Even three years after the housing recovery began, the national rebound is still in the middle innings as dozens of markets may not see home values fully recovered until 2017, according to a recent analysis from Zillow, Inc. (NASDAQ: Z).
Home values in half of the nation’s 100 largest metro areas will not reach their pre-recession peak levels again for another three-plus years, reports the second quarter Zillow Real Estate Market Reports.
Nationally, values are 11.3% below their 2007 peak, but looking ahead Zillow expects them to rise another 4.3% through the second quarter of 2015, however, this may not be enough of a boost.
“It will take 2.7 years for national home values to re-achieve their pre-recession levels, assuming a steady rate of appreciation at the forecasted level,” Zillow notes.
On a local level, in 50 of the 100 largest metro markets, it will take three years or more for home values to reach prior peaks. Notable outlier markets where it may take longer than a decade include Minneapolis (14.5 years), Kansas City (12.5 years) and Chicago (11.7 years).
“In dozens of markets, homeowners that bought at the peak of the market in 2006 or 2007 will have to wait until 2017 or later to get back to the break-even point on their home, a lost decade in which they will have built up no home equity,” stated Zillow Chief Economist Dr. Stan Humphries.
This is reflected in high negative equity and effective negative equity rates for more than a third of Americans with a mortgage lacking enough equity to list their home for sale and buy another, Humphries added.
There is, however, a silver lining to all of this, he adds.
“Because home values remain so far below their peak levels in so many areas, it is still possible for buyers to find bargains,” Humphries said. “This will be critical to maintaining home affordability over the coming years, especially as mortgage interest rates rise.”
Markets that are less than a year away from their peak levels include San Francisco (0.3 years), Dallas-Fort Worth (0.5 years) and Houston (0.6 years).
Those already at their pre-recession peaks include Denver, Pittsburgh and San Jose, Calif., with home values of $256,800; $123,000; and $815,000, according to the second quarter Zillow Home Value Index.
While there has been home price appreciation on a national basis, that growth has been slowed compared to year’s past.
U.S. home values grew 6.3% year-over-year in the second quarter to a Zillow Home Value Index of $174,200—the slowest annual pace of appreciation recorded this year thus far, and a sign that the market is returning to more normal levels.
“In a more normal market, home values appreciate at roughly 3% per year,” Zillow states. “Home values nationwide were up 1% compared to the first quarter and 0.5% from May.”
Written by Jason Oliva