Roughly 112 metro areas in the U.S. are still dealing with 10% unemployment or greater. That’s down from 166 at the same time last year, but tell that to folks in El Centro, Calif., where nearly one in every four people is unemployed. The Riverside-San Bernardino-Ontario area in California is still dealing with nearly 14% unemployment, while the 13.3% unemployment in Las Vegas is not only driving up foreclosures, but driving down traffic to its McCarran airport. Passenger numbers fell off 2.6% last year.

On the other side of the recovery, more than 210 cities are below the average U.S. rate and 65 areas dipped below 7%. If you’ve got a sweet gig at the University of Nebraska or have a steady buyer for your grain or corn-based ethanol, count yourself among the lucky residents of Lincoln, Neb., who aren’t part of the city’s absurdly low 4.1% unemployment rate. That’s still up from 3% just two years ago, however, and is only a hair better than the 4.2% rate in Bismarck, N.D.

It takes more than just a low unemployment rate in a small town to show the world you’ve weathered years of recession-fueled financial woes. With help from the Census Department, the Bureau of Labor Statistics and the Bureau of Economic Analysis, TheStreet found U.S. cities that not only withstood the economic downturn, but seemingly ignored it:

Austin, Texas

Reported GDP in 2009: $73 billion
Reported GDP today: $78.4 billion
Unemployment: 6.8%
Population change 2000-10: 20.4%

The locals want to keep Austin weird, and having a glut of jobs and a growing city definitely qualifies as weird during a period of financial turmoil. Heavy hitters such as Dell, the University of Texas, Whole Foods and Forestar Group have helped by doling out jobs, and newcomers such as Samsung have added to the city’s work force. But a town that’s staked its reputation on art-and-music-fueled funkiness seems to expand every time the South By Southwest music, technology and movie festival rolls through.

Washington, D.C.

Reported GDP in 2009: $366.6 billion
Reported GDP today: $407.5 billion
Unemployment: 5.8%
Population change 2000-10: 2.8%

With government jobs, lobbying and contracting gigs linked to those government jobs, a huge law community, a heavy tourist draw and the bolstering presence of universities such as Georgetown, George Washington, Howard and American and companies including Danaher and Pepco Holdings, D.C. and its surrounding areas were doing just fine before the recession. When the government decided the best way to upend that recession was to beat it over the head with money until it went away, that certainly didn’t hurt the city’s cause.

Augusta, Ga.

Reported GDP in 2009: $17 billion
Reported GDP today: $18.4 billion
Unemployment: 8.4%
Population change 2000-10: 0.3%

It’s not all of the sun-baked fellows in the galleries yelling “It’s in the hole” at the Masters Tournament or the tourists getting a taste of the city’s powerfully hot summers that have kept the city growing and its unemployment numbers on the wane since 2009. Instead, Augusta steeled itself against the recession in the best way a city can — by building its economy around a recession-proof industry. In Augusta’s case, the medical, biotech and military communities provided a stable base as the rest of Georgia crashed. The state’s unemployment mark still sits at 9.8%, above the national average, but a large medical community and an Army Signal Corps facility allowed Augusta to keep its cool.

Madison, Wis.

Reported GDP in 2009: $31.2 billion
Reported GDP today: $34.8 billion
Unemployment: 5.7%
Population change 2000-10: 11.6%

If that 5.7% unemployment rate looks enticing, you should have been in Madison during the recession in 2009, when unemployment was at 3.5%. That’s not a headline from The Onion, either, as the University of Wisconsin, the state government (protests and all) and the surrounding medical and biotech communities have largely shielded Madison from the recession’s effects. Companies such as Spectrum Brands seem fairly happy here as well, which has created a business base that makes Wisconsin grads slightly more inclined to stay.

Boulder, Colo.

Reported GDP in 2009: $16.2 billion
Reported GDP today: $17.6 billion
Unemployment: 6.9%
Population change 2000-10: 5.8%

The University of Colorado gets all the credit for keeping jobs around but, like Austin, Boulder’s hippie roots and artistic bent do a nice job of keeping the foot traffic moving and keeping the place just a little quirky. This helps spice up the job mix a bit by placing ad firm Crispin Porter + Bogusky, Celestial Seasonings tea and plastic sandal maker Crocs to the list of employers, but the area still relies heavily on scientific institutions such as the Center For Astrophysics and Space Astronomy, the National Oceanic and Atmospheric Administration and the Space Science Institute, as well as straitlaced companies including IBM, Lockheed Martin and Ball Aerospace & Technologies to keep the party going.

