Many left out of housing recovery, Trulia finds.
Many housing values are lower than before the crisis, Trulia finds
So how is the U.S. housing market doing? It depends upon whom you ask. A report last week from Trulia, the popular real estate website, upends conventional wisdom that the housing market is back to where it was in the halcyon days of 2006 and 2007. Back then, and for a decade preceding it, the housing bubble was fueled by low mortgage rates and relaxed lending criteria.
The Trulia report asserts that vast swaths of the 120 million single-family homes across America — or about two-thirds — are worth less than they were before the 2008 financial crisis.
“Everything is not up,” said Ralph McLaughlin, the chief economist at Trulia. “The places where home prices are up tend to be few and far between. In only 37 major metropolitan areas out of the top 100 has the share of homes recovered exceeded 50 percent.”
McLaughlin said housing prices in big metropolitan areas with strong economies and lots of jobs — think San Francisco, New York, Dallas, Austin and Boston — are healthy. Home prices in the nation’s economic soft spots — such as Upstate New York, much of rural America, the Rust Belt, Baltimore and bubble cities such as Phoenix, Las Vegas and parts of Florida’s Gulf Coast — are wheezing.
Put simply, Trulia says, the housing market’s recovery has followed geography. Others paint a different picture. The S&P CoreLogic Case-Shiller Index and the Federal Housing Finance Agency House Price Index indicate that the market is back to its pre-bust levels.
“Overall, various different price metrics say we have surpassed prior peak levels in home value,” said Lawrence Yun, chief economist with the National Association of Realtors. “People who had purchased during the peak years and went through the downturn would now have fully recovered those values.”
The big difference between Trulia and the Realtors is that Trulia measures the value of homes based on its algorithm it created to put a value on homes. The Realtors’ prices are based on actual sales.
According to a survey supplied by the Realtors, the median price for a U.S. home sold in the fourth quarter of 2016 was $235,000, compared with $221,900 in 2006, which is considered near the peak of the housing bubble.
Many home prices can have estimates, but many believe the best way to find a home’s value is to put it on the market and see what it brings.
McLaughlin said median sale prices such as those used by the Realtors as a gauge of market trends can be misleading “because the types of homes that sell at any given point can change. For example, one might think increasing median sales price is a sign of a hot market, when in reality it’s perfectly possible that it’s just nicer, more expensive homes that are selling.”
Some economists split the difference, acknowledging that many communities have not caught up to the broader housing uptick across the nation.
“There are still some homeowners who are underwater and have negative equity, but that number is far, far less than what it was at the trough of the housing cycle in 2010,” said Frank Nothaft, chief economist of CoreLogic, a real estate technology and data analytics company.
The darkest days came in December of 2009, Nothaft said, when 12.2 million people with mortgages owned homes that were worth less than what they paid. That is known in finance parlance as “underwater.”
As of December 2016, he said, the number underwater is 3.2 million, or 6 percent of Americans with home mortgages.
“It’s dramatic improvement, but 3 million homeowners are still underwater. That’s a lot,” he said. “Unfortunately, it’s concentrated in the sand states of Nevada, Arizona and Florida. Even in markets that seem to have people that have recovered really well, such as the Washington area, there are pockets and neighborhoods that have not yet recovered.”
TOP: A new home is under construction in Phoenix. Trulia found that home prices are weak there, as well as in much of rural America, the Rust Belt and other places.