Forbes.com July 14, 2008

We examined the country's 40 largest metropolitan areas and looked at cities where home prices have appreciated over the last two years. We also measured tightening vacancy rates. These metrics indicate places where buyers are investing in homes in order to live, not just make a quick buck, and where the housing market is relatively solid. We culled our vacancy and home price information from the U.S. Census Bureau and the National Association of Realtors.

The average vacancy rate across the major metro areas was 2.88%, and the average percent appreciation was just .07% over the last two years.

With lending tight, we also factored in the spread between a monthly rent check and a mortgage payment at the median level (assuming that the down payment was 10% and the fixed interest rate is 6.25%). Encino, Calif.-based real estate brokerage firm Marcus & Millichap provided stats on median monthly rents.

Cities where a mortgage payment was close to, or less than, the average rent were given a higher score. For instance, in Cleveland the average rent is $702, and the average mortgage is $565.78. With a lower monthly payment, tax incentives and the opportunity to build equity, it makes sense to buy here.

In stark contrast, San Jose, Calif., has an average monthly mortgage payment of $4,322.33, versus an average rent of $1,612.

Texas dominated our lineup of mortgage-worthy areas. Thanks to a business-friendly tax environment, many large corporations call the Lone Star State home, which creates jobs and tax revenue.

The University of Texas campus provides young blood and research-related jobs to No. 2 city AUSTIN. This state capitol is a hip area on the rise. The vacancy rate has fallen by 37.5% in the last 24 months to just 1.5%, despite a lot of building in recent years. And buying isn't much more expensive than renting. An average mortgage payment is $1,022.40, and average rent hits $767.

San Antonio, No. 5, and Dallas, No. 6, made the list thanks to affordable housing, which continues to appreciate. In both cities, the median home price hovers around $150,000, and a monthly mortgage payment of around $800 is pretty close to what one pays in rent. If you can pony up the down payment, these are great areas to live.

By Connie Gore GlobeSt.com

ADDISON, TX-Weathering out today's economic turmoil is easier in Texas than practically any place else in the US. And, a leading economist for the Real Estate Center at Texas A&M University says the climate's going to stay that way for a long time to come.

"I think Texas is poised for an all-out boom for the next 25 years," Dr. James P. Gaines, research economist for the College Station-based real estate center, told nearly 175 professionals attending yesterday's CoreNet Global Southwest meeting in Addison Conference Center at 15650 Addison Rd. In a macro- to micro-look at the US and Texas, Gaines says the state's good fortune to be gaining while others lose comes with a cost: pressure on infrastructure, government services and public finance.

Population projections show the state will add 13.6 million residents by 2030, more than the current populations of Dallas/Fort Worth, Houston, San Antonio and Corpus Christi. The stats show three million to seven million people will land in Dallas/Fort Worth, with Gaines betting the final tally will push the high end of the 2030 projection.

Gaines credits the state's strong showing, today and in the future, to job growth, which is leading the US, non-union labor and pro-growth attitudes. Still, he says it doesn't mean Texas will escape unscathed from the nation's economic upheaval. "Texas housing markets are going to be spotty," he forewarns. "Rents and occupancies for commercial real estate will continue to rise for now." And in Dallas/Fort Worth, he says absorption is positive although "we're seeing some early, early strain of overbuilding, but there's still investor interest."

Commercial real estate owners are facing new pressure with lending rules changing and corporations caught in "wait and see" modes. "You just can't assume you're going to have a 10% rent increase every year for 10 years and 1.5x debt coverage," Gaines stresses. "And, that's what's been going on."

Texas' economic indicators still point to 2% to 2.5% growth, besting predictions about the nation as a whole by nearly two points. The good news about Texas, though, is overshadowed by concerns at the national level. "One of our biggest problems facing our economy is a solvency issue," Gaines says, citing the feds' bailout of financial institutions and more recently, Fannie Mae and Freddie Mac.

The writing is on the wall for a "technical recession," Gaines says, pointing to rising food and energy prices, lower consumer spending, job losses, slow economic growth and high inflation. He echoes his peers in predicting the Fed will stop cutting interest rates as a stop-gap measure, adding mortgage rates most likely will stay flat or tick ever so slightly. The upshot is the economy will continue down its present path for the rest of this year and well into 2009.

"Dallas/Fort Worth moves more in sympathy with the US economy than any place else. Now, though, it's still perking above the US indicators," Gaines says. "In Texas, we're doing a whole lot better. If Texas was a nation, we'd be ranked No. 11 in the world."

Gaines says the state clearly is poised for a long boom, economically and population-wise. And though he didn't come out and say it, his outlook is a calling card for a well-known saying in Texas that all newcomers hear: "What took you so long to get here."