For Forbes’ list of the best cities for jobs, we ranked all 398 current metropolitan statistical areas, based on employment data from the Bureau of Labor Statistics reported from November 1999 to January 2011. Rankings are based on recent growth trends, mid-term growth and long-term growth and momentum. We also broke down rankings by size — small, medium and large — since regional economies differ markedly due to their scale.

Reflecting the importance of the war effort in stimulating local economies, command of this year’s best place for jobs was handed to the Army from the Marines. Killeen-Temple-Fort Hood, Texas, shot up to No. 1 from No. 4, while Jacksonville, N.C., last year’s first-place winner and home to Camp Lejeune, dropped to 19th place.

Once again the best places for jobs tended to be smaller communities where incremental improvements can have a relatively large impact. Eighteen of the top 20 cities on our list were either small (under 150,000 nonfarm jobs) or mid-sized areas (less than 450,000 jobs).

But no place displayed more vibrancy than Texas. The Lone Star State dominated the three size categories, with the No. 1 mid-sized city, El Paso (No. 3 overall, up 22 places from last year) and No.1 large metropolitan area Austin (No. 6 overall), joining Killeen-Temple-Fort Hood (the No. 1 small city) atop their respective lists.

Texas also produced three other of the top 10 smallest regions, including energy-dominated No. 4 Midland, which gained 41 places overall, and No. 10 Odessa, whose economy jumped a remarkable 57 places. It also added two other mid-size cities to its belt: No. 2 Corpus Christi and No. 4 McAllen-Edinburgh-Mission.

Whatever they are drinking in Texas, other states may want to imbibe. California — which boasted zero regions in the top 150 — is a prime example. Indeed, a group of California officials, led by Lt. Gov. Gavin Newsom, recently trekked to the Lone Star State to learn possible lessons about what drives job creation. Gov. Jerry Brown and others in California’s hierarchy may not be ready to listen, despite the fact that the city Brown formerly ran, Oakland, ranked absolute last, No. 65, among the big metros in our survey, two places behind perennial also-ran No. 63 Detroit-Livonia-Dearborn, Mich.

One lesson that green-centric California may have trouble learning is that, however attractive the long-term promise of alternative energy, fossil fuels pay the bills and create strong economies, at least for now. Even outside of Texas, oil capitals did well across the board, not surprising given the surging price of gas. Our No. 2 small metro, Bismarck, N.D., which also No. 2 overall, is the emerging capital of the expanding Dakota energy belt. Also faring well are Alaska’s two oil-fire cities, Fairbanks (No. 10 on our small list) and Anchorage (No. 3 on the medium-sized list).

There were some intriguing surprises as well. Most welcome are signs of revival from New Orleans-Metarie, La., which moved up a stunning 46 places to capture the No. 2 slot among our large metros. The region lost 11% of its population and nearly 16% of its jobs during the last decade. But now the Big Easy seems to be finding its place again among America’s great cities. Jobs, up 3.5% since 2006, have been created by rebuilding, a resurgence of tourism and a growing immigrant population — the region’s Hispanic population grew by 35,000 over the past decade.

There were other inspirational improvements this year. Sparked by a revival in manufacturing, a host of former sad sacks in parts of the Midwest are showing signs of definite improvement. Niles-Benton Harbor, Mich., a long-time denizen at the bottom of our list, shot up a remarkable 242 places this year to a respectable No. 121. Another old industrial city, Kokomo, Ind., ascended 177 places to No. 215, while Holland-Grand Haven, Mich., improved by 172 places to No. 221 and Grand Rapids, Mich., rose 167 places to No. 183. Milwaukee, a long-time loser among our largest metros, moved up by a healthy 163 places overall to a better-than-average No. 143.

The Northeast Corridor has also made strong progress. Here the likely explanation can be found in the fruits of Obamanomics. The stimulus has been particularly good for the vibrant economies surrounding the ever-expanding federal leviathan. Among the large metros, Washington-Arlington-Alexandria, Va., did best of all the cities outside the South, repeating its No. 6 ranking among large metro areas. Right behind, at No. 7 on the large city list, sits the primarily suburban Northern Virginia metro area, while Bethesda-Rockville-Frederick, Md., ranks 12th.

