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The College Effect Schooling Housing.
Metros majoring in university life are at the head of their class, but student debt could create a drag on the overall housing recovery.
TRUCKEE, Calif. – November 3, 2014 – Clear Capital, the premium provider of data and solutions for real estate asset valuation and collateral risk assessment, today released its Home Data Index™ (HDI) Market Report with data through October 2014. Using a broad array of public and proprietary data sources, the HDI Market Report publishes the most granular home data and analysis earlier than nearly any other index provider in the industry.
- Colleges and universities are having an effect on housing across the country. Metros with noteworthy university influence are at the top of their class, with home price trends far outperforming national rates of growth since 2004. A sample of ten metros (Chart 1), each having a university presence, shows an average growth of 32% since 2004. Considering national home prices have only now climbed back up to 2004 price levels following nearly three years of recovery, these college towns have performed remarkably well. Their immunity to the boom-bust-bubble cycle proves these markets are unique in their sustained housing demand.
- Sustained gains at the MSA-level are a direct benefit of metros with heavy college influences. The Ithaca MSA, home to Cornell University and Ithaca College, has seen home prices rise a stunning 51% since 2004, putting the metro at the head of the class nationally. And it’s not just metros in the Eastern Region seeing college pay off. In Boulder, home to the University of Colorado, home prices are up an impressive 26% since 2004. These markets each maintain a foundation of sustained demand from students hungry for an education and in need of a roof over their heads.
- Even larger MSAs with a heavy academic focus, like Boston, are seeing impressively strong micro market growth. Cambridge housing demand from students attending Harvard University has helped fuel price growth of 39% over the last decade. The University’s ZIP code 02183 has outperformed the Boston MSA by 36% since 2004, highlighting the noteworthy influence of academia on local home prices. There’s no question that the many universities within this area, including MIT, contribute to the unique demand in the Cambridge, MA ZIP code and surrounding areas.
- The symbiotic relationship between university life and home prices, however, is localized. Now a full year into a cooling recovery, stronger demand from first-time homebuyers is a prerequisite to a sustainable recovery as investor demand dwindles. College graduates who feel confident enough in their employment prospects and the housing market to attempt to qualify for a mortgage will have to grapple with an average of more than $30,000 in existing student debt. With student debt now in excess of $1 trillion and growing, the housing market faces demand headwinds at a crucial transitional point in the recovery.
- Contact Brian Opsal for your October 2014 file of the Top 30 MSAs or to access our data on the Bloomberg Professional service by typing CLCA <GO> .
“College towns are just another example of how real estate trends are impacted by local market conditions” said Dr. Alex Villacorta, vice president of research and analytics at Clear Capital. “It’s clear a significant portion of loan dollars are going towards student housing costs, thereby creating a critical demand surge. Healthy student populations activate a positive feedback loop where housing fuels local economies and jobs which increase the overall confidence and demand in these towns. Concerns over rising student debt and recent college graduates’ ability and desire to qualify for a home loan could certainly create a drag on the recovery overall as the next phase depends on re-engagement by traditional homebuyers. Generally, investment opportunity in college markets yield benefits that ripple beyond localized home price strength since higher education typically begets higher income which has allowed more folks to invest in the American Dream. While this is still true today, the struggle between rising student debt and a first-time homebuyer’s desire and ability to qualify for a mortgage will pose an interesting challenge for the future of the recovery.
We’ve now seen a full year of moderating price growth at the national level. The concern now is less about declining gains, and more in the market’s ability to stabilize once we hit that range. As we see investment demand and distressed sale activity transition back to a level more in line with historical averages, we need to see demand from traditional homebuyers ramp up. The first-time homebuyer segment is a key portion of this demand segment, but their desire and ability to offset the housing demand gap in today’s environment remains to be seen.”
Graph 1. The “Harvard effect” fuels home price growth. Source Clear Capital.
