SANTA CLARA, Calif.,
Nov. 13, 2017 /PRNewswire/ -- Home
prices have returned to the boom levels of a decade ago -- which
foreshadowed the bursting of the real estate "bubble" and the onset
of The Great Recession -- but today's housing market is starkly
different, according to data released today from
realtor.com®, a leading online real estate destination.
Backed by tighter lending standards and more solid economic
fundamentals, current price appreciation is being driven by strong
supply-and-demand dynamics with no signs of boom era flipping or
over-construction.
On the surface, today's housing market looks suspiciously
similar to the pre-recession years with rising home prices and
feverish buyer demand. However, a deeper analytical assessment
reveals material differences -- historically low inventory levels,
much tighter lending standards and significant job and household
growth -- and a strong housing market backed by economic
fundamentals.
Home Prices are Soaring
The U.S. median home sales
price in 2016 was $236,000, 2 percent
higher than in 2006.1 In fact, 31 of the 50 largest U.S.
metros are back to pre-recession price levels. Austin, Texas, has seen the largest price
growth in the last decade with a 63 percent increase.1
It's followed by Denver, at 54
percent and Dallas at 52 percent.
Three markets -- Las Vegas,
Tucson, Ariz., and Riverside, Calif., -- remained more than 20
percent below 2006 price levels at the end of 2016, at 25 percent,
22 percent and 22 percent, respectively.1 Additionally,
realtor.com® national data shows that listing prices
have been up double-digits for the majority of 2017.
"As we compare today's market dynamics to those of a decade ago,
it's important to remember rising prices didn't cause the housing
crash," said Danielle Hale, chief
economist for realtor.com®. "It was rising prices stoked
by subprime and low documentation mortgages, as well as people
looking for short term gains -- versus today's truer market
vitality -- that created the environment for the crash."
Lending Standards are Tight
The largest difference in
the last decade is that lending standards are the tightest they
have been in almost 20 years. Today, the Dodd-Frank Wall Street
Reform and Consumer Protection Act requires loan originators to
show verified documentation that a borrower is able to repay the
loan. As a result, the median 2017 home loan FICO score was 734,
significantly up from 700 in 2006, on a scale of 330 –
830.2
The bottom 10 percent of borrowers also have much higher credit
scores with a FICO of 649 in 2017, from 602 in 2006.2
While veterans and others with specialized mortgages can still put
zero percent down, these mortgages include additional restrictions
to ensure they can be paid back.
"Lending standards are critical to the health of the market,"
added Hale. "Unlike today, the boom's under-regulated lending
environment allowed borrowing beyond repayable amounts and atypical
mortgage products, which pushed up home prices without the backing
of income and equity."
Flipping and Over-Building Are in Check
A decade ago,
the widespread belief that prices could never go down spurred
rampant home flipping and building. Today, tight lending standards
have kept flipping and over-building in check, but are contributing
to severely constrained construction levels.
Prior to the crash, flipping became increasingly mainstream with
amateur flippers taking on multiple loans. In 2006, the share of
flipped homes reached 8.6 percent of all sales, exceeding 20
percent in some metros such as Washington, D.C. and Chicago.3 With today's tight
lending environment limiting borrowing power, flipping accounted
for 5 percent of sales in 2016, a more restrained
level.3
Over-building was another indicator of the unhealthy market
conditions in the early 2000s. As prices rose, builders kept
building, regardless of demand. In 2006, there were 1.4
single-family housing starts for every household formed, well above
the healthy level of one necessary to keep up with the
market.4 Today's market is well below normal
construction levels at only 0.7 single-family household starts per
household formation.4 While the lack of over-building is
generally positive for the market, the current environment of
under-building is having a material impact on supply and escalating
prices.
Today's Home Prices Driven by Economic
Fundamentals
Strong employment and demand paired with
severely limited supply is driving price escalation today.
Employment was also strong in 2006, but years of over-building put
an oversupply drag on the market.
In October 2017, unemployment is
now at 4.1 percent -- a 17-year low, with more than 150,000 jobs
created on average each month in 2017.5 In 30 of the 50
largest U.S. metros, unemployment is less than half of 2010
levels.5 In 2016, there were 8 million more workers on
payrolls than in 2006 and 10 million more households.5
At the same time, there are 600,000 fewer total housing starts and
nearly 700,000 fewer single-family housing starts.4
Hale added, "The healthy economy is creating more jobs and
households, but not giving these people enough places to live.