The other big East Coast winners are the financial and university-oriented economies, which have reaped huge benefits from the TARP bailout and the Obama administration’s college-centric stimulus plan. After the Texas cities and the imperial center, most of the best performing big metros are located in financial and university centers, including No. 9 New York City, No. 10 Philadelphia, No. 11 Pittsburgh, No. 13 Boston and No. 15 Raleigh-Cary, N.C.

So who’s losing? Outside of Oakland and the big Southern California metros — including No. 60 Los Angeles, No. 59 Sacramento, No. 58 Riverside-San Bernardino and No. 50 Santa Ana-Anaheim-Irvine — the bottom tier consisted of a motley crew of mid-South cities like Memphis (No. 64 on the big city list) and still-struggling, former big Sunbelt boomtowns Las Vegas (No. 62), West Palm Beach-Boynton Beach-Boca Raton, Fla. (No. 56), Ft. Lauderdale-Pompano Beach-Boynton Beach, Fla. (No. 54), Phoenix-Mesa-Glendale, Ariz. (No. 53), Atlanta-Sandy Springs-Marietta, Ga. (No. 52) and Tampa-St. Petersburg-Clearwater, Fla. (No. 51).

For the most part, these areas rose with the housing bubble and will not fully recover until the economy diversifies beyond real estate speculation. Already some of the bubble victims are showing signs of life, including No. 155 Merced, Calif., up 134 places, and No. 167 Orlando, Fla., which rode a revived interest in tourism to jump 89 places since last year.

While energy, America’s three wars, the recovering financial markets and real estate problems have played the lead role in setting the stage for the best places to do business, the Intermountain West has shown resilience with Salt Lake City, at No. 20 among large cities; Provo-Orem, Utah, Ogden-Clearfield, Utah, and Boulder, Colo., at Nos. 10, 25 and 26, respectively, among mid-sized cities; and Logan, Utah, and Fort Collins, Colo., at Nos. 9 and 38 among small cities.

As America struggles with a weak economic recovery, opportunities abound across the geography of the states — even in places where it seems bleakest like California, Nevada and Florida. If old industrial areas can stage the glimmers of a comeback, along with over-taxed and over-regulated Gotham, and greater New Orleans can rise from the near dead, these areas, with generally newer infrastructure and attractive climates, might be next to experience a resurgence of their own.

According to the National Association of Home Builders, this “pent-up demand” for new homes is expected to increase only slightly in the coming months, but the new homes to enter the market will be tailor-made to fit Americans’ changing needs and desires in the post-recession years.

“What’s driving it all is affordability,” says John McIlwain, senior fellow for housing at the Urban Land Institute in Washington, D.C., who notes that high unemployment, credit and student loan debt, stricter mortgage rules and a surplus of foreclosed homes will likely continue to scare many first-time buyers from the housing market and keep new home construction relatively slow.

The McMansion home of pre-recession years is on the way out, but a quality home with “well-designed bones” that is relatively inexpensive to operate has become more desirable, says McIlwain.

MainStreet talked to homebuilding experts to learn more about some of the key features home shoppers can expect to find in the new American home this year. Read on to learn all about the modern-day dream home and what not to expect on your house-hunting adventures.

Utility & Value

Homebuilders will continue to scale back on luxury add-ons, which are becoming more of an afterthought, says McIlwain, as homebuyers opt for a more modest and functional home, rather than a McMansion with a Jacuzzi and a heated pool.

“People are looking for shelter and value,” says Stephen Mellman, director of economic services for the National Association of Home Builders in Washington, D.C. “Everyone has their own lifestyle and they want to find a home to enhance their lifestyle and make it more efficient.”

Also with affordability still a huge factor for homebuyers, buying a new home no longer entails “doing fancy things” just for the sake of making a boom era statement, nor does it mean sinking the greater chunk of your cash into a long-term investment, as “the likelihood that that house value will appreciate is extraordinarily remote,” notes McIlwain.

The most noteworthy trend this year is that homebuyers are beginning to see their home as an extension of their lifestyle, whether that means making a strategic move from the suburbs for a shorter commute, having more proximity to downtown hotspots or finding a way to downsize after the children have flown the coop.

“This is shelter,” Mellman agrees, “it isn’t just an investment to sell in a year; you’re going to live here and raise your kids here and that colors everything: how you design it and what you’ll enjoy.”

