Will rise in home prices follow San Francisco's lead – or Cleveland's?

Quick. If you had to buy a home tomorrow with the best prospects for appreciation, would you purchase in San Francisco or Cleveland?

Both housing markets are down from their peaks (39 and 13 percent, respectively), both have seen a double-digit recovery from their lows (13 and 11 percent).

But it's the city on the bay that has the momentum. Median housing prices jumped nearly 3 percent from July to August in San Francisco, following two previous monthly gains of 3 and 4 percent, according to the S&P/Case-Shiller home price indices (.pdf) released Tuesday. In the city by Lake Erie, housing prices fell by half a percentage point in August.

The two cities illustrate how housing markets, after falling last year and early in 2009, are recovering at different speeds. Overall, the 20-city index rose for the fourth month in a row, up 1 percent in August and up 5 percent from its low in April. But that average masks the differences between the solid recovery in places and San Francisco and Chicago and the stagnation in metropolitan areas like Cleveland, Seattle, and Charlotte, N.C.

Some metro areas find themselves in even more extreme circumstances. Las Vegas' home values are still falling. Detroit seems to have stabilized — but at levels not seen since the mid-1990s!

Dallas, by contrast, has barely been affected by the "great recession." Its median home price is down only 4 percent from its 2007 peak.

So will the housing recovery continue or slow down as the tax credit for first-time homebuyers expires next month? The answer: Yes and yes, depending on whether you live by the bay, the lake, or some other locale.
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