Rapid price increases will not last forever. We expect a gradual
tapering as buyers are priced out of the market - not a market
correction, but an easing of demand and price growth as renting or
adding roommates becomes a more affordable alternative."
Millennial job growth has also contributed to rising demand. In
September, employment reached 79 percent in the 25-34 age group,
back up to 2006 levels and 5 percent higher than 2010. In fact,
millennials made up 52 percent of home shoppers this past spring
and with the largest cohort of millennials expected to turn 30 in
2020, their demand for homes is only expected to increase.
On top of escalating demand, the supply of homes available also
is significantly constrained. In 2016, single-family inventory
reached a 22-year historic low at 1.45 million homes for
sale.6 October 2017 marked the 26th
consecutive month of year-over-year declines in realtor.com
inventory. The market is currently averaging 4.2 months supply,
which is significantly faster than 2007's 6.4 months
supply.6 Vacancies also are very tight with for-sale
vacancies dropping to 1.3 million in 2016, compared to 1.9 million
in 2006. Rental vacancies hit 3.2 million in 2016, compared to 3.7
in 2006.7
Economic
Factor
|
2016
|
2006
|
Single Family Home
Prices
|
$236,000
|
$232,000
|
Unemployment
|
4.9%
|
4.6%
|
Home Sales
|
5.3
million
|
6.0
million
|
Months
Supply
|
4.2 months
|
6.4 months
|
Distressed
Sales
|
5.4%
|
2.6%
|
Home
Flipping
|
5.0%
|
8.6%
|
- Single-family home price sales - NAR/Moody's Analytics
Estimates
- Urban Institute
- Corelogic
- U.S. Census Bureau - Moody's Analytics Estimates
- Bureau of Labor Statistics
- National Association of Realtors
- Census, Housing Vacancy Survey
Largest 50 Markets Price Appreciation Since
2006
MSA
|
Change Home
Prices
2016 vs.
2006*
|
Year
|
Median Home
Price1
|
Foreclosure Share of
Sales 2017
|
Unemployment Rate
2017
|
Austin-Round Rock,
Texas
|
62.9%
|
2006
|
$173,510
|
4.7%
|
4.1%
|
2016
|
$282,625
|
1.6%
|
3.3%
|
Denver-Aurora-Lakewood, Colo.
|
53.5%
|
2006
|
$249,589
|
8.3%
|
4.3%
|
2016
|
$383,137
|
1.4%
|
3.1%
|
Dallas-Fort
Worth-Arlington, Texas
|
51.6%
|
2006
|
$149,003
|
7.4%
|
4.8%
|
2016
|
$225,914
|
3.4%
|
3.9%
|
San Antonio-New
Braunfels, Texas
|
45.9%
|
2006
|
$141,305
|
3.2%
|
4.6%
|
2016
|
$206,166
|
3.3%
|
3.8%
|
Houston-The
Woodlands-Sugar Land, Texas
|
45.5%
|
2006
|
$149,104
|
4.1%
|
5.0%
|
2016
|
$216,988
|
3.1%
|
5.3%
|
Charlotte-Concord-Gastonia, N.C.-S.C.
|
41.9%
|
2006
|
$145,300
|
4.0%
|
5.0%
|
2016
|
$206,187
|
4.2%
|
4.8%
|
Buffalo-Cheektowaga-Niagara Falls, N.Y.
|
33.6%
|
2006
|
$98,397
|
7.4%
|
5.0%
|
2016
|
$131,477
|
7.0%
|
5.1%
|
Salt Lake City,
Utah
|
33.6%
|
2006
|
$203,766
|
2.3%
|
2.9%
|
2016
|
$272,136
|
2.1%
|
3.2%
|
Indianapolis-Carmel-Anderson, Ind.
|
33.4%
|
2006
|
$118,969
|
8.5%
|
4.6%
|
2016
|
$158,749
|
4.0%
|
4.1%
|
Raleigh,
N.C.
|
33.2%
|
2006
|
$185,182
|
2.0%
|
3.7%
|
2016
|
$246,614
|
1.6%
|
4.4%
|
San
Jose-Sunnyvale-Santa Clara, Calif.
|
31.5%
|
2006
|
$771,633
|
0.5%
|
4.6%
|
2016
|
$1,014,864
|
0.7%
|
3.9%
|
Nashville-Davidson--Murfreesboro--Franklin,
Tenn.