Fuss-Free Kitchens

Whether your lifestyle is fast-paced or decidedly more conservative, Americans are spending more time in the kitchen and less in the formal dining room, which is starting to disappear. The reasons behind this shift vary from more Americans deciding to cook their own dinner to save on the costs of eating out or our increasing dependence on a usable kitchen that can entertain family and friends. As a result, spacious, eat-in kitchens that open up to the common room are now a huge trend for homebuilders in 2011, and the dining room, once its own separate space, is now simply designated by a table and chandelier, as people “try to do more with less,” says Mellman.

“You want an open kitchen because when you’re doing the cooking and entertaining, everybody gathers in the kitchen,” McIlwain says, noting Americans’ casual lifestyle and our ongoing obsession with food. “You don’t have a maid in the kitchen, but [when you’re cooking] you want to be part of the action. Cooking has become part of the whole entertainment process. And for couples, cooking together is a team sport, rather than an individual sport.”

But despite being the center of attention, the new American home’s kitchen doesn’t look quite as glamorous as it used to.

“The gourmet kitchen is on the way out,” says Mellman. “You don’t need eight burners” or a Vulcan stove, Mellman says. Americans post-recession are focused on standard appliances that they know they will use every day.

“A great stove, a fridge with an ice-maker and water filters, two sinks, a quiet wash dishwasher, or the equivalent—it doesn’t have to be commercial kitchen grade, but a decent quality kitchen that’s easy to move around in, and therefore cook in, with plenty of counter space and that’s easy to hang out in” is where the homebuilding trend is going, McIlwain says.

To save on kitchen construction costs, Dan Sandoval, a homebuilder with Republic Homebuilders in Fredericksburg, Va., says homebuyers are also forgoing traditionally pricey granite countertops for standard laminate countertops.

“Five years ago, they wouldn’t have sold, but now they’re OK,” he says of the materials. “It’s nice-looking, but very affordable,” unlike the dining room, which buyers now consider “wasted space” and an unattractive feature, says Sandoval.

“What I hear from customers is that they just don’t use it,” he says. “They don’t eat in there every Sunday, like their parents used to do. That’s not their lifestyle.”

Smaller Square Footage

It isn’t your imagination—the new American homes are actually getting smaller, according to a National Association of Home Builders’ report, The New Home in 2015.

In it, the NAHB found that the average size of single-family homes completed in 2009 dropped to 2,438 square feet, and in the first half of 2010, the average size of new homes completed continued its slide, dropping to 2,378 square feet.

What’s more, according to the NAHB study, bedrooms and baths have also downsized as well, as the share of single-family homes with four bedrooms or more has declined for three consecutive years, from 39% in 2005 and 2006 to 35% in the first half of 2010, and most new homes completed in 2008 and 2009 had either 2 or 2.5 baths (68%).

So what’s the story behind all these shrinking homes? “New homes that are being built by and large are tending to be smaller because that makes them more affordable,” explains McIlwain, who adds that “even the very wealthy will buy a home much smaller than they could afford,” just to cut back on living costs or perhaps to funnel their money into retirement savings and other mid-life goals.

As a result, certain rooms, like the formal dining room and traditional living room, are becoming extinct species or taking new forms in the combination spaces that are beginning to crop up, such as the eat-in kitchen and dining area, or the second or third bedroom, which has begun to do double-duty as a home office, McIlwain says. “Whether they’re working at home or having a room to keep personal information, such as taxes, an in-home office is more to take care of personal matters,” adds Sandoval.

Meanwhile, Mellman says stairways are moving from their traditional post in the front of the house, or entrance/foyer, to the back and the side, in yet another effort by homebuilders to curtail construction costs and provide more room.

Energy-Efficient Materials

EnergyStar homes have become the gold standard, but homebuyers remain hesitant to splurge on solar roofs or eco-friendly siding, says Mellman.

“Some of my customers inquire about those systems, but they don’t see the return on it,” Sandoval explains about pricey green add-ons. “It’s too costly at this time. Unfortunately, a lot of our customers have lost a lot of their retirement in the stock market, and they’re just trying to get a basic house to last them in their retirement. They would love to have those sorts of things, but they have to think of the costs.”

Tax breaks also play a role, and the lack of them in Virginia makes them even less appealing for prospective homebuyers, says Sandoval. Adds Mellman: “People want to have a green home and incorporate those features, but to a certain extent they’re not going to stretch themselves to get those things. Also, appraisers weren’t including those things for awhile, so a home would sell for less than its actual value and the cost of construction.”

