About the last place a prospective homebuyer might want to peruse MLS listings these days is in one of the country’s most expensive markets, like San Francisco, where the median cost of a single-family dwelling has jumped 37 percent since 2003. (It’s now more than triple the national figure.)
A couple of leading economists, however, think buyers shouldn’t be intimidated, even if prices in these markets go into a slump. San Francisco, New York, and a small handful of other big cities may suffer dramatic swings in a downturn, but their long-term trends “are so strongly upward that if you’re willing to buy and hold, it’s a good strategy,” says Todd Sinai, an associate professor of real estate at the Wharton School and coauthor of a recently released study called “Superstar Cities.”
The same logic, Sinai says, applies in other inflated markets like Boston, Los Angeles, and Seattle.
Given the admission that there may be “dramatic swings in a downturn” I guess I don’t really understand the “bubble-proof” label. If they were making the usual claim, that the worst case scenario is for prices to level off for a few years, then it would make sense. It seems more like they’re just pointing out the cities with the best long-term growth prospects, and I actually don’t disagree with their assessment. Seattle is a desirable place, and will likely take a less severe beating as the housing bubble busts. However, that hardly makes us “bubble-proof.”
Their reasons for including Seattle on this list are all the ones we’ve heard dozens of times before:
Seattle has a lot going for it physically, with its green landscape of towering trees laced with bays, inlets and rivers connected to Puget Sound.
But what makes the city effervesce is its status as the epicenter of the software industry, courtesy of Microsoft, and the birthplace of other marquee giants like Starbucks and Amazon.com. As these companies have grown, so has their demand for workers.
Other attractions include access to natural beauty, an active lifestyle and a lively pop music scene: Seattle is a home to numerous heavy metal and grunge bands. All this spurs demand for Seattle’s tight housing supply.
Not to mention historically low interest rates and loose lending standards…
(Paul Kaihla, Business 2.0 Magazine, 10.25.2006)