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Feb. 3, 2003 -- They're up 16% in a Washington, D.C., suburb, but losing steam in Denver. And just outside Los Angeles, home prices in the hillside town of La Canada Flintridge have shot up more than 23% from a year earlier. "We've been discovered," says Michael Braverman, who expects to get $500,000 more for his home than he paid five years ago.
Forget watching the stock market. The best -- and maybe the only -- game in town these days is the remarkably resilient real-estate market. Last year alone, amid all the bad news, home prices still rose by 7% nationally -- and some economists believe things will be almost as strong this year. And yet, many homeowners are holding their breath, worrying about the "bubble" and asking: What about my town?
We've got some answers. In an exhaustive town-by-town survey, we looked at home prices in more than 500 upscale ZIP Codes, taking a snapshot of prices last year and comparing them with the year before. We found that nobody in Greenwich, Conn., or Southern California is losing sleep. But who'd have thought duplex-lined Beach Haven, N.J., would be in the top 10 nationally for growth -- or that so many other overlooked communities would be so strong (introducing... Mattapoisett, Mass.). In last place? No, it's not Silicon Valley.
But our biggest surprise, given all the news, was just how many hot markets seem to be cooling off. Indeed, according to our survey by housing specialists Fiserv Case Shiller Weiss, the growth rate of prices in fully a third of our towns has slowed from the same time frame a year earlier. "There's just air coming out of the market," says David Lereah, chief economist for the National Association of Realtors, who expects price growth to slow nationally to about 4% this year.
Of course, people have been predicting the end of the real-estate run-up for years now, and home prices keep defying the naysayers. The economy's sputters actually have played to homeowners' advantage, with low interest rates and money pulled from the stock market causing buyers to bid up prices. But people keep getting mixed messages: The government recently said price growth slowed during the third quarter -- but a different report later said a record number of existing homes had been sold last year.
For our rankings, we looked at price changes over the 12 months ending last September, the most recent figures available, then looked at growth the year before to see which places were "losing steam." The survey covered ZIP Codes with a median home price of $350,000 or more and with enough sales for a reliable picture (generally 100 during the year). In the end, California, with its active mansion market, dominated our growth list, while some regions like the South had a limited number of towns that met our criteria.
Finally, we broke it out by region and hit some of the locales we thought represented what's going on across the country-from the biggest gainers to the slowest growers and some in between. Below, the highlights:
This leafy suburb in the foothills of the San Gabriel Mountains is one of the biggest winners of the Southern California boom, nabbing first place in the West (as well as nationally), with prices increasing more than 23% last year. Buyers, who include everyone from behind-the-scenes movie folks ("Ally McBeal" executive producer Bill D'Elia is typical) to NASA scientists, get valley views and an "Ozzie and Harriet" feel, real-estate agent Shannon Cistulli says.
Still, there's always the other side to paradise. Forget negotiating here -- sellers are getting an average 97% of their asking price, and lower-price homes (that'd be about $600,000) can go in a day. Buyers are stunned: Bill and Nina Browning just paid $1.7 million for a four-bedroom place that needs landscaping and redone bathrooms. "My husband thought he might retire in four or five years," Mrs. Browning, a homemaker, says. "Not now."
Denver (Rocky Mountains)
Who did the worst? Central Denver's historic Capitol Hill district may have large Victorian mansions, a big park and a short commute to downtown, but prices rose only 1.8% last year, lowest of any town in our survey. After having one of the best economies in the country just a couple of years ago, Denver now has one of the worst (think Qwest, which is based here, and other telecommunications meltdowns). With unemployment running at 5.3%, this is as good a place as any to see how fickle housing prices can be even in a nationally strong market. Despite an advertising blitz and a big renovation, Jason Maggard, a sales recruiter, got only one offer for his Victorian here -- for over $100,000 less than his asking price. "I grabbed it," he says.
Barrington, R.I. (Northeast)
We didn't know where to start in this part of the country. For the most part, the top-growth neighborhoods were a grab-bag of communities that aren't big names -- and didn't come close to making our list of top-priced towns. Indeed, Barrington's median price came to just $380,000, while the No. 2 in terms of growth, tiny Mattapoisett, Mass., was an even better bargain, with a median price of $375,000 despite a 17% increase from a year earlier.
But there is an important blind spot in this region: New York City, where co-op apartment sales dominate (and aren't generally available publicly) and where not enough single-family homes change hands. Still, while some Manhattan neighborhoods would obviously qualify for our richest-towns list, the city's definitely another place losing steam. "Prices were running at 60 miles an hour, but are ramping down," real-estate appraiser Jonathan Miller says.
Beach Haven, N.J. (Mid-Atlantic)
A Jersey Shore surprise: This humble remote barrier island wasn't only highest in this region but also was ranked sixth nationally on our list. Prices here have shot up more than 35% during the past two years. The big attraction: beachfront houses for half the price of the Hamptons.
Indeed, this is one of a number of once-overlooked towns where growth has begun to outpace better-known neighbors, like Kensington, Md. (beating out Chevy Chase). Still, Beach Haven doesn't have the charm of a traditional beach town; it's filled with contemporary houses that popped up after a '60s hurricane. We found three-bedroom homes going for $1.1 million, and even a featureless duplex will cost you $839,000 (wood paneling included). "Everyone's overpricing," agent Eileen Matson says. "It's getting hard to bring people back to reality."
Miami (Southeast)
This section of South Miami (the 33146 ZIP Code, which includes much of ritzy Coral Gables and part of Coconut Grove) had the best growth rate in the South, at 14.5%. But the good news ends there. The area's lost steam lately, with unemployment up (it's at 7% locally now) and tourism down. Making things worse: Many of the people who wanted to move their money out of stocks and into second homes have already done so, Brad Hunter, a local real-estate analyst, says.
Still, prices here remain steep and even a teardown-worthy place on the bay will cost upward of $1.2 million; a new place on a golf course will set buyers back $1.5 million. That's been too pricey lately for many U.S. buyers, and local real-estate agents say many of their clients are from overseas, especially South America. "To them, we're still a bargain," real-estate agent Darlene Dale says.
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