Close to Home: Cedar Rapids, Iowa, flood doesn't hurt market

— -- Just as Cedar Rapids, Iowa, plowed into the recession last year, a flood devastated the city, wiping out or damaging more than 5,300 homes and 700 businesses.

"The flood peaked at nearly 15 feet higher than it ever had before, and it completely inundated its downtown," says David Swenson, an economist at Iowa State University. Damage estimates were more than $6 billion.

Somehow, though, the city's housing market has been more stable than other parts of the country. Houses are being built in a different part of the city, and businesses are reopening.

"Even in the face of the disaster, some people are rebounding," says Cherokee Render, president of Cedar Rapids Area Association of Realtors.

Despite the disaster, home sales did not plummet, and are down 2.1% in July, compared with a year earlier.

Although many people lost their homes, they have been able to get federal disaster loans and grants. That has helped some move up to a slightly higher-end home, Render says. Others are gutting their homes and building from scratch.

"We are selling homes, and we believe that the $8,000 tax credit also has helped immensely," she says of the first-time home-buyer's credit. In particular, homes for $200,000 or less are selling. She predicts sales will remain steady.

Unlike many other metro areas, the Cedar Rapids housing market does not have peaks and valleys, nor has it experienced a surge in home foreclosure. "Midwest bankers tend to be more conservative," Swenson says.

The city is also fortunate because it has a diversified and dynamic local economy. It is home to General Mills, Quaker Oats, Cargill and Rockwell Collins, which provides communication and aviation electronic solutions.

The city's unemployment rate inched up to 6% in July, but it was less than the state of Iowa, which was 6.8%, and the nation, which hit 9.7%.

"You hate to say that a disaster is an opportunity," Swenson says. "But we know it makes the city reconfigure and re-evaluate its growth. And they are up to their hips in planning."