|
26.6%
|
2006
|
$176,298
|
4.5%
|
4.3%
|
2016
|
$223,241
|
4.3%
|
3.8%
|
Portland-Vancouver-Hillsboro, Ore.-Wash.
|
24.7%
|
2006
|
$280,009
|
0.9%
|
5.1%
|
2016
|
$349,100
|
4.6%
|
4.7%
|
Oklahoma City,
Okla.
|
21.4%
|
2006
|
$124,083
|
3.5%
|
4.0%
|
2016
|
$150,657
|
6.7%
|
4.3%
|
Columbus,
Ohio
|
18.5%
|
2006
|
$146,829
|
9.3%
|
4.9%
|
2016
|
$173,999
|
6.0%
|
4.1%
|
Louisville/Jefferson
County, Ky.-Ind.
|
17.9%
|
2006
|
$137,293
|
6.0%
|
5.6%
|
2016
|
$161,937
|
7.9%
|
4.2%
|
Rochester,
N.Y.
|
16.3%
|
2006
|
$113,586
|
5.4%
|
4.4%
|
2016
|
$132,152
|
6.5%
|
4.7%
|
Kansas City,
Mo.-Kan.
|
16.0%
|
2006
|
$154,929
|
4.7%
|
5.1%
|
2016
|
$179,791
|
4.7%
|
4.4%
|
Seattle-Tacoma-Bellevue, Wash.
|
13.9%
|
2006
|
$361,945
|
0.4%
|
4.2%
|
2016
|
$412,223
|
2.7%
|
4.5%
|
Birmingham-Hoover,
Ala.
|
12.4%
|
2006
|
$164,959
|
4.1%
|
3.7%
|
2016
|
$185,467
|
11.7%
|
5.6%
|
St. Louis,
Mo.-Ill.
|
10.4%
|
2006
|
$147,243
|
3.6%
|
5.0%
|
2016
|
$162,531
|
10.0%
|
4.7%
|
Pittsburgh,
Pa.
|
10.1%
|
2006
|
$129,852
|
7.5%
|
4.7%
|
2016
|
$142,945
|
9.3%
|
5.7%
|
San
Francisco-Oakland-Hayward, Calif.
|
9.6%
|
2006
|
$753,048
|
0.3%
|
4.2%
|
2016
|
$825,370
|
1.8%
|
3.8%
|
New Orleans-Metairie,
La.
|
8.7%
|
2006
|
$172,434
|
0.5%
|
5.0%
|
2016
|
$187,387
|
6.8%
|
5.6%
|
Memphis,
Tenn.-Miss.-Ark.
|
8.4%
|
2006
|
$142,196
|
9.5%
|
5.7%
|
2016
|
$154,209
|
15.4%
|
5.3%
|
Atlanta-Sandy
Springs-Roswell, Ga.
|
7.3%
|
2006
|
$171,165
|
5.5%
|
4.7%
|
2016
|
$183,600
|
6.6%
|
5.2%
|
Cincinnati,
Ohio-Ky-Ind.
|
6.4%
|
2006
|
$142,640
|
7.9%
|
5.2%
|
2016
|
$151,777
|
7.7%
|
4.3%
|
Richmond,
Va.
|
3.9%
|
2006
|
$224,649
|
0.5%
|
3.3%
|
2016
|
$233,520
|
9.9%
|
4.2%
|
Boston-Cambridge-Newton, Mass.-N.H.
|
3.3%
|
2006
|
$403,119
|
0.7%
|
4.5%
|
2016
|
$416,569
|
5.4%
|
3.3%
|
Milwaukee-Waukesha-West Allis, Wis.
|
3.0%
|
2006
|
$219,227
|
1.0%
|
4.9%
|
2016
|
$225,711
|
6.1%
|
4.5%
|
Minneapolis-St.
