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Why Kathy Wilson Is at Home in Waterloo, Iowa

City dwellers and housing, not farmers and silos, boost Great Plains economy

The snow fell liberally all over Iowa this weekend. It fell on rooftops in Sioux City and Cedar Rapids and here in Waterloo. It gathered on grain silos and railroad tracks and on the tidy front porch of Kathy Wilson's new home.

Ms. Wilson bought the property this summer after four years of renting. Waterloo's economic prospects, once gray as the curbside slush, have improved dramatically in that time, and Wilson has decided to stay here, in her hometown, for good.

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She isn't alone. In the third quarter of this year, a real-estate buying spree boosted the sale prices of existing homes in Waterloo by 17 percent, according to the National Association of Realtors. It was the largest such increase in any American city.

To Wilson, Waterloo's economic recovery offers a chance to battle the approaching winter with a fireplace and a two-car garage. To economists, it confirms what they've long suspected: The resurgence of the Great Plains economy is a largely urban phenomenon.

"States like Iowa really have two economies," says Thomas Pogue, a University of Iowa economist. "Many of the smaller rural towns that haven't picked up major employers are facing dull real-estate markets and an uncertain future. Meanwhile, cities like Waterloo have become growth centers."

By any standard, the Plains states are roaring back from the agricultural depression of the 1980s.

The plains' roaring '90s

In that decade, unemployment in the five-state region peaked at 13 percent, and earnings per worker dipped below the national average for the first time. Iowa's population declined 4.7 percent, and housing markets bottomed out. In Waterloo, the median home price dipped below $50,000.

Since then, the region has nearly recovered all of its lost population. Regional jobless figures are the nation's lowest, and per-worker wages in Iowa rose to $28,500 in 1994, back above the national average. The region's low cost of living and good schools have lured a wave of new companies here, from telemarketers and manufacturers to high-tech firms, which have generally set up shop in mid-sized towns like Waterloo close to universities and community colleges.

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The result, experts say, is a more diverse and urbanized economy capable of withstanding downturns. A recent report by the Center for the New West proclaimed the region's economy the strongest since the advent of the Transcontinental Railroad.

Although Iowa cities like Cedar Rapids, Ames, Sioux City, and Iowa City have witnessed recoveries and jumps in real-estate prices, Waterloo's belated success is arguably more significant. As a meatpacking center and home to John Deere, the farm- equipment giant, this town of 67,000 was walloped by the agricultural slump of the 1980s. Job cutbacks and plant closings caused some city officials to say, not entirely in jest, the last person to leave Waterloo "should turn out the lights."

Yet civic leaders here, like their counterparts in cities across the Plains, banded together to offer corporate incentives. Hawkeye Community College expanded its job-training programs, and Deere began outsourcing more of its operations to lure independently owned firms. A steady increase in manufacturing and packing jobs that pay $7 to $9 per hour has attracted workers and convinced many former renters like Wilson, who is a registered nurse, to purchase homes. "Throughout the 1980s, houses in Waterloo ranked at the bottom in the state in median-priced housing," says Larry Niemans, former president of the Waterloo-Cedar Falls Board of Realtors. "We had a tremendous oversupply of small houses built in the 1950s, and they did not bring a lot of money. It took a lot of time for the supply to be absorbed."

A nice two-bedroom - cheap

At present, home prices here are still low, even by Iowa standards. According to the survey of 136 US metropolitan areas, the median price for existing homes in Waterloo and its neighbor, Cedar Falls, was $68,200 during the third quarter, compared with $102,000 in Des Moines.

According to Lou Cutwright, Waterloo's building inspector, the city has issued permits for about 65 new single-family dwellings in each of the past four years. Of these, he says, about 40 percent will sell for $90,000 and above.

Local realtors say these new homes have charged the real-estate market by luring retirees and older families out of homes that growing families have been eyeing for years. "We haven't had a big jump in population," Mr. Niemans explains. "What's going on here is that everybody's confident enough about the economy to move up a notch."

For Waterloo and cities like it, the future seems bright. Although the Plains region has one of the nation's highest work-force participation rates, and a dearth of workers could start to curb economic growth, few people will be dwelling on that this winter.

This, it seems, will be a winter of contentment.

"I've always wanted a house with a garden, a decent kitchen, a front porch, a big dining room, and a fireplace," Wilson says. "I spent a little more than I planned to, but I don't regret it. This is my American dream."

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