New research suggests that colleges and universities boost local housing markets, even insulating home prices from boom-and-bust cycles, partly because of constant demand for single-family houses.
Out of the top 35 metropolitan areas where home prices have appreciated since 2004, 10 were college towns, and nine of those towns were among the top 15,
according to research by Clear Capital. Put in context, most housing markets in the U.S. are just now breaking even with 2004 home-price levels.
The metropolitan area around Ithaca, New York, home to Ithaca College and Cornell University, saw home prices grow 52 percent since 2004. Ithaca homes appreciated just a little bit slower than the No. 1 city, Honolulu, which has seen 64 percent appreciation since 2004.
Corvallis, Oregon, home to Oregon State University, and Charleston, West Virginia, home to the University of Charleston and West Virginia State University in the neighboring town of Institute, beat out big cities like San Francisco and Houston in terms of price appreciation since
One factor in the rise of home prices is the demand for rental properties — specifically single-family rentals, as opposed to demand for apartments or condominiums. Clear Capital Vice President of Research Alex Villacorta told Scotsman Guide News, “In college towns there tends to be a stronger demand for [single-family]
rentals, which is why we see growth in home sale prices as opposed to apartment complexes.”
Villacorta said that Clear Capital’s research indicates the robust home-price appreciation was spread between rental homes and owner-occupied homes, indicating that the college towns are desirable places to live in general.
Clear Capital compared the appreciation of home prices in Cambridge, Massachusetts, to Boston. Only the Charles River separates the two cities, but Cambridge contains two of the most prestigious universities in the world, Harvard University and the Massachusetts Institute of Technology.
Since the housing crash, prices in the area near Harvard outperformed the growth of the entire Boston metropolitan area, which includes Cambridge. Prices in Cambridge are 36 percent above 2004 levels, while the entire Boston area improved just 2.8 percent.
The Clear Capital report on college towns was part of its monthly nationwide report on home values. Home prices increased 1.2 percent in the U.S. this past third quarter, and 7.4 percent on an annual basis.
The cities with the best quarter-over-quarter growth were the metropolitan statistical areas around Detroit at 4.6 percent, New Orleans at 4.5 percent, Atlanta at 2.4 percent and San Jose, California, at 2.1 percent.
On an annual basis, the Detroit area saw home prices appreciate 20.9 percent, the fastest pace of any city in the top 15. The next-best annual appreciation was in San Francisco, at 14 percent.
The metropolitan markets with the worst quarter-over-quarter growth were Hartford, Connecticut, which declined 0.8 percent — the only area to post negative numbers — followed by Baltimore and Rochester, New York, at 0.1 percent each, Boston at 0.2 percent, and Honolulu at 0.4 percent.