It could be another eight years before all homes recover their value: Trulia
Most American homes are worth less now than they were before the recession, according to a report out Wednesday.
Fresh data from real-estate website Trulia show that just 34.2% of homes have returned to the peak levels registered before the onset of the recession in 2008. What’s more, Trulia estimates it could take until 2025 for a true national recovery in home prices.
“We are absolutely not out of the woods as far as home-value recovery is concerned,” Trulia’s chief economist, Ralph McLaughlin, told MarketWatch. “The housing-market crash was pretty monumental. The scarring of the housing market has not gone away and will be visible for the indefinite future.”
Trulia’s data are derived from actual home sales, and they are compared to the earlier peak price for the property. In contrast, the better-known Case-Shiller index is based on repeat-sales data for the same property to deduce how much prices are rising or falling. That data are then aggregated into a metro-level index and compared with earlier periods.
McLaughlin likened home-price trackers to the stock market: Saying that Case-Shiller is up or down is a little like saying the Dow Jones Industrial Average or the S&P 500 is up or down — whereas considering Trulia’s data on individual properties is more like looking at single stocks. As he put it, “Aggregate measures really mask a lot of idiosyncrasies that are going on in the market.”
Much of Arizona is such an idiosyncrasy. Kent Simpson, a Realtor in Tucson, which is second only to Las Vegas in the ranking of cities where the smallest numbers of homes have recovered their value, said he remembers the lead-up to the crash as a “crazy” time.
‘I’ve been stuck with a money-pit rental for going on 12 years.’
Matt Maison of Mesa, Ariz.
“We had people buying three or four homes, holding them for 30-60 days, and then selling them for a $30,000-$50,000 profit,” he said.
A decade later, the city is “in a recovery waking-up stage,” he said. Home builders are only just starting to put up new houses, and the value of land is about where it was in 2011.
“Folks are staying in their homes longer, there’s not a frenzy, a feeling of, I need to trade up or trade down to keep up with the Joneses.” And yet, he said, as big employers like Caterpillar and Raytheon announce plans to expand operations and hire in the city, consumer sentiment is being buttressed.
“Everyone’s a little more comfortable with the economy and not feeling like they have to save for the next rainy day,” Simpson said.
In 2005, Matt Maison was working in real estate in San Diego when he bought a small house in Mesa, just outside Phoenix, intending to relocate to Mesa to be near family. He got sidetracked and took a job on the East Coast instead.
Finding tenants hasn’t been a problem — the home has rarely been vacant, but, between maintenance and landscaping, normal repairs and instances of what he calls “tenants trashing the place,” Maison has had negative cash flow for most of that time. He wishes, he said, that his timing had been better.
“I should have sold it shortly after,” he told MarketWatch. “Instead, I’ve been stuck with a money-pit rental for going on 12 years. I’m hoping to sell it this year.”
Across the country, Trulia found that growth in incomes and population, as well as the number of vacant homes, have the most impact on home values — more than even job growth. Still, as Trulia acknowledged in a release, “there is a direct relationship between job growth and income growth.”
Also read: The lopsided recovery in the housing market
But McLaughlin thinks the implications for personal finances may be more meaningful than those for the macro economy, he said.
“For buyers, the take-away should be [to] make sure you’re in the right financial place to buy a home where you can stay put for 5-6-7 years and make decisions based on those fundamentals, not on what things are going on in your market,” McLaughlin said. “You should treat it as a place to live, where you can gain equity over the long term.”
And for owners who might be thinking of becoming sellers?
“The important thing for existing homeowners to take away is, don’t think the prerecession peak is your target,” McLauglin said. “That was arguably at the height of the bubble. In some areas, that peak may never come again.”