	-4.69	1.36
196	Myrtle Beach-North Myrtle Beach-Conway, SC	-4.74	0.98
195	Wilmington, NC	-4.74	-2.71
197	Longview, WA	-4.78	-1.85
198	Manchester-Nashua, NH	-4.8	0.45
199	Seattle-Bellevue-Everett, WA (MSAD)	-5	-1.56
200	New Haven-Milford, CT	-5.05	-0.31
202	Rockingham County-Strafford County, NH (MSAD)	-5.09	0.05
201	Mount Vernon-Anacortes, WA	-5.09	-2.93
203	Tacoma, WA (MSAD)	-5.11	-0.78
204	Portland-Vancouver-Beaverton, OR-WA	-5.2	-1.75
205	Barnstable Town, MA	-5.26	1.25
206	New York-White Plains-Wayne, NY-NJ (MSAD)	-5.39	-0.58
207	Edison-New Brunswick, NJ (MSAD)	-5.42	-0.64
208	Lansing-East Lansing, MI	-5.54	2.2
209	Atlantic City-Hammonton, NJ	-5.56	0.74
210	Bridgeport-Stamford-Norwalk, CT	-5.59	-1.31
211	Muskegon-North Shores, MI	-5.6	0.39
212	Tallahassee, FL	-5.72	-3.8
213	Boise City-Nampa, ID	-5.74	-0.06
214	Trenton-Ewing, NJ	-5.79	-1.23
215	Newark-Union, NJ-PA (MSAD)	-5.83	-0.38
216	Springfield, MA	-5.84	0.13
217	Baltimore-Towson, MD	-5.84	-1.37
218	Worcester, MA	-6.02	1.12
219	Saginaw-Saginaw Township North, MI	-6.16	4.13
220	Holland-Grand Haven, MI	-6.21	-0.52
221	Minneapolis-St. Paul-Bloomington, MN-WI	-6.37	0.17
222	Gulfport-Biloxi, MS	-6.71	-1.35
223	Ann Arbor, MI	-6.87	-0.41
224	Greeley, CO	-7.25	-1.31
225	Kingston, NY	-7.49	-2.73
227	Flagstaff, AZ-UT	-7.58	-0.85
226	Bremerton-Silverdale, WA	-7.58	-2.06
228	Poughkeepsie-Newburgh-Middletown, NY	-7.59	-3.21
229	Nassau-Suffolk, NY (MSAD)	-7.69	-1.23
230	San Francisco-San Mateo-Redwood City, CA (MSAD)	-7.86	-1.23
231	Hagerstown-Martinsburg, MD-WV	-8.02	-1.5
232	Providence-New Bedford-Fall River, RI-MA	-8.11	-0.52
233	Bethesda-Frederick-Rockville, MD (MSAD)	-8.76	-0.85
234	Pensacola-Ferry Pass-Brent, FL	-9.03	-4.58
235	Panama City-Lynn Haven-Panama City Beach, FL	-9.07	-0.95
236	Medford, OR	-9.33	-0.93
237	Flint, MI	-9.47	2.24
238	Jacksonville, FL	-9.98	-3.23
239	Chico, CA	-10.63	-1.08
240	Warren-Troy-Farmington Hills, MI (MSAD)	-10.97	-1.22
241	Bay City, MI	-11	-2.38
242	Tucson, AZ	-11.28	-2.24
243	San Jose-Sunnyvale-Santa Clara, CA	-11.41	-1.97
244	Washington-Arlington-Alexandria, DC-VA-MD-WV (MSAD)	-12.15	-1.27
245	Santa Cruz-Watsonville, CA	-12.76	-2.06
246	San Luis Obispo-Paso Robles, CA	-13.11	-4.06
247	Prescott, AZ	-13.16	-3.73
248	St. George, UT	-13.28	-3.22
249	Redding, CA	-14.62	-2.2
250	Bend, OR	-15.14	-5.48
251	Ocala, FL	-15.27	-3.12
252	Reno-Sparks, NV	-15.5	-1.91
253	Fort Walton Beach-Crestview-Destin, FL	-15.56	-3.5
254	Lakeland-Winter Haven, FL	-15.68	-7.73
255	Santa Barbara-Santa Maria-Goleta, CA	-15.78	-0.98
256	Lake Havasu City-Kingman, AZ	-15.99	-1.83
257	Detroit-Livonia-Dearborn, MI (MSAD)	-16.42	-3.17
258	Winchester, VA-WV	-17.03	-6.62
259	Monroe, MI	-17.26	-9.52
260	Orlando-Kissimmee, FL	-17.95	-4.71
261	San Diego-Carlsbad-San Marcos, CA	-18.03	-2.3
262	Santa Ana-Anaheim-Irvine, CA (MSAD)	-18.22	-2.92
263	Santa Rosa-Petaluma, CA	-18.25	-2.29
264	Tampa-St. Petersburg-Clearwater, FL	-18.82	-5.39
265	Phoenix-Mesa-Scottdale, AZ	-18.85	-4.14
266	Oakland-Fremont-Hayward, CA (MSAD)	-19.26	-2.15
267	Los Angeles-Long Beach-Glendale, CA (MSAD)	-19.77	-3.48
268	Deltona-Daytona Beach-Ormond Beach, FL	-19.84	-3.96
269	Napa, CA	-20.11	-7.25
270	Port St. Lucie, FL	-20.17	0.77
271	Oxnard-Thousand Oaks-Ventura, CA	-20.62	-3.28
272	Palm Bay-Melbourne-Titusville, FL	-21.06	-4.79
273	West Palm Beach-Boca Raton-Boynton Beach, FL (MSAD)	-21.2	-1.77
274	Visalia-Porterville, CA	-21.31	-4.91
275	Sacramento-Arden-Arcade-Roseville, CA	-22.09	-2.8
276	Miami-Miami Beach-Kendall, FL (MSAD)	-24.15	-8.52
277	Fresno, CA	-25.06	-4.56
278	Bradenton-Sarasota-Venice, FL	-25.36	-7.4
279	Ft. Lauderdale-Pompano Bch.-Deerfield Bch., FL(MSAD)	-25.95	-6.28
280	Madera-Chowchilla, CA	-28.61	-6.91
281	Bakersfield, CA	-29.06	-5.19
282	Yuba City, CA	-29.62	-7.47
283	Punta Gorda, FL	-29.72	-14.27
284	Salinas, CA	-32.18	-1.58
285	Las Vegas-Paradise, NV	-32.6	-9.49
286	Naples-Marco Island, FL	-32.87	-13.7
287	Cape Coral-Fort Myers, FL	-32.93	-10.92
288	Riverside-San Bernardino-Ontario, CA	-34.32	-7.36
289	Vallejo-Fairfield, CA	-34.38	-5.32
290	Modesto, CA	-37.78	-7.48
291	Stockton, CA	-40.19	-5.03
292	Merced, CA	-49.5	-16.29

