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The U.S. still is feeling the effects of widespread housing bust, but a new report serves as a reminder that large swaths of the nation didn’t experience a boom in home prices and hasn’t suffered from the bust.
New York Federal Reserve staffers Jaison R. Abel and Richard Deitz released a report highlighting the stability of upstate New York’s housing markets. The research notes that while the rest of the U.S. saw a real-estate boom and bust, upstate New York was largely insulated from the cycle.
“Despite upstate's long-term weak economic growth and population loss, Buffalo, Rochester, and Syracuse all ranked in the top 10 percent of metro areas in terms of home price appreciation in 2009, with Buffalo ranking sixth overall,” the authors wrote.
But upstate New York isn’t alone in bucking the national trend. “Most U.S. metro areas actually experienced more moderate increases in house prices than the nation between 2000 and 2006. In fact, 249 of the 383 metropolitan areas tracked by the Federal Housing Finance Agency saw price increases below the national rate of 8.1% during the boom,” Abel and Deitz said. Many of these areas, in turn, didn’t experience the resulting bust.
The authors say a lack of nonprime lending in these areas played a prominent role in insulating them from the boom and bust. “It is likely that causation runs in both directions — an increase in nonprime lending led to more significant home price appreciation [in boom areas], and more rapid home price appreciation led to a rise in nonprime lending,” the authors stated.
A correction from the boom years was clearly the driving force behind a national decline in home prices, and some regions with little to correct have been largely insulated. However, the trouble in the housing market may not end as the market returns to normal levels. Many metro regions may have been spared a precipitous decline in home prices, but the recession sparked by the drop has left almost no one unscathed. As every part of the country faces middling economic growth and continued long-term unemployment, a second leg down in the housing market could be more geographically widespread.
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“live the life of two cars and fun and comfort”
how dare they!
I hear no mention of equity extraction, or, refinancing. I’m pretty sure that’s a nationwide problem. It’s how America has increased it’s standard of living for the past twenty years.
I lived in upstate NY from ‘04-’07, and, most everyone I knew was sitting on a second loan on their home to live the life of two cars and fun and comfort. They certainly weren’t making big bucks at the local factory.
What happens when mortgage rate rise by 2%?
Can they illustrate what % of the population was affected?
As for upstate NY, how’s that economy doing recently? There may have been no boom because things have been moribund for years. Net, net, was any part of the country spared from the consequences of the housing bubble bursting? No…
Real Time Economics offers exclusive news, analysis and commentary on the economy, Federal Reserve policy and economics. The Wall Street Journal's Phil Izzo and Sudeep Reddy are the lead writers, with contributions from other Journal reporters and editors. Send news items, comments and questions to realtimeeconomics@wsj.com. Read more Economics coverage.
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