Tag Archives: Frank Nothaft

The Housing Market Since the Great Recession

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photo by Robert J Heath

CoreLogic has posted a special report on Evaluating the Housing Market Since the Great Recession. It opens,

From December 2007 to June 2009, the U.S. economy lost over 8.7 million jobs. In the months after the recession began, the unemployment rate peaked at 10 percent, reaching double digits for the first time since September 1982, and American households lost over $16 trillion in net worth.

After a number of economic stimulus measures, the economy began to grow in 2010. GDP grew 19 percent from 2010 to 2017; the economy added jobs for 88 consecutive months – the longest period on record – and as of December 2017, unemployment was down to 4 percent.

The economy has widely recovered and so, too, has the housing market. After falling 33 percent during the recession, housing prices have returned to peak levels, growing 51 percent since hitting the bottom of the market. The average house price is now 1 percent higher than it was at the peak in 2006, and the average annual equity gain was $14,888 in the third quarter of 2017.

However, in some states – including Illinois, Nevada, Arizona, and Florida – housing prices have failed to reach pre-recession levels, and today nearly 2.5 million residential properties with a mortgage are still in negative equity. (4, footnotes omitted)

By the end of 2017, ” the most populated metro areas in the U.S. remained at an almost even split between markets that are undervalued, overvalued and at value, indicating that while housing markets have recovered, many homes have surpassed the at-value [supported by local market fundamentals] price.” (10) This even split between undervalued and overvalued metro areas is hiding all sorts of ups and downs in what looks like a stable national average.  You can get a sense of this by comparing the current situation to what existing at the beginning of 2000, when 87% of metro areas were at-value.

And what does this all mean for housing finance reform? I think it means that we should not get complacent about the state of our housing markets just because the national average looks okay. Congress should continue working on a bipartisan fix for a broken system.

 

From Owners to Renters

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Frank Nothaft

Frank Nothaft

CoreLogic’s July issue of The MarketPulse has in interesting piece by Frank Nothaft, Rental Remains Robust (registration required). It opens,

A vibrant rental market has been an outgrowth of the Great Recession and housing market crash. Apartment vacancy rates are down to their lowest levels since the 1980s, rental apartment construction is the most robust in more than 25 years, rents are up, and apartment building values are at or above their prior peaks. But the rental market is more than just apartments in high-rise buildings.

Apartments in buildings with five or more residences account for 42 percent of the U.S. rental stock. Additionally, two-to-four-family housing units comprise an additional 18 percent of the rental stock, and one-family homes make up the remaining 40 percent.

The foreclosure crisis resulted in a large number of homes being acquired by investors and turned into rentals.  Between 2006 and 2013, three million single-family detached houses were added to the nation’s rental stock, an increase of 32 percent. The increase in the single-family rental stock has been geographically broad based, but has impacted some markets more than others.

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While the growth in the rental stock has been large, so has been the demand. Some of the households seeking rental houses were displaced through foreclosure. Others were millennials who had begun or were planning families, but were unable or unwilling to buy. (1-2, footnotes omitted)

Nothaft’s focus is on the investment outlook for rental housing, but I find that his summary has a lot to offer the housing policy world as well. He describes a large change in the balance between the rental and homeowner housing stock, one that has had an outsized effect on certain communities and certain generations.

Housing policy commentators generally feel that the federal government provides way too much support to homeowners (mostly through the tax code) and not enough to renters. Perhaps this demographic shift will spur politicians to rethink that balance. Renters should not be treated like second class citizens.