As all the realtors say, real estate is location, location & location. This data clearly shows that some markets are very BAD and some markets are doing ok. I am particularly glad that Austin Tx, my main investment area, is doing "ok".

Happy Investing and contact me at oystersf@yahoo.com if you are interested in investing Austin Texas!!!!

What's happening in real estate in Manhattan?

Manhattan, the global financial center, is hurting quite badly in terms of job loss and economy.


As for the residential real estate, New York market performed "ok" compared to bubble area like California, Nevada and Florida. In fact, Case-Shiller Index has shown 12 month decline of 7% only. However, due to this financial crisis, residential real estate market in Manhattan has begun to feel the major pain.

Below is the article from Barron's regarding the price drop of $5 million+ luxury real estate in Manhattan. While it has decline by 20% compared to market peak, many industry professionals expect further 30% decline before it stabilizes.

Manhattan On Sale

Manhattan's luxury real-estate market is rotting, as Wall Street layoffs and tight credit squeeze demand. Why prices could slip another 30%.

http://online.barrons.com/article/SB123517384563737163.html

Reasons are:

- In NYC, financial jobs represent 8% of total employment and 22% of total salary. It is forecast that NYC will lose additional 50,000 financial jobs. And among those with jobs, salary will drop further.

- It is extremely difficult to get mortgage on luxury property.

- While transaction has declined by 40%, inventory has increased by 60%.

- Due to strong US dollar and slump in overseas economy, foreign investors purchase of Manhattan properties has stopped.

- Super wealthy have lost significant asset - thus tightening belt on luxury spending.

Since many financial firms have received TARP fund from US government. Employees in these firms will see major decline in bonus. In addition, hedge fund, major buyers of luxury real estate, lost 2/3 of managing asset over last 12 month. While ago, many researchers predict that wealthy segment continues frivolous spending ---- but that seems to be things of the past

Below is article from Wall Street Journal regarding massive sell off of executives in financial firms on luxury real estates.

Hot Words in Finance: 'For Sale'
A flock of fine mansions listed; Bear Stearns 'stuff hit the market'
http://online.wsj.com/article/SB123206067548987615.html

However, not all segment of real estate in Manhattan is falling. Studio segment, suitable for first time home buyers, are performing quite well. As government has announced $8,000 tax credit for first time home buyers. I think entry level properties in Manhattan go through this period without major scratches.

While the Housing Market Drops, Studio Sales Rise
http://nymag.com/realestate/realestatecolumn/54039/


Happy Investing!!!!!