|The College Effect: MSA Price Change From 2004|
|Rank||Since 2004 +/-|
|2||Ithaca, NY (Cornell University, Ithaca College)||50.7%|
|3||Austin-Round Rock, TX (University of Texas)||46.8%|
|4||Corvallis, OR (Oregon State University)||41.2%|
|5||Charleston, WV (University of Charleston)||36.6%|
|6||Champaign-Urbana, IL (University of Illinois)||33.6%|
|7||San Jose, CA – Sunnyvale, CA – Santa Clara, CA||32.9%|
|8||Portland, OR – Vancouver, WA – Beaverton, OR||32.7%|
|9||Syracuse, NY (Syracuse University)||28.3%|
|10||Nashville, TN – Davidson, TN – Murfreesboro, TN||28.1%|
|11||State College, PA (Penn State University)||27.1%|
|12||Boulder, CO (University of Colorado)||25.7%|
|13||Seattle, WA – Tacoma, WA – Bellevue, WA||24.6%|
|14||College Station-Bryan, TX (Texas A&M University)||24.0%|
|15||Los Angeles, CA – Long Beach, CA – Santa Ana, CA||18.0%|
|16||Virginia Beach, VA – Norfolk, VA – Newport News, VA||17.7%|
|17||San Francisco, CA – Oakland, CA – Fremont, CA||17.5%|
|19||Washington, DC – Arlington, VA – Alexandria, VA||15.6%|
|20||Dallas, TX – Fort Worth, TX – Arlington, TX||15.5%|
|21||Houston, TX – Baytown, TX – Sugar Land, TX||15.4%|
|22||Raleigh, NC – Cary, NC||12.5%|
|23||Phoenix, AZ – Mesa, AZ – Scottsdale, AZ||12.3%|
|24||Baltimore, MD – Towson, MD||12.2%|
|25||Denver, CO – Aurora, CO||12.2%|
|27||Philadelphia, PA – Camden, NJ – Wilmington, DE||10.3%|
|28||NY, NY – No. New Jersey, NJ – Long Island, NY||8.6%|
|30||Charlotte, NC – Gastonia, NC – Concord, NC||6.3%|
|31||Clinton, IA (Ashford University)||5.1%|
|33||New Orleans, LA – Metairie, LA – Kenner, LA||3.5%|
|34||Boston, MA – Cambridge, MA – Quincy, MA||2.8%|
|35||Oxnard, CA – Thousand Oaks, CA – Ventura, CA||2.2%|
|36||Hartford, CT – West Hartford, CT – East Hartford, CT||0.5%|
|37||Miami, FL – Ft. Lauderdale, FL – Miami Beach, FL||-0.3%|
|38||Riverside, CA – San Bernardino, CA – Ontario, CA||-0.6%|
|39||San Diego, CA – Carlsbad, CA – San Marcos, CA||-1.5%|
|44||Sacramento, CA – Arden, CA – Roseville, CA||-8.5%|
|45||Tampa, FL – St. Petersburg, FL – Clearwater, FL||-8.9%|
|46||Minneapolis, MN – St. Paul, MN – Bloomington, WI||-12.3%|
|47||St. Louis, MO||-12.4%|
|50||Atlanta, GA – Sandy Springs, GA – Marietta, GA||-13.9%|
|51||Milwaukee, WI – Waukesha, WI – West Allis, WI||-14.4%|
|52||Cincinnati, OH – Middletown, OH||-15.2%|
|54||Providence, RI – New Bedford, MA – Fall River, MA||-18.4%|
|55||Birmingham, AL – Hoover, AL||-22.9%|
|57||Las Vegas, NV – Paradise, NV||-23.4%|
|58||Chicago, IL – Naperville, IL – Joliet, IL||-24.7%|
|59||Cleveland, OH – Elyria, OH – Mentor, OH||-36.4%|
|60||Detroit, MI – Warren, MI – Livonia, MI||-42.2%|
Chart 1: The college influence on price growth since 2004. Source Clear Capital
|National and Regional Market|
|Market||Qtr/Qtr % +/-||Yr/Yr||Distressed Saturation|
Chart 2: National and Regional Markets – October 2014. Source Clear Capital
|Highest Performing Major Metro Markets|
|Rank||Metropolitan Statistical Area||Qtr/Qtr % +/-||Yr/Yr||Distressed Saturation|
|1||Detroit, MI — Warren, MI — Livonia, MI||4.6%||20.9%||20.1%|
|2||New Orleans, LA — Metairie, LA — Kenner, LA||4.5%||5.5%||16.2%|
|3||Atlanta, GA — Sandy Springs, GA — Marietta, GA||2.4%||13.9%||18.6%|
|4||San Jose, CA — Sunnyvale, CA — Santa Clara, CA||2.1%||11.7%||4.6%|
|5||Birmingham, AL — Hoover, AL||2.0%||2.4%||15.3%|
|6||Milwaukee, WI — Waukesha, WI — West Allis, WI||1.9%||3.4%||17.5%|
|8||Cincinnati, OH — Middletown, OH||1.8%||8.4%||18.0%|
|10||Houston, TX — Baytown, TX — Sugar Land, TX||1.7%||12.1%||3.9%|
|11||Dallas, TX — Fort Worth, TX — Arlington, TX||1.6%||9.4%||4.0%|
|12||Miami, FL — Ft. Lauderdale, FL — Miami Beach, FL||1.6%||13.2%||28.8%|
|14||San Francisco, CA — Oakland, CA — Fremont, CA||1.5%||14.0%||7.1%|
|15||Minneapolis, MN — St. Paul, MN — Bloomington, WI||1.5%||8.6%||9.9%|
Chart 3: Highest Performing Major Metro Markets – October 2014. Source Clear Capital
|Lowest Performing Major Metro Markets|
|Rank||Metropolitan Statistical Area||Qtr/Qtr % +/-||Yr/Yr||Distressed Saturation|
|1||Hartford, CT — West Hartford, CT — East Hartford, CT||-0.8%||-1.4%||14.5%|
|2||Baltimore, MD — Towson, MD||0.1%||1.3%||20.7%|
|4||Boston, MA — Cambridge, MA — Quincy, MA||0.2%||7.1%||8.8%|
|6||Virginia Beach, VA — Norfolk, VA — Newport News, VA||0.5%||1.9%||21.0%|
