Longtime businesses shutter. Workers get axed. Neighborhoods turn to ghost towns.
For decades, this story line played out dramatically in cities across upstate New York, which seemed to suffer more than most communities as America’s industrial economy shrank.
But as the rest of the country experiences the pains of a collapsing housing market, longtime Rust Belt mainstays like Rochester and Syracuse are surprisingly showing strength in their housing markets.
In the first quarter of this year, for instance, the median sales price in Rochester was $108,500, up 1.5 percent from $106,900 in the year-ago period, according to the National Association of Realtors.
And Syracuse, with a $110,300 median price, compared with $107,500 in the year-ago quarter, posted an even bigger 2.6 percent jump.
In contrast, the national median price in 2008’s first quarter was $196,300, down from $212,600 in 2007, which represents a 7.7 percent plunge.
Foreclosure numbers were also comparatively low in Syracuse, which in May saw one for every 4,186 households, according to RealtyTrac, which lists foreclosed properties.
In contrast, New York City had one foreclosure for every 1,274 homes, which was in line with Rochester, which had one per 1,064. Those are all a far cry from a housing crash epicenter like Stockton, Calif., which in May saw one homeowner in 75 suffer foreclosure, according to RealtyTrac.
It may seem counterintuitive, but because mortgage payments in Rochester and Syracuse represent a much smaller fraction of monthly expenses than elsewhere, the cities may be better insulated from downturns, according to brokers, developers, community leaders and affordable housing advocates.
In fact, in 2006, the most recent year with data, Rochester residents spent just 9 percent of their incomes servicing mortgages, down from 16 percent two decades earlier.
Syracuse residents, meanwhile, spent 10 percent to pay down their mortgages, down from 17 percent in 1986, according to NAR data.
In comparison, mortgage payments in New York City accounted for a whopping 27 percent of income in 2006, a figure that was essentially unchanged since the 1980s, the data show.
Of course, Syracuse and Rochester “didn’t have the strong price growth between 2000 and 2005 that New York City did,” said Ken Fears, a NAR economist who studies regional trends.
Without a huge run-up, there wasn’t as far to fall, but consequently, “they have much more healthy and stable markets than the rest of the country,” Fears said.
There are other positive forces buoying the economy of these upstate Rust Belt towns, and by extension, their housing markets: According to brokers, jobs are multiplying, as colleges expand and new companies put down roots.
And after years when residents migrated away from core downtown areas, they appear to be returning, as they rediscover the benefits of living within walking distance of theaters and museums.
This trend is boosting downtown property values, even if it’s also putting home ownership farther out of reach of lower-income renters.
Rochester, which is near Lake Ontario, may also benefit from a conservative mindset, especially in terms of loans, said Jeff Scofield, a partner with Re/Max Plus based in the suburb of Brighton.
Indeed, buyers never really took to problem-plagued adjustable-rate mortgages, opting instead for safer 15- or 30-year alternatives. Plus, as a general rule, they buy below their means, said Scofield, who has been selling homes for 16 years.
“You may live next door to a millionaire but might not know it, because he lives in a $250,000 home,” he said, pointing out that just 15 homes over $1 million sold last year in his market, which includes portions of five counties. “We are very traditional.”
Certainly, volume has slackened — Scofield sold 120 homes in 2007, versus 150 at the market’s 2005 height, he said — but values are climbing 3 percent a year in the upper-scale communities east of the Genesee River, such as Pittsford, Henrietta and Victor.
Projections indicate that Rochester’s downtown area, particularly the east side, will see an increase from 3,000 to 5,000 units within the next three years, said Patrick Tobin, a vice president with Victor-based Christa Development.
Last year, the company completed the Sagamore on East, a seven-story, 23-unit luxury condo that was the first ever built downtown. Its two-bedrooms, ranging in size from 2,000 to 3,200 square feet, were priced from $400,000 to $675,000 and sold out in a year, Tobin said.
A new project, which will break ground next year, will also be a condo, but the two-bedroom units will be smaller, ranging from 1,600 to 1,850 square feet. They will be priced from $325,000 to $425,000, Tobin said.
Meanwhile, PAETEC, a telecom company, will build its headquarters in Rochester, and the downtown could also get a boost from a new law school and the $35 million expansion of the Eastman School of Music; those factors could help offset the loss of tens of thousands of jobs in recent years from its Big Three corporations: Xerox, Eastman Kodak and Bausch & Lomb.
Still, last year the median income of city residents was $28,000, versus $64,100 in the greater metro area, said Carolyn Vitale, the COO of the Urban League of Rochester’s economic development arm.
Downtown houses cost around $50,000, but buying them could require nearly $800 in monthly payments, which for many can be a third of a paycheck — a tall order, Vitale said.
That’s why all 67 units at her new project, the Mills at High Falls, are rentals, and targeted as affordable, starting at $600 a month.