Homeowner Affordability and Stability Plan

On February 18th 2009, President Obama announced Homeowner Affordability and Stability Plan (if you want to read the details, please see below link).

Homeowner Affordability and Stability Plan
http://blogs.wsj.com/washwire/2009/02/18/obamas-plan-aimed-at-helping-troubled-homeowners/

Here is the summary of the plan

OBJECTIVE

- Provide opportunity to home owners who is suffering from high mortgage payment and whose debt is too high to do refinancing.

- By doing this, home owner can reduce mortgage payment as low as 31% of total income (31% or less debt coverage ratio).

- "Rescued loan will be guaranteed by Fannie Mae or Freddie Mac.

INCENTIVE

- For borrowers, if they pay on time, they will receive $1,000 a year for principal reduction for 5 years.

- For lenders, they will receive $1000 fee at the time of refinance and there will be bonus payment if borrowers continues to make payments.

IMPORTANT NOTE

- Targeting borrowers who are NOT behind on payment but who will have hard time making payment in future for rate adjustment or high debt-to-income ratio.

- If borrowers mortgage principal amount is higher than 105% of property value, they are disqualified.

- Conforming Mortgage Only ($417,000 or lower in many area -- up to $625,500 in area like San Francisco).

- Existing mortgage has to be "bought" by Fannie Mae or Freddie Mac.

- First mortgage only (not for second mortgage)

- Lowest mortgage rate available is 3%.

- Fixed up to 5 years.

- Owner-occupants only (not for investment properties)

I was quite surprised with this plan as government target the borrower who is "current" on the mortgage. I guess, since recent "intentional default" and "walking away" is causing such a moral hazard, the government wants to reward those who are making payment on time.

Additionally, it is quite notable that this plan exclude "underwater" home owner whose mortgage exceed 105% of LTV (say owe $105,000 but property value is lower than $100,000). One the the "negative equity" is one of the key reason borrowers walk away from the property. Since 17.6% of home owners have negative equity, I believe more than 10% of home owners have negative equity more than 105% of LTV. This indicate that these home owners with too much negative equity will continuously be the source of foreclosures (= housing will not bottom in near future).

http://www.zillowblog.com/americans-lose-14-trillion-in-home-values-in-q4/2009/02/

I think this plan is good but does not solve core issues and housing bottom is yet to come.

Happy Investing!!!!!

How the Crash Will Reshape America?

This is article from The Atlantic in March 2009.

How the Crash Will Reshape America
http://www.theatlantic.com/doc/200903/meltdown-geography

This article was written by Richard Florida, an author / professor known for "Rise of Creative Class" and "Who's Your City". In order for me to determine which cities to invest, his books and thesis has been very helpful.

Richard Florida's Website
www.creativeclass.com

It is very long article but I highly recommend that you read this IF you are real estate investor or IF you are in evaluation of relocation to new place.

In summary, he concluded that winner is "the great mega-regions that already power the economy, and the smaller, talent-attracting innovation centers inside them that can accommodate and accelerate invention, innovation, and creation".

Here is summary of winning and declining cities:

New York City -> Winner
- "Hub" of Boston-New York-Philadelphia-Washington DC "mega-region", the largest metropolitan area in USA.
- Will keep leadership role as global finance, media, design, art, entertainment, fashion, technology.

Hub of Mega-Region -> Winner
Chicago - Leadership in industrial management and regional hub for law and finance, stealing "creative jobs" from second-tier mid-western cities.
Los Angeles - Center of Southern California mega-region and global hub for media and entertainment.
Miami - Center of South Florida mega region and finance center for Latin America.

Cities with Creative Class with Advanced Degree -> Winner
- Nowaday's economic innovation and accumulation of wealth takes place at cities with creative class with advance degree.
-　Typical cities are Seattle, San Francisco, Austin, Raleigh, and Boston

Rust Belt Cities -> Decline
- Manufacturing jobs used to be 32% of total jobs in 1950 but it has dropped to approx. 10%. This trend will continues.
- Rust Belt cities (such as Detroit) will see larger challenges in population growth, abandoned houses, high employment, low-educated workforce and defection of "creative jobs" to regional hub city.

Real Estate Driven Sun Belt Cities -> Decline
- Typical example is Las Vegas and Phoenix.
- These cities relied too much on real estate related economy growth --- it takes really long time to recover from this bust.
- Other industries in these cities are also suffering; retirement; tourism; low-end manufacturing jobs.

Sprawling Exurb -> Decline
- The economy depends on generating and transporting ideas. The places that thrive today are those with the highest velocity of ideas, the highest density of talented and creative people, the highest rate of metabolism. Velocity and density are not words that many people use when describing the suburbs. The economy is driven by key urban areas.

