May 14, 2011 -- Though home prices in most areas around the country remain weak, the attractiveness of purchasing a home continues to diminish in the wake of the real estate bust. Fears of price erosion, a weak economy and foreclosure dog markets coast to coast.
But not everywhere. In places like the suburbs of Rochester, N.Y., houses look like a great buy. You can get a relatively new 3,000-square-foot home on a nice quarter of an acre lot in a good school district for between $300,000 and $400,000. "The real estate here is very inexpensive, it's about the same as renting and it actually makes sense for families," says Delores Conway, a real estate economics professor at the University of Rochester. "The houses are solid investments with good school systems that are fairly priced."
One of the reasons residential real estate in Rochester is attractive is because Rochester is a college town--and homes in college towns tend to hold their value because the employment situation is more stable. The University of Rochester, a private institution that will not be impacted by the financial troubles in the public sector, is one of the biggest employers in New York State.
According to recent data put together by real estate website Zillow.com, Rochester is the best place to buy a home in the United States. One of the reasons Zillow.com rates Rochester so highly is that its foreclosure rate is a minuscule 0.24%.
In order to figure out the best places to purchase a home in the country, Zillow.com looked at four statistical measures in 125 metro areas as of the end of February. These factors included affordability, as measured by home price to income ratios; the unemployment picture (both the absolute figure and how it's trending over time); the foreclosure situation; and year-over-year housing price trends.
"The list is populated by markets that did not participate in the housing run up from 2000 to 2006 and therefore their housing recession has been milder," says Stan Humphries, chief economist at Zillow.com. "These markets are very affordable, where people are typically spending under 2.5 times their income on a house so it's pretty affordable, and they are now spending what they were paying in the 15 years between 1985 and 2000."
The housing recession in places like Pittsburgh was relatively mild, helping to land Pittsburgh second on the list of best places to purchase a home. Like Rochester, Pittsburgh depends on major university employers such as the University of Pittsburgh and Carnegie Mellon. It also has a robust health care sector, including the UPMC and Allegheny General hospital systems. The former Steel City's median home price is an inexpensive $103,900.
Right behind Pittsburgh is Utica, N.Y, a revived industrial area where home foreclosures stand at an incredibly low 0.08%. Zillow's research has shown that bank sales negatively impact home values across a market, making ownership less profitable.
The 10 best places to purchase a home in America are mostly in the heartland, reflecting the coastal nature of the housing boom and bust. None of the best places to purchase a home are located on the West Coast in states like California, Oregon and Washington, not to mention Nevada and Arizona.
There are, however, places in the center of the U.S. that figure to be great for home purchases. In Oklahoma, Oklahoma City and Tulsa are both energy belt areas with strong economic fundamentals and housing markets that have been steady for years. And at 4.1% Lincoln, Neb., has the lowest unemployment rate of any metro area in the nation, and it's falling. All three cities are in the top 10.
For more from the authors visit blogs.forbes.com/davidwhelan and blogs.forbes.com/nathanvardi.
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