Price Appreciation Soars in Less Affluent Cities; Little Havana/Miami Among Leaders

As investors - or those seeking an eventual return on their Florida home loan - consider investing options, they may be in for a surprise. The houses around the nation that have shown the most significant appreciation over the last two years can be found is less affluent cities than you might expect.

According to a Forbes.com ZIP code analysis, the California city averaging the LEAST amount of appreciation was the posh neighborhood of Holmby Hills. Conversely, Watts - an area known for poverty - showed rising home prices of 91.9% between 2003 and 2005.

A pattern of home loan appreciation

This is a pattern that held true in several of the largest cities in the U.S. over the past couple years. Many neighborhoods with lower median incomes, neglected housing stock and low home prices, or areas that were dominated by office or industrial space, have surged forward.

For example, consider Miami’s Little Havana. Prices increased more than 150% over the last two years. Similarly, there’s the tough Northern Liberties section of Philadelphia, which enjoyed appreciation of more than 70%.

“In the past, you would expect that neighborhoods with higher median incomes would have stronger demand for homes,” says David Lereah, senior vice president and chief economist for the NAR. “Lower-income neighborhoods will have more renters. Higher-income areas will have more demand from people wanting to climb the ladder. It means that some things have changed.”

Fall out from home price increases

As prices have increased, some of the most desirable neighborhoods - which have always been more expensive - have topped out, becoming unaffordable for many home buyers. So instead of buying charming but overpriced stone homes in the leafy Baltimore neighborhood of Guilford, for instance, young families turned to blue-collar areas near the water, rehabbing old row houses that seemed cheap in comparison.

Jonas Lee, a founder and managing partner of Redbrick Partners in Manhattan, a private investment fund that puts money into single-family homes, is not surprised. His company targets just such urban areas for investment.

“It takes people a while to figure it out, but there’s a very large arbitrage between these neighborhoods and some of the nicer neighborhoods,” Lee says. “Once that price differential is large enough, people start to recognize the opportunities, and then there’s a sort of a herd mentality. It’s leading to the revitalization of neighborhoods that had not seen a lot of investment for a long period off time.”

What does all this mean? Perhaps you should be looking toward Miami for your next Florida home loan. The best real estate investing advice we can give you at the moment is to focus on areas that are reflective of booming price appreciation.