|7||Philadelphia, PA — Camden, NJ — Wilmington, DE||0.5%||3.7%||17.2%|
|8||Raleigh, NC — Cary, NC||0.5%||3.4%||7.9%|
|9||NY, NY — No. New Jersey, NJ — Long Island, NY||0.6%||4.9%||11.0%|
|10||Washington, DC — Arlington, VA — Alexandria, VA||0.6%||5.5%||13.6%|
|11||Phoenix, AZ — Mesa, AZ — Scottsdale, AZ||0.7%||7.2%||13.7%|
|12||St. Louis, MO||0.7%||6.0%||19.7%|
|14||Charlotte, NC — Gastonia, NC — Concord, NC||0.8%||4.6%||11.2%|
|15||Providence, RI — New Bedford, MA — Fall River, MA||0.8%||5.3%||15.3%|
Chart 4: Lowest Performing Major Metro Markets – November 2014. Source Clear Capital
About the Clear Capital Home Data Index (HDI) Market Report
The Clear Capital HDI Market Report provides insights into market trends and other leading indices for the real estate market at the national and local levels. A critical difference in the value of the HDI Market Report is the capability of Clear Capital to provide more timely and granular reporting than nearly any other home price index provider.
The Clear Capital HDI Market Report
- Offers the real estate industry (investors, lenders, and servicers), government agencies, and the public insight into the most recent pricing conditions, not only at the national and metropolitan level, but within local markets as well.
- Is built on the most recent information available from recorder/assessor offices, and then further enhanced by adding the company’s proprietary streaming market data for the most comprehensive geographic coverage and local insights available.
- Reflects nationwide coverage of sales transactions and aggregates this comprehensive dataset at ten different geographic levels, including hundreds of metropolitan statistical areas (MSAs) and sub-ZIP code boundaries.
- Includes equally-weighted distressed bank owned sales (REOs) from around the country to give the most real world look of pricing dynamics across all sales types.
- Allows for the most current market data by providing more frequent updates with patent pending rolling quarter technology. This ensures decisions are based on the most up-to-date information available.
Clear Capital HDI Methodology
- Generates the timeliest indices in patent pending rolling quarter intervals that compare the most recent four months to the previous three months. The rolling quarters have no fixed start date and can be used to generate indices as data flows in, significantly reducing the multi-month lag time experienced with other indices.
- Includes both fair market and institutional (real estate owned) transactions, giving equal weight to all market transactions and identifying price tiers at a market specific level. By giving equal weight to all transactions, the HDI is truly representative of each unique market.
- Results from an address-level cascade create an index with the most granular, statistically significant market area available.
- Provides weighted repeat sales and price-per-square-foot index models that use multiple sale types, including single-family homes, multi-family homes, and condominiums.
About Clear Capital
Clear Capital (clearcapital.wpengine.com) is the premium provider of data and solutions for the mortgage finance industry. The Company’s products include appraisals, broker price opinions, property condition inspections, value reconciliations, automated valuation models, quality assurance services, and home data indices. Clear Capital’s combination of progressive technology, high caliber in-house staff, and a well-trained network of more than 40,000 field experts sets a new standard for accurate, up-to-date, and well documented valuation data and assessments. The Company’s customers include the largest U.S. banks, investment firms, and other financial organizations. Clear Capital’s home price data can be accessed on the Bloomberg Professional service by typing CLCA ‹GO›.
The information contained in this report is based on sources that are deemed to be reliable; however no representation or warranty is made as to the accuracy, completeness, or fitness for any particular purpose of any information contained herein. This report is not intended as investment advice, and should not be viewed as any guarantee of value, condition, or other attribute.
Vice President, Marketing