By Jodi Summers

Time for some national housing statistics. At the end of the third quarter of 2006, the median home price in the U.S. was $231,000, according to the National Association of Realtors. Money magazine reported that Newport Beach had the highest median home price, at $1.36 million, followed by Greenwich, Conn., at $1.13 million, and Santa Barbara, at $979,500.

And here is the $10,000 question: As the real estate market softens, where will home prices remain highest? Last year, the median price of homes in San Bernardino County rose 8.6 percent, while in Ventura County, they fell 8.2 percent. Where is one to buy? Experts say look for a strong local economy.

“Investors will pull back from core office markets,” notes Forbes columnist Peter Slatin. “Instead, the two strongest targets for investment will be retail/affordable housing in inner cities and office buildings in outer suburbs, both of which have been passed over by investors for years — and both of which now represent strong value plays.”

Housing data from the U.S. census shows that the metro areas with good healthy technology, manufacturing, entertainment or financial-services companies, and renowned universities, enjoy healthy property values.

Areas such as San Jose, San Francisco and Anaheim have buyers paying nine times their median incomes on new homes. The reason, says Mark Zandi, chief economist for Moody’s Economy.com, is that “these local economies are among the nation’s most productive. Housing values are driven by the activity on the land.”

Between 2Q 2004 and 2Q 2005, Elk Grove, Calif., located south of Sacramento, had the nation’s fastest growth — an 11.6 percent population increase to 112,338, according to the latest U.S. Census Bureau population estimates.

But where to buy? The National Association of Realtors reported the largest 2006 gain in single-family home-prices were in the Salem, Oregon, area. Here, the 3Q 2006 median price of $228,000 was 24.7 percent higher than the third quarter of 2005. Another winning location was Elmira, N.Y., where the median home price of $93,000 was 21.4 percent higher than 3Q 2005.

The median sales price in Richland County, South Carolina (the area around Columbia), jumped from $136,979 in October 2005 to $162,487 a year later — a rise of 18.6 percent —- and a jump from $83 to $92 in the price per square foot.

The area around Austin, TX, a hot investment market, saw 9 percent growth. In Georgia’s Columbia County, home prices appreciated 5.8 percent while in nearby Richmond County, they went up 3.1 percent in that period.

Zandi observes that home buyers looking for a bargain in the strongest areas will be largely disappointed.

“Studies have shown that the time it takes for real income to catch up with median housing prices is around 12.5 years in top market areas,” he said. “At which point, the housing cycle may again be in an upswing.”

If you’re looking to invest, the areas to watch are in the middle. In places experiencing moderate growth and where the local economy is steady if unexciting, there are people who have been taking advantage of low interest rates to finance lifestyles beyond their real spending power, buying second homes, cars, boats, etc., using their equity as easy credit. As rates increase, they will find it increasingly difficult to refinance their spending habits, and many will be forced to sell their assets — that’s where the true values can be had.

Fortune magazine and Moody’s Economy.com both note that the housing market looks particularly healthy in the Southeast.

Their top market, McAllen, Texas, is predicted to rise 8.5 percent in 2007, and another 9.8 percent in 2008. Here are their selections for the top-10 housing markets projected to rise the most in 2007 and 2008:

- McAllen-Mission, Texas

- El Paso, Texas

- Albuquerque, N.M.

- Salt Lake City

- Syracuse, N.Y.

- San Antonio

- Rochester, N.Y.

- Baton Rouge, La.

- Fort Worth-Arlington, Texas

- Birmingham, Ala.

Jodi Summers is Director of the Investment Division at Boardwalk Realty. She can be reached at jodis@boardwalkrealty.com or (310) 309-4219. Her Web sites are www.SoCalInvestmentRealEstate.com and www.santamonicalandmarks.com.