Still, energy-efficiency has become a mainstay for empty-nesters looking to cut down the costs of heating and cooling a home, while other amenities, like EnergyStar windows, are becoming more commonplace and widely embraced.

“Green is no longer an amenity,” says McIlwain. “EnergyStar, EnergyStar windows, very efficient HVAC systems, siding to take advantage of solar power—those are the homes that are selling and they’re becoming the standard. They’re materials you’ve got be attuned to.”

1. Jobs. Housing follows jobs. Period. And while the job market is still slow or non-existent in many areas (nationally as well as regionally), we all know Austin continues to be the leading market in the nation for job growth. 

2. Jobs. At the risk of being redundant, housing follows jobs. Consumer confidence is close to reaching last spring’s high point, the most optimistic the U.S. has felt since 2008. Consumer confidence index for Texas is 89.7, highest it has been since May and up 38.2% from 12 months ago. The U.S. is up 6.9% in the same time period. And while hiring hasn’t restarted in earnest, firing has slowed to a drip. If you haven’t been fired, chances are your job is reasonably secure. Job security drives optimism, planning for the future and home buying.

3. Pent-up demand among young adults. Consider the echo boomers blight (baby boomers kids): 2006 college grads entered the labor market just as home prices began to collapse. Those who still have a job kicked and scratched their way through the Great Recession and are now 27 to 30, perhaps married or getting there and kids may be on the horizon. Some were even smart enough to save some money. According to economists, census bureau, etc., today’s young adults are under-represented as homeowners compared to historical norms, and a disproportionately large chunk lives at home. As the job market crawls back to life, this trend is likely to reverse. And if the apartment market’s strong performance in 2010 is any indication, it already has.

4. Inflation. While much is made of inflation in the media presently, most media (as well as consumers) don’t actually understand it and have been taught to fear it. Inflation expectations, not inflation, are what we should be worried about. Things get scary when consumers start believing that prices are rising, or are about to rise. Just like when rates began creeping up in Oct 2010, we saw a flurry of activity then it slowed. With most consumers, rational economic actions take hold, and rather than filling their tanks when empty, drivers fill whenever they pass a gas station. The expectation of higher prices, not higher prices themselves, is what changes economic actions. Rising inflation expectations pull demand forward, pushing up prices in an inconvenient self-fulfilling prophesy. Historically, real estate has been a rather good hedge against inflation. As people start to get nervous about inflation, they buy real estate. What is the saying? …Buy low, sell high! 

5. Higher rents and low interest rates. Ask a prospective tenant in Austin how the apartment/single family home search is going and the response will not be pleasant. Rents are rising, inventory is down, and landlords are back in the driver’s seat. And despite a recent bounce, interest rates remain historically low. Higher rents and low interest rates push would-be renters towards buying, particularly in Austin.

6. The start of a booming apartment market. As stated in the last couple of weeks, investors are aggressively snatching up multifamily properties as positive signs (such as demographic trends, low interest rates, and perceived values) attract professional and amateur buyers alike. Homeownership is at a 10-year low, young adults are moving out of their parents’ basements and into apartments, and leverage is fantastically cheap. What more could an apartment buyer want? The multifamily space typically recovers first, and if history is rhyming in even the smallest way, this is good news for housing.

7. Investment appetite remains strong. What should you look for?

• A low valuation
  • Lowest valuation in at least a generation
  • Forced Sellers
• A larger than normal number of distressed transactions in that asset class.
  • Distressed opportunities
    • Across all types of real estate — they have come to market slower than expected, which means buyers have had more time to hit the pavement and raise money. With limited opportunities, competing buyers are driving up prices of distressed assets: For every well-priced foreclosure there are a dozen all-cash buyers looking for a deal.
• Attractive financing available
  • High LTV, low rate, fixed rate, long term debt, preferably without pre payment penalty
• Favorable short term supply dynamics
  • Short term oversupplied market, but long term supply is controlled
• Favorable long term demand dynamics
• Demographically driven demand growth
• Favorable Tax treatment
  • 50%+ annual write-off
• Out of Favor
  • Currently, this is somewhat of a shunned/disgraced asset class. Not for long.

8. The stock market is doing well again. At the close of Thursday, the Dow Jones Industrial Average back above 12,000 and the S&P 500 Index topping 1,300 for the first time since mid-2008. IRAs, 401(k)s, and trading accounts are feeling fuller than they have in years. The wealth effect is in full effect as buyers look to sell stock for a down payment and the confidence to pull the trigger on a new home.

