REAL ESTATE. UP, DOWN, FREEZING OR HANGING IN?

A recent article in the Baltimore Sun says it all. Is real estate heating up, cooling down, headed for a deeper freeze, or just hanging in there despite the challenges? Pick your own theory, but the latest federal report on home real estate price appreciation offers support for each of those scenarios. The third-quarter "house price index" compiled by the Office of Federal Housing Enterprise Oversight examined changes under way in 275 of the largest metropolitan markets.

Now to the four scenarios: Yes, real estate is heating up. You have to be in the right markets, of course, but there are several dozen hot spots around the country.

Everybody knows about the second scenario: Yes, real estate is cooling down. The third-quarter index documented that conclusively. The average appreciation rate for houses nationwide dropped to 0.86 percent in the quarter, or 3.4 percent annualized. That's chillier than it has been since mid-1998.

The deeper-freeze scenario? There's less hard evidence in the latest federal statistics.
But some sobering trends are certainly under way in two categories of real estate markets: First, those areas where the regional economy has been struggling, corporate layoffs and plant closings have pushed unemployment higher, and there is little in the way of immediate relief in sight.

The takeaway message: Even in a general national cooling trend, the performances of individual local real estate markets are governed by the fundamentals of their own economies. There is no single scenario at work here

But there is some positive news overall: In the words of Patrick J. Lawler, chief economist for the oversight agency that produces the price index: "The transition from sizzling markets to normal or weak markets has been orderly so far, and recent drops in interest rates lessen the likelihood that precipitous changes will occur."