Home Prices Now 50% Higher Than Post-Crisis Lows

U.S. home prices have swelled nearly 50% higher than their low point in the wake of the last recession, reflecting a shrinking inventory and stoking fears of overheating in certain markets.

Home prices in June 2017 were riding 6.7% higher than at the same time in 2016, according to the most recent data from real estate research firm CoreLogic, and 1.1% higher than in May.

“The growth in sales is slowing down, and this is not due to a lack of affordability — but rather a lack of inventory,” CoreLogic chief economist Frank Nothaft said in the firm’s most recent report. “As of Q2 2017, the unsold inventory as a share of all households is 1.9%, which is the lowest Q2 reading in over 30 years.”

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The Irvine, Calif.-based research firm thus projects slightly softer growth over the coming 12 months, with a year-over-year gain of 5.2% predicted by June 2018. That’s still impressive considering that this June’s figure represents a nearly 50% boost from March 2011, when home prices bottomed out in the wake of the mortgage-backed security crisis and economic downturn.

“With no end to the escalation in sight, affordability is rapidly deteriorating nationally and especially in some key markets such as Denver, Houston, Miami, and Washington,” CoreLogic president and CEO Frank Martell said in the report. “While the low mortgage rates are keeping the market affordable from a monthly-payment perspective, affordability will likely become a much bigger challenge in the years ahead until and when the industry resolves the housing supply challenge.”

Denver topped CoreLogic’s list of top U.S. metro areas for growth, logging a 8.7% change from this time last year. Las Vegas, San Diego, Los Angeles, and Boston rounded out the top five.

But Denver was also included in CoreLogic’s list of “overvalued” markets, along with the Houston, Miami, and Washington, D.C. metropolitan areas.

If some of those western cities sound familiar, it’s because as in previous months, home-price gains have loosely correlated with the top cities for Home Equity Conversion Mortgage growth: Denver and Las Vegas also topped Reverse Market Insight’s most recent list of reverse mortgage origination growth by city, turning in gains of 42.1% and 40.8%, respectively.

Written by Alex Spanko

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  • Since percentages alone can be somewhat misleading, let us look at some numbers.

    In San Bernardino County, CA, home values on many homes fell to 1/3rd of their value before the mortgage crisis. So a home that was worth $300,000 at its peak value before the crisis fell to values of just $100,000. So in this example a 50% increase would be $50,000 or a total value of $150,000 which is 50% less than their highest pre-crisis values. Homeowners there would laugh to hear their current values may now be the result of an overheated market.

    In the area I live home values now exceed about 12% of their highest pre-crisis values. The post crisis value of homes here fell to about 2/3rds of their pre-crisis peak values. For example, a home worth $580,000 fell to about $400,000 and are now worth about $650,000.

    Only speaking in percentages produces one effect while seeing over numbers produces yet another. Seeing them together helps bring perspective to what is actually going on.

    It is amazing that metro LA as the second largest population are of any US metro area is fourth in the list of home value growth metro areas since its population is about the same as the other four combined.

    In fact the population of metro LA as the second largest US metro is now over 13 million which is larger than the population of any state except CA (39 million), Texas (28 million), Florida (21 million), and New York at (20 million).

    While the NY-Newark Metro areas has the largest population of any US metro area at 20 million, it consists of populations in NY, NJ, CT, and PA. The LA metro area only includes two counties in Southern California (LA and Orange counties). The San Diego metro area also in Southern California has another 3.3 million people.

  • In the Boston Metro area, taking a particular (seven miles out from Boston proper), “two family” house (a type of house that makes-up a considerable percentage of the total housing stock in the Boston area) appraised at $400,000 to $450,000 in late 2014, that same house will be HUD-appraised at $600,000 to $650,000 (depending on sq. ft. – 2300 to 2800).

    About $80,000 to $100,000 of that rise in value taking place in the last six or seven months. These are not after-gut-renovated values, but “decent to superior shape” properties; add another $100,000 for newly-renovated.

    Currently, a typical house of any structure is on the market for 7 to 10 days with multiple bids and closings above the asking price.

    Your point is well taken: if according to the article, the “high” in price increase is Denver at 8%, that leaves Boston (5th) at an undisclosed, somewhat lower percentage, where “the percentage in price increase” really doesn’t give a very accurate “visual” of what’s really happening.

    • Mr. McSherry,

      My point was that a recovery percentage alone cannot tell the full story of what recovery means to a homeowner.

      For example, a homeowner has a home worth $300,000 before the recession that fell to $100,000 (i.e., lost 2/3rds of its value) at the lowest point in the recession. A fifty percent increase means his home today is worth just $150,000 (i.e. 50% of its pre-recession value).

      On the other hand, a homeowner has a home worth $480,000 that fell 1/3rd in value to $320,000. A 50% increase in value will make the home currently worth $480,000 or exactly equal to its pre-recession value.

      So a 50% increase in value to first homeowner means a whole lot less to the first homeowner since the current value of his home is still 50% lower than it was before the recession while in the second case, the homeowner is looking to make up home value appreciation that he has missed out of due to the recession but his home value is fully recovered.

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