While we regularly gripe about our sluggish job growth, our below-average incomes and our high taxes, our tepid housing market is keeping us on the fringes of the still-developing subprime lending storm and the end of the nationwide real estate boom.
The numbers bear that out. Median home prices here have risen by an average of about 1.5 percent a year over the last 15 years, not even enough to keep up with inflation. But nationally, median home prices have soared more than five times faster, by an average of about 8 percent a year.
That set Buffalo apart, since owning a house here is mostly about having your own place to live in one of the nation’s lowest-priced housing markets, where the median home last year sold for right around $100,000. Elsewhere, especially in high-flying markets like San Francisco, where the median home sells for nearly $850,000, housing was a hot investment, too.
“Housing prices here have tended to be well below other parts of the country,” says Richard Deitz, the regional economist for the Federal Reserve Bank of New York’s Buffalo branch. “But we also haven’t had the appreciation.”
While those high housing prices elsewhere created a lot of new wealth for many homeowners, it also made buyers in those markets to stretch to finance their new homes, forcing many into adjustable- rate mortgages with low teaser rates or loans where the initial payments only covered all or part of the interest due. Those buyers were banking on housing prices that would keep going up, which would allow them to make a big profit when they sold.
Only booms don’t last forever, and the housing market started to slow last year. Median sale prices nationally now have dropped for 12 straight months, capped by a 1.5 percent annual decline during the second quarter, the National Association of Realtors reports.
Meanwhile, the same report showed that prices in the Buffalo Niagara region rose 6.7 percent, while home sales are up about 4 percent through July, according to the Buffalo Niagara Association of Realtors.
“One of the reasons we’re on the periphery is that we’re one of the more affordable markets,” says M&T Bank economist Gary Keith.
By David Robinson — The Buffalo News