Paul-Bloomington, Minn.-Wis.
|
1.1%
|
2006
|
$232,529
|
2.5%
|
3.8%
|
2016
|
234,976
|
3.5%
|
3.6%
|
Jacksonville,
Fla.
|
-1.5%
|
2006
|
$213,864
|
1.8%
|
3.3%
|
2016
|
$210,621
|
10.5%
|
4.8%
|
Philadelphia-Camden-Wilmington,
Pa.-N.J.-Del.-Md.
|
-2.5%
|
2006
|
$228,949
|
1.6%
|
4.5%
|
2016
|
$223,156
|
10.2%
|
5.1%
|
Cleveland-Elyria,
Ohio
|
-2.6%
|
2006
|
$133,270
|
7.3%
|
4.9%
|
2016
|
$129,814
|
8.9%
|
5.3%
|
San Diego-Carlsbad,
Calif.
|
-6.1%
|
2006
|
$600,323
|
0.7%
|
4.0%
|
2016
|
$563,619
|
3.6%
|
4.7%
|
Virginia
Beach-Norfolk-Newport News, Va.-N.C.
|
-8.9%
|
2006
|
$234,257
|
0.5%
|
3.4%
|
2016
|
$213,385
|
9.4%
|
4.6%
|
Washington-Arlington-Alexandria,
D.C.-Va.-Md.-W.V.
|
-9.7%
|
2006
|
$430,205
|
0.7%
|
3.1%
|
2016
|
$388,429
|
7.4%
|
3.9%
|
Baltimore-Columbia-Towson, Md.
|
-9.9%
|
2006
|
$278,958
|
0.8%
|
4.1%
|
2016
|
$251,347
|
11.6%
|
4.4%
|
Tampa-St.
Petersburg-Clearwater, Fla.
|
-11.6%
|
2006
|
$223,916
|
0.5%
|
3.5%
|
2016
|
$198,029
|
9.7%
|
4.7%
|
Los Angeles-Long
Beach-Anaheim, Calif.
|
-12.2%
|
2006
|
$685,432
|
0.3%
|
4.5%
|
2016
|
$601,874
|
2.7%
|
5.0%
|
Phoenix-Mesa-Scottsdale, Ariz.
|
-13.1%
|
2006
|
$267,186
|
0.7%
|
3.5%
|
2016
|
$232,154
|
3.7%
|
4.5%
|
Chicago-Naperville-Elgin, Ill.-Ind.-Wis.
|
-14.9%
|
2006
|
$272,253
|
1.9%
|
4.6%
|
2016
|
$231,638
|
10.2%
|
5.8%
|
Detroit-Warren-Dearborn, Mich.
|
-15.6%
|
2006
|
$184,440
|
8.7%
|
7.1%
|
2016
|
$155,678
|
14.9%
|
5.4%
|
Sacramento--Roseville--Arden-Arcade,
Calif.
|
-15.7%
|
2006
|
$374,013
|
0.7%
|
4.7%
|
2016
|
$315,228
|
3.3%
|
5.2%
|
Orlando-Kissimmee-Sanford, Fla.
|
-17.2%
|
2006
|
$268,985
|
0.9%
|
3.2%
|
2016
|
$222,732
|
10.2%
|
4.6%
|
New
York-Newark-Jersey City, N.Y.-N.J.-Pa.
|
-17.4%
|
2006
|
$468,732
|
0.5%
|
4.6%
|
2016
|
$387,092
|
7.6%
|
4.8%
|
Miami-Fort
Lauderdale-West Palm Beach, Fla.
|
-17.8%
|
2006
|
$371,790
|
0.3%
|
3.1%
|
2016
|
$305,574
|
8.6%
|
5.0%
|
Riverside-San
Bernardino-Ontario, Calif.
|
-22.2%
|
2006
|
$401,572
|
0.4%
|
4.9%
|
2016
|
$312,530
|
6.4%
|
5.9%
|
Tucson,
Ariz.
|
-22.4%
|
2006
|
$244,738
|
0.3%
|
3.9%
|
2016
|
$189,912
|
6.5%
|
4.8%
|
Las
Vegas-Henderson-Paradise, Nev.
|
-25.2%
|
2006
|
$317,075
|
0.4%
|
4.0%
|
2016
|
$237,271
|
7.9%
|
5.8%
|
About realtor.com®
Realtor.com®
is the trusted resource for home buyers, sellers and dreamers,
offering the most comprehensive source of for-sale properties,
among competing national sites, and the information, tools and
professional expertise to help people move confidently through
every step of their home journey. It pioneered the world of digital
real estate 20 years ago, and today helps make all things home
simple, efficient and enjoyable. Realtor.com® is
operated by News Corp [NASDAQ: NWS, NWSA] [ASX: NWS, NWSLV]
subsidiary Move, Inc. under a perpetual license from the National
Association of REALTORS®. For more information, visit
realtor.com®.
Media Contact:
Realtor.com®
Lexie Puckett Holbert –
lexie.puckett@move.com
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SOURCE realtor.com