If you are a value investor -- and you're looking for affordable markets where property values are defying the national downtrend -- then check out a new report from the federal government.

What it shows is that the top markets for residential real estate investment, at least in terms of price appreciation gains for the past 12 months, have been concentrated in just four states: North Carolina, Utah, Texas and Washington.

Three of the top five, and four of the top 20, have been in Utah: Provo, where prices gained an impressive 14.4 percent; Ogden at 13.7 percent; Salt Lake City, 13.4 percent; and Logan, 9.1 percent.

North Carolina also has four of the top 20: Asheville at 9.4 percent average appreciation, Hickory-Lenoir 8.6 percent; Charlotte 8.1 percent and Durham 7.8 percent.

Texas looks strong, too, with another four of the top 20: Austin 9.7 percent, Beaumont-Port Arthur 9.4 percent, San Antonio 8.4 percent and El Paso 7.9 percent.

Finally, the state of Washington had another four of the top 20 -- Wenatchee, which is just to the east of Seattle and earned the number one appreciation ranking in the U.S. for the second straight quarter at a sizzling 15.7 percent; Yakima and Spokane (Spo-can) at 8.8 percent, and Seattle 7.8 percent.

Keep in mind that every one of these areas is counter-cyclical-prospering while many other parts of the country are having problems.

Every one of them also has solid local employment growth, and moderate housing prices that never ballooned out of sight during the boom years.

Small rental home investments work well in markets like these, they cash flow thanks to declining interest rates, and they all look like strong performers for the mid to long term.

The government's survey, compiled quarterly by the Office of Federal Housing Enterprise Oversight, also ieentified markets in the three states where property values are falling fastest.

You probably guessed them -- Florida has eight of the worst 20-performing housing markets, California has six, and Michigan has three.

Merced, California, has the dubious distinction of being the fastest-deflating city in the country -- an average negative 13 percent in the past 12 months -- followed by Punta Gorda, Florida at nearly a negative 12 percent.

Santa Barbara, California-one of the priciest markets in the U.S. -- also saw average property value losses close to 12 percent, or nearly 1 percent a month.

The latest survey doesn't specifically mention it, but we spotted what may be a sleeper market segment for investors in the latest numbers -- the Gulf Coast, now rebounding from hurricane Katrina.

Check back with us next week for a look at Biloxi and Gulfport, Mississippi…where property prices are affordable, prices are rising at 6 to 7 percent -- and rental housing investment opportunities are attractive.

Published: December 6, 2007

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Kenneth R. Harney writes an award-winning, nationally-syndicated column on housing and real estate from Washington, D.C. He is also managing director of the National Real Estate Development Center, a professional education company. He is a past member of the Federal Reserve Board's Consumer Advisory Council, a committee that by federal statute reviews all Fed actions on home mortgage, consmer credit and banking industry regulation. He served as a member of the U.S. Department of Housing and Urban Development's Working Group on Computerized Loan Origination (CLO) systems, and is a member of the Editorial Board of the Fannie Mae Foundation's journal, Housing Policy Debate. He is the author of two books on mortgage finance and real estate.