This may seem like a flashback, but it isn’t. Burt Reynolds is a movie star again. Your friends are wearing Lacoste. And your home is showing significant appreciation.
Home values rose 4.9 percent in 1997, well above the nation’s average inflation rate of 1.7 percent, according to an index that tracks repeat home sales compiled by mortgage buyers Freddie Mac and Fannie Mae. That means U.S. home prices have climbed faster than inflation for three straight years. The country hasn’t seen such good news on the housing front since the late 1980s.
Perhaps the biggest surprise in the index was the gain posted by Flint, Mich., a gritty factory town of about 430,000 whose economic woes were chronicled in the quirky 1989 documentary “Roger & Me.”
With automakers hiring again, Flint’s housing prices jumped 25 percent last year. The median home price in Flint was $102,845, up 64 percent from 1990.
Dean C. Ludwig, a retired high school principal, is relishing his recent gains. His four-bedroom house in Flint was appraised in 1993 at $99,000. Last year, it sold for $126,500.
“For that four-year span, the increase was quite great,” he says.
Back in the late ’80s, when auto-industry layoffs savaged Flint’s economy and one in five adults was out of work, some residents were raising rabbits in their backyards to sell as “pets or meat,” according to the movie. Now, Flint’s unemployment rate has fallen to 4.4 percent. The town has even become a bedroom community of sorts. Some new residents, attracted to Flint because its housing prices remain among the lowest in the area, commute 60 miles each way to Detroit.
Other Michigan cities also registered some of the largest gains last year. Hiring binges by the Big Three automakers reduced Michigan’s unemployment level to 4 percent last year from 7.6 percent in 1990, and bolstered confidence. A statewide referendum that lowered property taxes in many towns three years ago also contributed to home appreciation, economists said.
Major gains were also posted in Utah, as housing prices in Salt Lake City and Provo shot up more than 24 percent. Real estate brokers credited an influx of Californians, who drove up prices, and Utah’s flourishing high-tech and construction industries.
Nationwide, the index showed a continuation of the upward trend that began in 1995. That year, housing prices rebounded after roughly half a decade during which a recession and corporate cutbacks eroded consumer confidence and employment levels.
Economists say it is no coincidence that 1997 saw both the decade’s highest rate of home ownership (65.7 percent) and the lowest unemployment level since 1973 (4.9 percent). Low interest rates also have been spurring home sales.
Even markets with low turnover saw some home-price appreciation.
“You don’t need a lot of people who are willing to pay more for houses to boost the entire price level,” says Ingo Winzer, publisher of the Local Market Monitor, Wellesley, Mass., which tracks real estate trends.
“If only a few of them change hands, everybody thinks their own homes are worth 10 percent more.” (In determining its index, Freddie Mac and Fannie Mae took into account not only sale prices but also recent property appraisals.)
Last year, the median U.S. home price was $124,100, up 5 percent from $118,200 in 1996 and up nearly 10 percent from 1995, according to the National Association of Realtors, a trade group in Washington, D.C. The gains in the national median price, in which half the homes sold for more and half for less, reflect both price appreciation and a move toward higher-priced homes, as Baby Boomers trade up to more spacious and fancier digs.
In some areas of the country, however, housing prices remained sluggish. Central California was tepid, as was part of the Northeast.
Hawaii’s housing market continued a slump that began in the mid-1990s, when Japanese investors began pulling out in response to a downturn in the economy back home.
Though Hawaiian houses still are expensive by mainland standards, the islands’ average home price of $380,000 has slipped from the 1990 average of $498,500, according to the Honolulu Board of Realtors.
“Nobody takes out mortgages,” says Rufo Ganir, a local real estate agent. “The economy is so bad, people are afraid.”
Among Hawaiians who have been stung by the downturn is George Cassarno, 74, who purchased a rundown four-bedroom house in an exclusive section of Honolulu several years ago, hoping to make a tidy profit after renovating the property.
After sinking about $1.3 million into the house, he put it on the market last year at $1.4 million and didn’t get a single offer. Disappointed, he recently took the house off the market and rented it.
“I don’t think my investment will ever go back to the value it was when I bought it,” Cassarno says. “Two years from now, if I’m still alive, we’ll try it again.”