9. Confidence. Do you feel better or worse about the U.S. economy, and more importantly your own personal economy, than you did two years ago? This is not a political statement. Challenges remain, but we Americans are a resilient, optimistic bunch. Confidence is relative, and for a country that has been to economic hell and back since 2008, we are in remarkably better shape. Confidence in the present builds confidence in the future, and confidence of all types increases risk-taking activities. Confidence is on a positive trajectory, as we mentioned earlier, particularly in Texas and Austin. The fact that most people believe that we’re no longer headed for apocalyptic economic collapse is, as they say, a good thing.

There is not a better time to buy! The home you look at today will be more expensive this time next year!

Or are they simply reflecting market realities? They see record inventories of houses sitting unsold, and they may not have the money, time or inclination to do fix-ups after making the purchase.

Large numbers of real estate agents consider this a significant and perplexing issue, one that’s having a negative effect on the housing recovery. New research suggests that they may be on to something. A survey by Coldwell Banker Real Estate of 300 first-time buyers found that a startling 87 percent said that “finding a move-in ready home is important” to them.

A posting about fussy buyers on the 203,000-member “Active Rain” online real estate network in late February drew strong support from agents nationwide. Holly Kirby Weatherwax, an agent based in Reston, who wrote the original blog post, said in an interview that some shoppers are so picky that they walk out of well-priced houses solely because of relatively minor imperfections such as:

• The kitchen appliances are by different manufacturers.
• There are no granite countertops – even though the house is a modest-priced starter home.
• A carpet needs to be replaced, or the color doesn’t match their furniture.
• Wall colors are “wrong,” such as white, when for today’s tastes, they should be a warmer hue.

“They’re missing out on some excellent, older lived-in houses – it’s a shame,” she said, “simply because they can’t overlook” flaws that would not have bothered shoppers during the previous two decades.

Zillow, a giant Seattle-based online real estate research and data company, suggests that any shift by consumers toward greater attention to home details may be an inevitable byproduct of today’s higher down-payment minimums and more stringent loan qualification requirements.

According to Zillow researchers, the median down payment in 11 major metropolitan areas has jumped to 20 percent, compared with “close to zero” in some of the same areas just five years ago. In other words, first-time buyers today have to put a huge effort into coming up with their down payment, and they want to make sure that equity investment goes into the house that will need the fewest and least-costly upgrades. Also, Zillow spokeswoman Katie Curnutte said, shoppers in 2011 “are really in the driver’s seat. Nationally, buyers who purchased homes [last] December paid 4 percent less than the asking price. That points to a lot of room for negotiating and opportunities for buyers to be choosy.”

Some agents suggest that buyers today tend to be hipper and more sophisticated about home design, furnishings, floor materials, countertops and appliances because they are exposed to far more information on cable TV than earlier generations. Michael Jacobs, a Coldwell Banker agent in Pasadena, Calif., says cable channels such as HGTV “certainly have opened the eyes of more buyers” to design and presentation details. He said he’s held open houses where young buyers walk in and say immediately, “Oh, this house has been staged” – an observation virtually unheard of years ago.

But constant exposure to cable design shows may also be fostering a lack of realism on the part of some shoppers, according to agents. Cindy Westfall of Prudential NW Properties in Lake Oswego, Ore., said the shows have “given some buyers the impression that all homes should have granite counters, stainless steel appliances, etc. There are a few [shoppers who] want all the bells and whistles of that $500,000 house for $200,000, and no amount of talking to them on the realities can change their minds.”

In an interview, Westfall said she recently had a buyer who was interested only in older houses under $200,000 – starter-home price territory – but who wouldn’t tolerate even the sort of minor imperfections and nicks that older houses typically display.

“The fact is,” Westfall said, “you just can’t have it all. You can’t have the big yard, the top-line updates and all that in a starter home. You’ve got to compromise somewhere or else you’ll never buy anything.”

It is not surprising to many people that Austin has the highest apartment rents of any city in Texas, but what some may find compelling is that the Capitol City saw the largest, fastest, and highest jump in apartment occupancy this year compared to last. 

After four straight years of declines, sales of million-dollar homes and condos rose last year in all 20 major metro areas, according to DataQuick Information Systems. On average, these cities saw an 18.6% jump in high-end home sales.

