March 21, 2018

Most States Return to Peak Prices

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Most States Return to Peak Prices

Many markets are rising above their previous peaks, and the Great Recession is now far in the rear-view mirror. But that’s not the case for every market. In some places, home prices continue to lag, even seven years after bottoming out. CoreLogic’s newly released report, “Evaluating the Housing Market Since the Great Recession,” examines the bust years between 2006 and 2011 and subsequent recovery in the housing market.

The Great Recession was the longest economic recession in the U.S. since World War II. It had a profound impact on the housing market. From December 2007 to June 2009, the U.S. economy lost more than 8.7 million jobs. The unemployment rate peaked at 10 percent, and American households lost $16 trillion in net worth.

Home prices peaked in most of the country in early 2005, but the downturn prompted prices to plunge in most markets starting in 2007. Home prices nationwide fell 33 percent during the recession.

Most areas have since rebounded, and home prices have since surged above peak levels. Nationwide, the average home price is 1 percent higher than it was at the peak of 2006, and the average annual equity gain was $14,888 in the third quarter of 2017.

“Homeowners in the United States experienced a run-up in prices from the early 2000s to 2006, and then saw the trend reverse with steady declines through 2011,” says Frank Nothaft, chief economist for CoreLogic. “After reaching bottom in 2011, our national price index is up more than 50 percent. West Coast states, such as California, Washington, and Oregon are seeing some of largest trough-to-current growth rates in home prices. Greater demand and lower supply, as well as booming job markets, have given some of the hardest-hit housing markets a boost in home prices. Yet, many are still not back to precrash levels.”

Notably, states like Illinois, Nevada, Florida, and Arizona have yet to see many of their markets return to prerecession levels. Nearly 2.5 million residential properties with a mortgage nationwide are still in negative equity territory, in which homeowners owe more than their mortgage.

Nevada faced the largest drop during the recession, with home prices plunging 60 percent from their peaks. Home prices have since seen a 93 percent increase from its crisis levels, but home prices remain 23 percent below the pre-recession peak. Further, 9 percent of properties with a mortgage in Nevada remain underwater in the third quarter of 2017, according to CoreLogic’s report.

On a metro level, Las Vegas, Miami, and Chicago have been among the slowest markets to recover since the recession, and home prices remain below their prerecession peaks there too.

On the other hand, California—which saw a 42 percent decline in home prices during the recession—has seen its markets boom once again. Home prices in the state are now 2 percent higher than they were prior to the recession, according to CoreLogic’s report.

Source: CoreLogic