Hot-Selling Market Means a Nice Equity Boost

WASHINGTON--The average price of a house nationwide rose 6.6% last year, according to the latest government tally. Of the 31 markets surveyed by the Federal Housing Finance Board, 25 had increases--almost half by two digits.

Only five places registered declines, and one--Atlanta--was unchanged. In monetary terms, the average selling price for new and existing houses rose $14,000 during the last 12 months, from $211,100 in 2000 to $225,100 in 2001.

That works out to an appreciation rate of more than $1,000 a month, not all that much less than the $1,269 mortgage payment (principal and interest) on a $200,000 mortgage at 6.54%, the going rate for a loan these days.

But several markets fared far better. In the Bay Area, the owner of an average priced house saw the value of his home rise by $35,500, or almost $3,000 a month, last year. And the typical Milwaukee owner wasn’t far behind, posting a gain of $31,900 in just 12 months.

Other places where home owners registered big gains included Seattle, up $32,300; Greensboro, N.C., up $31,600; Miami-Ft. Lauderdale, Fla., up $29,700; Chicago, up $27,600; Washington, D.C., up $27,400; New York City, up $28,700; Los Angeles up $26,400; and San Diego up $23,400.

Much of the gains were fueled by greater activity at the high end of the housing market, where analysts believe many investors are parking their money until the stock market quiets down. In places where prices declined, values didn’t actually fall. Rather, there was more activity in lower-end product last year, which caused the average to dip.

Dip probably isn’t the right word to describe what occurred last year in Rochester, N.Y., where the average price plunged 16.5%, from $164,100 to $137,000 in 12 months. And it doesn’t adequately portray the tumble experienced in Indianapolis, where the average was off 9%, from $183,200 to $166,800. The decline in Cleveland was a more modest 4.8%, dropping from $180,700 to $172,000. And in Columbus, Ohio, the drop was a negligible 0.6%, slipping from $194,100 to $192,900.

In many of the other markets, though, sellers were gobbling up big profits as the housing markets in their cities and towns remained on fire. And the largest windfalls were recorded in normally low-cost places.

In Greensboro, for example, the average price of new and used houses shot up 22.2%, from $142,600 to $174,200. In Milwaukee, it jumped 20.5%, from $155,500 to $187,400. In Miami, the average rose 17.4%, from $170,900 to $200,600. And in Pittsburgh, and Kansas City, the average rose 15.1%, from $136,800 to $157,400 in the Steel City and from $158,700 to $182,600 in Kansas City.

The more expensive markets didn’t do as well last year. But then, prices are so high in most of these places that even a relatively small percentage increase results in huge monetary gains.

In the Bay Area, which, as usual, heads the list of the nation’s most costly housing markets. The average in the San Francisco-Oakland-San Jose region rose a reasonable 8.5% last year, from $419,100 to $454,600.

The second and third most expensive markets also are located in the Golden State. San Diego is second at $340,700, an increase of 7.4% from $317,300 a year ago. And Los Angeles is third at $313,800, up 9.2% from $287,400.

The three California metropolises are the only markets in the country where the average is more than $300,000. But two big Eastern burgs, New York City and Washington, are closing in. In the Big Apple, the average now stands at $298,200, an increase of 10.6% from $269,500. And in the nation’s capital, the average is $291,600, up 10.4% from $264,200. Rounding out the top 10 are: Seattle-Tacoma at $283,600, up 12.9% from $251,300; Denver-Boulder at $283,200, up 8.5% from $261,000; Boston-Worcester at $278,700, up 3.4% from $269,500; Honolulu, and Chicago-Gary at $247,300, up 12.6% from $219,700.

At the other end, the average in the 31 markets studied is lowest in Rochester at $137,000, followed by Pittsburgh at $157,400, Louisville, Ky., at $158,400, Tampa-St. Petersburg, Fla., at $160,600 and St. Louis at $163,900.

How strong is house price appreciation? Robust enough to allow homeowners to use up the equity they built up in their houses and still owe less than they did when they first bought their places. Homeowners refinanced a whopping $1.1 trillion of housing debt last year, according to Fannie Mae, a major supplier of funds for home loans. About $800 billion of the total was in cash-out loans in which more was borrowed than was owed at the time the loan was traded in.

Yet in most cases, the loan-to-value ratios on their new loans were “still substantially lower” than they where when their original mortgages were written, said Fannie Mae chief economist David Berson. And that, he added, “all points to strong gains” for homeowners.

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Lew Sichelman is a syndicated real estate columnist. He can be contacted via e-mail at LSichelman@aol.com. Distributed by United Feature Syndicate.