San Jose, Calif., had the biggest market for million-dollar homes, with a 27.4% spike in sales last year; Phoenix saw the smallest increase at just 0.4%.

Meanwhile, sales outside of this price point actually fell 2.8%.

“It hasn’t been a good six months for all people, but it was a good six months for rich people,” said Glenn Kelman, CEO of Seattle-based real estate brokerage Redfin. “When Wall Street goes up, rich people buy homes.”

And Wall Street has gone up: Stock values have nearly doubled from their March 2009 lows.

“Higher income households are feeling better about their financial security,” said Greg McBride, chief economist for Bankrate.com.

As their confidence soared, the wealthy took advantage of bargains in expensive homes. An average seaside manor on Jupiter Island, Fla., that might have sold for $4 million in 2006 cost less than $3 million last year. The Brentwood bungalow in L.A. was $1.5 million instead of $2 million, and that Scarsdale colonial fell to $1.1 million after gong for $1.5 million four years ago.

Getting a mortgage for these expensive homes was cheaper as well.

Normally buyers have to take out a jumbo loan to finance any mortgage beyond the $417,000 threshold ($729,000 in high-cost cities such as New York). These loans have higher interest rates because they are considered non-conforming — or higher risk — and are not backed Fannie Mae or Freddie Mac.

In 2009 buyers of high-end homes paid 1.8 percentage points more in interest than the average buyer. But in 2010, that spread had shrunk to just 0.6 points more.

That reduction would save about $780 a month on a million-dollar mortgage. That may not matter much when you’re a software gazillionaire, but for buyers stretching to reach that league, it can make a difference.

Some metro area markets experienced modest price rebounds in 2009, which was enough to push a handful of homes above the million-dollar threshold. In San Jose, for example, home values rose for several quarters, boosting the prices of homes right on the border of a million.

“You had some creep into the million-dollar bracket,” said broker Scott Kliewer with Windermere Silicon Valley.

But in most cities, the million-dollar homes sold were actually million-dollar homes, not just those that crossed into the high-end territory because of rising prices.

In New York, where volume grew nearly 25%, high-priced home sales were driven by bonuses on Wall Street. Even though bonuses were slightly smaller last year, they still topped $120,000. And that’s just the average; many employees brought home significantly more.

Wealthy clients have driven the business for Gary Reavis, the CEO of Keller Williams Hollywood Hills in Los Angeles, where sales rose about 20%.

He attributes the jump to the stock rebound and good times in some of the area’s best-paying industries, including entertainment.

And in Washington, government workers continued to bolster the high-end market, which grew 20% here as well. The DC area is now the best educated place in the nation and and one of the highest paid. Median family income is now over $101,000 in the D.C. area and more than $109,000 in the Bethesda-Rockville, Md., area.

Other big gainers were Honolulu (26%), San Diego (14%) and Nashville (13%).

The real estate industry may take some solace from the mini boom in high-end sales, but it does not necessarily mean good times are ahead for the rest of the market. In fact, the rest of the market is facing a potential 25% drop in prices and stalling sales.

Buffett gave an aggressive earnings forecast for Berkshire’s collection of businesses, said the company would engage in record capital spending and forecast a recovery in the housing market would start within a year.

Foremost, though, was his acknowledgment of the need for Berkshire to expand its non-insurance businesses, a broad collection that most prominently includes the railroad Burlington Northern and the electric utility MidAmerican.

“Our elephant gun has been reloaded, and my trigger finger is itchy,” Buffett said. The letter was released just before 8 a.m. EST Saturday, as it is in most years — and many large investors say they get up early that day to read it the moment it comes online.

The so-called “Oracle of Omaha” said Berkshire will need “more major acquisitions” — with an italicized emphasis on major — to meet its goal.

One long-time Berkshire investor described the letter as “punchy” and “confidently American,” among other things.

“I would say as an investor, I think it’s a very upbeat letter, it’s one that celebrates his courage on behalf of investors of going into the marketplace when the world was most fearful,” said Tom Russo, a partner at Gardner Russo & Gardner in Lancaster, Pennsylvania, who is one of the 15 largest holders of Berkshire Class A shares.

Buffett’s enthusiasm for America was obvious in the letter, not only in his capital spending plans but also in his outlook on the growth opportunities for his railroad, his utility business and the other companies Berkshire owns that are fundamentally exposed to the U.S. economy and consumer.

