About two months ago, I took a look at how the housing markets in two of North America’s capital cities — Washington, D.C., and Ottawa, Canada — fared in the recent downturn.

As it turned out, both markets saw some slight downturn, but with a stable employment base of federal workers and government lobbyists, the cities came through the global recession without the bruising real estate market maladies experienced in other major cities.

That got me thinking about state and provincial capital cities, so I abstractly chose a region in North America along the Canada/U.S. border to take a peek at municipalities where smaller but equally prevalent government bureaucracies were a key factor in the local economies.

About two months ago, I took a look at how the housing markets in two of North America’s capital cities — Washington, D.C., and Ottawa, Canada — fared in the recent downturn.

As it turned out, both markets saw some slight downturn, but with a stable employment base of federal workers and government lobbyists, the cities came through the global recession without the bruising real estate market maladies experienced in other major cities.

That got me thinking about state and provincial capital cities, so I abstractly chose a region in North America along the Canada/U.S. border to take a peek at municipalities where smaller but equally prevalent government bureaucracies were a key factor in the local economies.

My region of choice was northern New England and the province of Quebec, which borders my three states of focus: Vermont, New Hampshire and Maine.

It was interesting to throw the province of Quebec’s capital city, Quebec City, into the mix because of the four locations it is really the only one of significant size with a population of almost 500,000 (the metro population is more than 700,000).

In comparison, the three northern New England capital cities are tiny. The largest is Concord, N.H., at 43,000 people, and then we get to two of this country’s smallest capital burghs: Augusta, Maine, at 19,000 people; and Montpelier, Vt., at 7,800.

While the three U.S. capital cities experienced minor economic tremors from the global recession, Quebec City probably did as well, if not better, than most major metropolitan areas in North America. Of course, these are all older cities where the local housing markets saw modest gains during the boom times and didn’t really expect too much disappointment in the bust.

As a provincial capital city, Quebec City is extremely dependent on its government bureaucracy, which accounts for 30 percent of jobs. Toss in a big, still-expanding insurance industry presence and that’s about 50 percent of all jobs.

There is also a growing manufacturing sector. Earlier this year, Quebec City boasted the lowest unemployment rate in Canada, at below 4 percent.

After extrapolating that cursory employment information, you might hazard a guess that the housing market in Quebec City rests on very stable ground. And you would be right.

"The market is strong today, and prices continue to rise," reported Jeannette Casavant, an independent real estate agent in the city.

However, the one sign of weakness in the market is that it is taking longer to sell a house today. "Before, if a house was on sale you would immediately have three offers at the same time. Now, it sells within 60 days. There are still a lot of buyers out there," said Casavant.

Going back a decade, Canada suffered an economic slowdown and housing prices weakened across the country, including in Quebec City. So back in 2002, if you were lucky you might have a found a two-bedroom condominium in a great Old Town location for $200,000. Today, if it went on the market it would sell for $500,000.

"Prices have appreciated quite a bit lately and that means we have gained back what we lost 10 years ago," Casavant said. "Prices will continue to rise."

In 2008, the unemployment rate in New Hampshire was a mere 4.3 percent. A year later, unemployment spiked upward to 7.2 percent, the state’s highest rate in 17 years.

That wasn’t felt too severely in Merrimack County, where the capital city of Concord can be found.

"It always seems as if the state has a lot of job openings," said Karen Hatch, regional development manager for The Bean Group in Bedford, N.H.

"If you are looking for employment, go to the state site — there are always listings for jobs," she said. "I haven’t heard the state was laying off; it seems as if we are not at capacity for jobs."

As for the housing market in Merrimack, the downturn has been very mild.

"In 2009, the average selling price in Merrimack County was $206,000; it was $201,066 in 2010," Hatch reported. "As for the average amount on time on market before a house sells, it’s averaging 146 days this year, about the same as the year before."

Things are looking even better in Kennebec County, Maine, home to the capital city of Augusta and a population base of 117,000 folks.

The median sale price of a home from January 2010 to July 2010 was up 2 percent over the same period the year before, noted Anne-Marie Haywood, regional development manager for The Bean Group, in Portsmouth, N.H.

"The number of units sold from January 2010 to July 2010 hit 560 — that’s up from 507 units, again for the same period of time in 2009."

Both the private and public sectors cut jobs in Kennebec County, said Haywood. She suspects the salubrious numbers in the first part of 2010 had something to do with the tax incentive. It will take a few more months, post-ending of the tax credits, to see if the local market has indeed held strong.

One troubling sign for Kennebec County and the surrounding region: After government, the biggest industry is tourism, and visitation numbers are down.

The one regional capital city where the housing market noticeably softened was Montpelier, Vt., which is the smallest capital city in the country. The shire is located in Washington County, home to 58,000 very independent citizens.

"Our major industries are government, government-associated industries and insurance," said Tim Heney, a principal with Heney Realtors in Montpelier. All that couldn’t bolster the housing market.

Average home prices peaked in 2006 at $242,600 and then fell to $188,100 in 2009. Back in 2006, homes sold briskly with an average time on market of about 40 days. Today, it takes 120 to 140 days to sell a home.

The numbers look worse than they are, said Heney, because what has been selling has been lower-end homes.

"Montpelier is very stable," he stressed. "People are buying homes — there are just not as many buyers as we would like."

More than 200 years ago, the English kicked the French out of North America. Today, the economy in the former colony of New France outpaces neighboring New England. Revenge is sweet, even if it is a bit late.

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