Courtesy of Carrie Pierce and Associates

The real-estate bust has stripped all the smoke and mirrors from the housing market. In the starkest way possible, it is revealing which homes hold value in a recession, and why.
"Even in this market, there are certain things that will sell," says real-estate agent Michelle Sandoval in Port Townsend, Wash., where it's difficult to sell homes, although prices haven't dropped.
"Even in this market, I've had things sell for over full price. There are always bulletproof properties" that hold value better, Sandoval adds.
Certain upgrades can help recession-proof your house, but your home's price resilience mostly depends on choices you made when you purchased. Since most homeowners buy and sell several times in their lives, you're likely to have a chance to use these bulletproof principles the next time you buy.

Location, location, location

You've heard it before because it's true: Location matters. It matters most, in fact, when it comes to holding value under pressure. Why? Because houses are replaceable, but land is not. If you've got a spot everyone wants, your place will sell faster and for a better price than a similar house elsewhere.
Take Punta Gorda, Fla., where, at this very moment, house prices are sliding so fast you can almost hear them sink.
"Everything is depreciating," says Cady Rowe, an agent with Coldwell Banker Morris Realty in Punta Gorda. However, Rowe adds, how deeply your price depreciates depends on where "your dirt" is.
"If your dirt is sitting in Punta Gorda Isles on the waterfront, it's going to be worth a lot more than dirt somewhere else with a thousand lots just like it," Rowe points out.
A December study by Moody's Economy.com predicted price declines in Punta Gorda will be the worst in the nation -- down 35.3% by the second quarter of 2009. And that's not accounting for inflation.
That makes Punta Gorda a laboratory for testing the effect of location on the durability of prices. Appraiser Charles M. Polk III agreed to do some informal research for MSN Money. Polk, an appraiser with 20 years' experience and advanced credentials in valuing residential and commercial property, is also an attorney, a real-estate agent and a magistrate who adjudicates county tax appeals.
In December, Polk compared the sales of 59 homes of equal size and quality in Punta Gorda Isles and the nearby inland development of Deep Creek. Location makes all the difference, he found. Although all Punta Gorda real estate lost value, Punta Gorda Isles homes didn't lose as much. Based on square-foot prices, Punta Gorda Isles homes had seen a 22% drop in sales prices since the last half of 2006, compared with a 32% drop in Deep Creek prices.

More than a view

Schools and safety. These make or break values. In some Bay Area communities, overseas investors buy homes sight unseen based on the value of the city's public-school rankings. Questions about schools and safety are the first out of buyers' mouths, says Furhad Waquad, an agent in suburban Detroit. He refers them to local police departments for neighborhood information and to the free Standard & Poor's school evaluation service, SchoolMatters.

Culture and public services. Buyers favor homes near libraries, parks, playgrounds and revitalized or charming commercial areas with shopping and coffee shops and theaters. An easy walk to light-rail terminals and bus lines is a plus. In communities full of retirees, proximity to hospitals and doctors' offices is valued.
One caution: Watch out for noise. It's good to be close to an elementary school but not next door, and it's good to be near a main street with bus service but not directly on it.

Infrastructure. Although the fringes of hot cities are popular locations when prices are rising, interest falls off quickly in a downturn. City sewer and water service help hold up prices compared with an identical home on a septic system and well water. Cities with fatter tax bases may boast quicker fire department response times, better-maintained streets and stronger schools, all of which sustain demand.
Take the simple matter of sidewalks: Waquad points to the wealthy communities of Bloomfield Township and Bloomfield Hills, originally built without sidewalks. He credits their recent decisions to install sidewalks for helping hold up sale prices in the Detroit area's severe down market. "Now, you see mothers and nannies with prams and strollers, people exercising, running. It has made a world of difference," Waquad says.

Principles of durability

Location is just one piece, albeit a big one, of recession-proofing. When buying, these principles matter, too:
The "progression" principle. This rule of thumb says better homes bring up the value of a not-so-great house nearby. (And lesser homes subtract from nearby property values.) The lesson: Don't buy the best house on the block.
George Baker, an expert in residential and commercial appraisals with Vestor Realty Consultants in Wilmette, Ill., knew this when he purchased his 2,400-square-foot home surrounded by 5,000-square-foot palaces. "Its value is enhanced by the fact that it's on the block with better, larger properties," says Baker, who is also a real-estate broker.

Single-family homes rule. Condominiums lose more value in a down market, and they lose it faster than single-family homes, says Terry Bernhardt, a Portland, Ore., home appraiser. In part that's because builders tend to throw up too many condos when a market is hot. Also, it's because more buyers want single-family homes than condos. In Portland, Bernhardt says, "middle market" houses hold value best because even in a downturn, more people want them.

Some trends endure. In Bernhardt's market, the craze is Craftsman bungalows. He thinks it's a durable trend. Craftsman homes have charming, slightly nostalgic designs that include covered porches, a mix of indoor and outdoor living areas, higher ceilings and lots of architectural details, including moldings trim, stair rails, and built-in nooks and bookcases.
"It's a warm, attractive design that everybody seems to like, and it prices up substantially," Bernhardt says. Don't bank on a trend, however, without doing plenty of research into what sells in your particular market.