New research from Zillow indicates that seven out of 35 of the largest U.S. housing markets have regained all value lost during the recession, and that could signal a looming turning point in those markets. Zillow considers a market to have recovered to pre-recession values when more than 95% of homes surveyed in a market are worth more than their peak value during the housing boom. In this housing cycle, that equates to those markets have a median home value of $217,300.
The seven markets to surpass pre-recession peaks join 14 others that had already reached this milestone, leaving only 14 markets still below pre-recession highs. “In markets like Las Vegas that got farthest ahead of themselves during the boom and, consequentially, fell the most, a large majority of the homes are still not worth as much today as they were a decade ago,” observed Zillow senior economist Aaron Terrazas. He added markets that were “more stable” prior to the housing crash have recovered more quickly.
Scars of the Recession
Terrazas went on to warn that even in recovered markets, “the scars of the recession still run deep for millions of longer-term U.S. homeowners.” He said it could take “years of growth” for some homeowners to regain lost value and that stabilization of rent rates may not be enough to enable buyers in competitive markets to save enough money to buy a home in the near future.
What Does Recovery Mean for a Housing Market?
While Terrazas is concerned about homebuyers in competitive markets finding prices still out of reach in many cases, other analysts say that hitting the pre-recession-peak milestone may be the first signal that a market is about to turn. For example, Nobel Prize-winning economist Robert Schiller said recently, “This could be the very beginning of a turning point,” although he emphasized he would not yet make that call.
Bloomberg contributors Prashant Gopal and Sho Chandra were not willing to make that call yet either, but they did recently marshal evidence that some regional markets might be cooling. The two wrote, “A slew of figures released this week gives ample evidence of at least a cooling,” citing:
- Falling existing-home-sales volumes
- The slow pace of new-home purchases
- Rising inventory
- The rate of price increases climbing less, year-over-year, than it has since early 2017
- Shares of national builders declining in value