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As a nice follow-up to an earlier article I wrote on the myopic reports of housing bubble bursts approaching, the local Rochester regional paper is reporting strong housing sales in the city of Rochester - even trending against slowing sales in the 11-county region of Western New York. Sales are up 9% over last year's record pace.

Keep in mind, this is an increase over the already high sales numbers from last year. It appears that my predictions were right (and the predictions that actually focused on most of America for CNN). In fact, Rochester is exceeding those numbers so far.

It's not particularly surpising given that interest rates continue to be historically low. The local economy appears to be on the uptrend, so sales should continue to be pretty hot. Suburban sales are slumping a little from last year - mainly because suburban homes are - and have been - priced reasonably well, not significantly undervalued.

The city is still priced quite well below national averages and under their true natural values. Crime and a stagnant economy held prices down in the bargain basement level for much of the city. Given the recent change in city administration, tehre's a palpable feeling of optimism for the city. The sales seem to be a good indicator that the optimism isn't shallow but is being backed up by actual investment by residents. I can only see high sales continuing for the short term - perhaps not at the current record pace, but certainly above the regional and historical rate. The only complications I see are:

• The increasing number of upscale luxury apartments - Corn Hill Landing, The Temple Building, and the East Ave apartment complexes. There's been a marked increase of upscale apartments in the city and even closer to downtown. Apparently there's been a pent-up demand though because these complexes are doing a good job of getting tenants. This is something that's been a bit baffling to me - Rochester has a dead downtown and a very hard time retaining 18-30 yr olds. So who is moving into these complexes?
• The increase of housing supply. The report didn't break down listings by city/region, but supply seems to be overtaking demand. Interestingly, the median and average home price continue trending up.

I think both fore-tell that sooner or later the simple laws of supply and demand will kick in and housing prices will stand still again. But I'd say that the city will outsell and outpace the region and the house prices we see today are still below true market value. If crime takes a significant drop or the economy really takes off locally, we'll see prices rise regardless of regional supply issues.