Next Economic Landscape
- It will likely be sparser in the Midwest and also, ultimately, in those parts of the Southeast that are dependent on manufacturing.
- Its suburbs will be thinner and its houses, perhaps, smaller.
- Some of its southwestern cities will grow less quickly.
- Its great mega-regions will rise farther upward and extend farther outward.
- It will feature a lower rate of homeownership, and a more mobile population of renters.
- In short, it will be a more concentrated geography, one that allows more people to mix more freely and interact more efficiently in a discrete number of dense, innovative mega-regions and creative cities.
- Serendipitously, it will be a landscape suited to a world in which petroleum is no longer cheap by any measure.
- But most of all, it will be a landscape that can accommodate and accelerate invention, innovation, and creation—the activities in which the U.S. still holds a big competitive advantage.

Winners are:
- Hub city of mega-region
- Niche Creative center such as Silicon Valley, Boulder, Austin, and the North Carolina Research Triangle

I have been following Mr. Florida's books and thesis to fine-tune my real estate investment strategies and to select cities and locations. Thus my real estate investments are in "winning cities" (Austin, San Francisco and Manhattan) and in close-in central locations. I have recommended same strategy for my clients. So far so good.

Happy Investing!!!

America's Emptiest Cities

One of the key factors behind recent burst of real estate bubble is that there has been too much supply of housing (both SFR and multiple units), driven insatiable demand from speculators. As we face severe recessions, many people are moving in with relatives and families to save money. Thus number of vacant homes and apartment units (excessive supply) are growing in alarming pace.

Below is the data from Forbes.com (using US Census data) about 15 metropolitan areas with the worst home and rental unit vacancy rate.

http://www.forbes.com/2009/02/12/cities-ten-top-lifestyle-real-estate_0212_cities.html

- Cities in this ranking are generally categorized as follows; 1) Sunbelt cities with lack of development restriction; 2) Rustbelt cities with steady decline of populations. Major metropolitan area with little area to develop (= no excessive supply) are not listed in this ranking.

- Metropolitan area with excessive development (such as Las Vegas, Phoenix, Orlando, Jacksonville, Miami, Tampa and Bakersfield) are currently facing significant decline of economy and jobs. Therefore home and rental unit vacancy getting dangerously high. It will take a long time to reduce these excess inventories.

- While cities such as Atlanta, Charlotte, Indianapolis and Kansas City did not have real estate bubble, due to excessive supply in recent years, home and rental vacany is reaching very high point.

- Rustbelt cities such as Detroit and Dayon are facing the most challenging issues --- declining populations. For example, Detroit's populations has declined from 1.8 million in 1950's to 900,000 now. As economy in the market like Detroit could possibly get worse (think about BIG 3 trouble), devaluation of real estate in these market is likely to continue.

Rank	Metropolitan Area	Home Vacancy	Rent Vacancy
1	Las Vegas/Paradise, Nev.	4.7%	16.0%
2	Detroit/Warren/Livonia, Mich.	4.0%	19.9%
3	Atlanta/Sandy Springs/Marietta, Ga.	4.3%	16.1%
4	Greensboro/High Point, N.C.	4.7%	15.0%
5	Dayton, Ohio	3.6%	21.7%
6	Phoenix AZ	3.6%	19.0%
7	Orlando, Fla.	7.3%	12.3%
8	Kansas City, Mo./Kansas City, Kan.	3.6%	15.2%
9	Jacksonville, Fla.	3.6%	14.7%
10	Indianapolis, Ind.	3.2%	17.1%
11	Miami/Ft. Lauderdale/Miami Beach, Fla.	3.6%	13.1%
12	Chicago/Naperville/Joliet, Ill.	3.7%	11.8%
13	Tampa/St. Petersburg/Clearwater, Fla.	3.0%	15.6%
14	Bakersfield, Calif.	3.1%	14.7%
15	Cincinnati, Ohio/Middletown, Ky.	4.3%	9.8%
15	Charlotte/Gastonia/Concord, N.C.	3.0%	14.7%

It is said that, unless real estate market hit the bottom, the US economy will not get better. I personally think that "bottom" of US real estate market will realize when vacany home rate decline from 2.9% to historical average 1.75% range. Since number of transactions are growing and housing starts are getting smaller, this will contribute to reducing excess inventory. But it certainly will take 1- 3 years to bring housing inventory to historial market level.

Lastly, in Austin Tx, my prime investment city, populations are growning at 2% annualy, home vacany hovers at 2% and developers have reduced housing starts. Real estate pros see, Austin will face porperty shortage sometime in 2010. That's great news for existing owners and new buyers.

Happy Investing!!!!