econintersect.com
       
  

FREE NEWSLETTER: Econintersect sends a nightly newsletter highlighting news events of the day, and providing a summary of new articles posted on the website. Econintersect will not sell or pass your email address to others per our privacy policy. You can cancel this subscription at any time by selecting the unsubscribing link in the footer of each email.



posted on 23 July 2016

10 Years After The Bubble, Home Prices Are Hitting New Highs

from CoreLogic

-- this post authored by David Stiff

This July marks the 10-year anniversary of the U.S. home price bubble. The national CoreLogic Case-Shiller Home Price Index peaked in July 2006 and then dropped 27 percent over the next six years. Nearly a decade later, the national index still remains 4 percent below its peak nominal value.[1]

Many local markets have already fully recovered from the bubble collapse. In fact, in 40 percent of metro areas prices are at new peaks and another 30 percent are within 10 percent of their previous peak. Nationally, we will likely hit or surpass 2006 levels by next spring or summer. Bothmortgage default rates and foreclosure inventories have fallen to their lowest levels in eight years, and the economy is generating about 2.5 million new jobs per year.

Since the last housing market crash nearly took down the U.S. financial system and led to the most severe recession since the Great Depression, it's natural to be concerned as U.S. home prices move toward new record highs. Could we be headed for another housing market crash? The short answer is most likely no, because the current run-up in prices is being driven almost entirely by fundamentals - solid job growth boosting housing demand and limits on supply as new home construction slowly drifts upward from record-low levels - and not by easy credit and investor frenzy.

The pre-bubble housing market was very different. Although job growth was strong during the housing bubble years, much of it was driven directly or indirectly by real estate speculation. In many markets, such as the Inland Empire in Southern California, the drivers of economic growth were housing construction, real estate brokerage, mortgage finance, and retail sales associated with home purchases (e.g., home improvement, furniture, and appliances). Think of it as a real estate perpetual motion machine in which housing became the proverbial tail wagging the economy. Unfortunately, there is no such thing as a perpetual motion machine and eventually reality in the form of economic fundamentals took hold. Speculation morphed into fear, and the housing market and, to a lesser extent, the job market gave back nearly all of their bubble-era gains.

The current rebound in housing markets, on the other hand, is mostly a story of solid jobs gains driving the rebound in home sales and price appreciation. Figure 1 lists ten large metro areas in which home prices have increased the most compared to their previous peak. Employment growth in all of these metro areas, with the exception of Pittsburgh, has been strong, exceeding the 9.6% national growth rate. (Pittsburgh is one of the few markets in the U.S. that escaped the home price bubble, so its current peak price level reflects steady price increases over the past twenty years.)

Another difference, this time around, is underwriting. Gone are the affordability mortgage products - think pay option ARMs and no income, no asset verifications - that fueled speculation.

Despite the fact that the economic dog is now wagging the housing market tail, it is likely that home price appreciation will weaken going forward. The May jobs report was disappointing, and some markets continue to experience slow recoveries from the Great Recession (e.g., Philadelphia: 6 percent employment growth since March 2011, home prices still 9 percent below peak). But there is very little speculation occurring in most housing markets, so the downside risk to prices is most likely limited to any potential weakness in the job market.

Source

http://www.corelogic.com/blog/authors/david-stiff/2016/07/10-years-after-the-bubble-home-prices-are-hitting-new-highs.aspx


1 In inflation-adjusted terms, the March 2016 value of the national Case-Shiller index was 18 percent below its peak value.

© 2016 CoreLogic, Inc. All rights reserved.

>>>>> Scroll down to view and make comments <<<<<<

Click here for Historical News Post Listing










Make a Comment

Econintersect wants your comments, data and opinion on the articles posted.  As the internet is a "war zone" of trolls, hackers and spammers - Econintersect must balance its defences against ease of commenting.  We have joined with Livefyre to manage our comment streams.

To comment, using Livefyre just click the "Sign In" button at the top-left corner of the comment box below. You can create a commenting account using your favorite social network such as Twitter, Facebook, Google+, LinkedIn or Open ID - or open a Livefyre account using your email address.



You can also comment using Facebook directly using he comment block below.





Econintersect Contributors


search_box

Print this page or create a PDF file of this page
Print Friendly and PDF


The growing use of ad blocking software is creating a shortfall in covering our fixed expenses. Please consider a donation to Econintersect to allow continuing output of quality and balanced financial and economic news and analysis.


Take a look at what is going on inside of Econintersect.com
Main Home
Analysis Blog
The Surprising Pevalence of Surprises in Export Specialisation
The Destruction of the Existing Workforce
News Blog
Early Headlines: Asia Stocks Mixed, Dollar Down, Oil Up, China May Replace US In TPP, Trump Freezes Feds' Hiring, Trump Files 'Secret' Transfer Papers, May To Visit China And More
January 23, 2017 Weather and Climate Report - NOAA Continues ENSO Neutral Denial
Documentary Of The Week: China's Wealth, Collapse, And Environmental Nightmare
Where Trump Stands On Twitter
Is This Really The Final Word On Whether Calorie-restricted Diets Make You Live Longer?
Electric Mobility Has A Long Way To Go
Average Gasoline Prices for Week Ending 23 January 2017 Fell Over 3 cents
What We Read Today 23 January 2017
Badass Grandpa Tokyo Drift!
Hurricane Matthew Clocks Top Wind Speed For 2016 At 101 MPH
Consumer Debt Growth May Have Stalled In Q3
Measuring Americans' Expectations Following The 2016 Election
Infographic Of The Day: Seven Negotiation Techniques
Investing Blog
Netflix And Co. Surpass DVD And Blu-ray Sales
The Future Of Online Sales
Opinion Blog
Bill Maher 2017 Season Premier
Trumping World Trade
Precious Metals Blog
A Slow Start For The Week Would Be Constructive For Gold
Live Markets
23Jan2017 Market Close: Wall Street Down, But Pares Morning Losses By The Closing Bell, Crude Rises Back To Normalcy And The US Dollar Nears Slipping Below 100
Amazon Books & More






.... and keep up with economic news using our dynamic economic newspapers with the largest international coverage on the internet
Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government































 navigate econintersect.com

Blogs

Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day
Weather

Newspapers

Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government
     

RSS Feeds / Social Media

Combined Econintersect Feed
Google+
Facebook
Twitter
Digg

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution

Contact

About

  Top Economics Site

Investing.com Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2017 Econintersect LLC - all rights reserved