In Kenneth R. Harney’s always insightful column, The Nation’s Housing, he discusses the types of housing markets in [Market Action Slips Away From Coasts [WaPo]](http://www.washingtonpost.com/wp-dyn/content/article/2006/05/26/AR2006052600808.html).

First American Real Estate Solutions [note: I have had terrible experiences with their customer service, but their research is pretty good.] has completed an extensive analysis of 100 major metro areas to understand more about housing price cycles. There are 3 major categories:

* Linear markets _where booms and busts almost never occur._[Columbus, Ohio; Indianapolis; Houston; San Antonio; Memphis; Atlanta; Cincinnati; Des Moines; and Louisville.]

* Cyclic markets are the _shooting stars of housing booms. Generally they are along the East and West coasts, where household incomes are higher and land for new construction is in short supply_. [California south of the San Francisco Bay, Florida, Washington DC, Baltimore, New York and much of New England.]

* Hybrid markets _have linear, slow-growth characteristics for periods, followed by periods of moderate cyclic-style appreciation._ [Chicago, Seattle, Minneapolis-St. Paul, Detroit and Phoenix.]

By understanding the type of housing market a property owner is currently in, they may be able to make better choices when it comes to housing. For market-timer wannabes, it sure seems like you don’t want to be in the midwest because there are no cycles, however, thats where there has been much discussion about the location of the next housing boom as the coasts cool off.

However, housing is a lagging indicator, not a leading indicator, and rising mortgage rates have eliminated much of the flexibility for real estate investment. If the midwest is currently attractive to investors who want to make returns on housing, then lets be clear what type of investors we are speaking about: institutional investors with deep pockets, _not_ individual investors, who days are numbered.