“Money will always flow toward opportunity, and there is an abundance of that in America,” he wrote.
Buffett tends to give an economic outlook in his letter and this year’s was no exception.

“A housing recovery will probably begin within a year or so,” he noted, which has led Berkshire to ramp up spending and acquisitions at its housing-related businesses.

He was less bullish on interest rates, which have been low enough to earn the company a “pittance” on its cash in recent times. Buffett said rates will eventually rise enough to contribute more normal growth to the company’s investment income, but it was “unlikely to come soon.”

INVESTMENTS

Another hit to the investment portfolio will come from the redemption of crisis-era preferred investments in Goldman Sachs and General Electric. Buffett said both are likely to be gone by year-end. The Goldman investment in particular famously pays Berkshire $15 every second.

All things being equal, Buffett forecast Berkshire’s “normal” earnings power at about $12 billion a year after-tax.

Some of that will come from dividends, particularly in large holdings like drinks giant Coca-Cola Co and bank Wells Fargo.

Wells has been hamstrung on its dividend payouts by post-crisis regulatory oversight, but Buffett said that should ease soon, leading to an increase of “several hundreds of millions of dollars” a year in dividend payments.

He forecast Coke would pay Berkshire dividends of $376 million this year, and he predicted that would double within another 10 years.

In the meantime, Buffett is spending on growth. He said Berkshire would make a record $8 billion in capital spending this year, with the $2 billion growth over last year to be spent entirely in the United States.

“Berkshire has created within itself its own outlet to redeploy capital,” Russo said. “The best thing about that is when you can by that spending create additional competitive advantage.”

That outlook could provide a boost to markets on Monday, as positive comments from Buffett’s investor letter have sometimes done in the past.

SUCCESSION

Buffett addressed the hot-button succession issue in the 26-page letter, something investors had anticipated given his age, 80, and the lack of a clear replacement.

Investment manager Todd Combs, hired late last year, will manage an initial portfolio of $1 billion to $3 billion, Buffett said, and Berkshire may add another one or two managers over time alongside him.

But Buffett said he will continue to manage the bulk of the portfolio while he is CEO. Berkshire’s equity holdings topped $52 billion at year-end.

He said less in the letter about who might follow him as chief executive of the company, though he said there were a number of good candidates. The most frequently tipped is David Sokol, chairman of MidAmerican and private jet service NetJets, who Buffett praised.

“With economists forecasting 2% to 2.5% job growth in Austin in 2011 (which will result in our unemployment rate falling below its current 6.8%), along with the continuation of strong population growth in the region, the level of pent-up demand for for-sale housing in our area is likely intensifying,” said Eldon Rude, director of Metrostudy’s Austin Region.

Regarding the new home market, in 2010, Austin saw 5,855 starts, down 10% from 2009. Austin closed 6,458 homes in 2010, down 14% from 2009. Because closings outpaced starts, new home inventory stands at 2,897 at the end of 2010, the lowest total inventory in Austin since 1993. “We anticipate the move-up market will strengthen in 2011, with minimal new home inventory levels possibly resulting in some pricing pressure in certain sectors of the resale market,” said Rude. “These numbers all put Austin in postion to begin its housing recovery in 2011.”

Metrostudy is the leading provider of primary and secondary market information to the housing industry and related industries nationwide. In addition to providing its own primary housing data collected by a staff of 650, the company is recognized for its consulting expertise on development, marketing and economic issues, and is a key source of research studies evaluating the marketability of residential and commercial real estate projects. Services are offered through an extensive network of offices located in major metropolitan areas throughout the U.S. For more information, visit www.metrostudy.com.

“Apartment occupancy levels approaching 95% and virtually no new construction at this time will help the housing recovery,“ said Rude. Austin Investor Interests pointed to continued strong migration to the Austin region, as well as apartment renters starting to seek their own units again after doubling up over the last several years, as the primary reasons for the firming up of the apartment market over the last year.

“Also, the resale market inventory stands at healthier levels,” said Rude. As of November 2010 there were 9,906 active listings, resulting in a 6.0 month supply of listings based on the current pace of closings. In November 2009 there were 9,836 listings which translated into a 6.8 month supply.

“Significant further improvement in Austin’s apartment occupancy rate looks like a sure thing,” said Greg Willett, MPF’s vice president of research. “As for rent growth, it is always a feast-or-famine situation in Austin. Conditions now are coming together to produce one of the area’s cyclical pricing spikes.”