Home values have faced a lot of turmoil since 2008’s housing market crash, but they’ve generally been on the increase since the end of the downturn. However, research from Zillow suggests that home value recovery has been disproportional in many areas of the U.S., and that it may be due in part to the forclosure rates experienced by individual housing markets.
Market Recovery Correlates to Foreclosure Rate
Through research into housing market trends, Zillow discovered a strong correlation between foreclosure rates and the recovery of home values in individual neighborhoods.
Housing markets with higher foreclosures rates resulting from the housing market bust consistently have lower recovery rates. Furthermore, many of the neighborhoods in the most severely affected metros have not yet recovered to their pre-recession values.
Although some neighborhoods go against the trend, in most metros around the United States it can be seen that:
- Higher foreclosure rates led to less home value recovery.
- Lower foreclosure rates led to higher home value recovery.
In some cases, neighborhoods with the lowest foreclosure rates even surpassed their pre-recession values during the recovery.
Housing Market Changes Nationwide
The median home value nationwide is 9.8% higher than it was at the height of the housing bubble, according to Zillow. However, this does not reflect the inequity in home value growth seen throughout the U.S.
- 21 out of 35 of the country’s largest metros have recovered their home values from before the recession, with 4 metros increasing in value by more than 50% of pre-2008 peaks.
Average home values are not showing the complete picture, because some housing markets are lagging behind while others are excelling.
On average, home values have recovered and sometimes increased in many markets, but this has more to do with home value growth in low foreclosure areas. There is a large gap in present-day median home values between markets that experienced high foreclosure home values during the housing crisis and markets that experienced low foreclosure home values.
According to Zillow, markets that experienced lower rates of foreclosure have seen more than 10% home value growth than markets with high rates of foreclosures. This is observed throughout the nation, not only in specific cities or states.
- In 13 of the 35 largest metros, home value increases from low foreclosure markets are more than 100% of those in high foreclosure markets, and in 3 metros the homes in low foreclosure markets are 4 times more valuable than those in high foreclosure markets.
Comparing Specific Housing Market Changes
Washington, D.C. has some striking differences in home value numbers. Overall, the housing market around D.C. has 7.9% lower value than its pre-recession peak. Within that, 31.3% of homes in low foreclosures areas have recovered their value compared with 5.2% of homes in high foreclosure areas.
Florida was more mixed than some other states.
- Tampa followed the national trend with a 27.5% recovery in low foreclosure areas versus 16.4% recovery in high foreclosure areas, despite a 6.8% lower overall value compared to pre-recession peaks.
- Orlando had a similar experience with 11.4% versus 4.8% respectively and a 12.9% reduction in median home value compared to pre-recession peaks.
- Miami, however, saw the reverse happen with only 9% recovery in low foreclosure areas and 11.8% in high foreclosure areas, with a median value reduction of 10.7%.
Pittsburgh and Philadelphia showed very different results for metros within the same state.
- Pittsburgh saw excellent home value recovery of 28.1% overall, with 80.4% in low foreclosure areas and 51.8% in high foreclosure areas.
- Philadelphia, however, experienced the opposite. In Philly, home values were 3.4% lower than pre-recession peaks with only 23.3% recovery in low foreclosure areas and 36.1% recovery in high foreclosure areas.
Dramatic Market Changes
Out of the 35 largest metros in the U.S., those on the west coast did better overall in terms of home value recovery.
San Jose median home values increased by 73.3% over pre-recession values, with 99.9% of low foreclosure areas recovering. San Francisco, Los Angeles, and San Diego all saw median home values increase over previous peaks.
Seattle and Portland did well over the national average also, with more than 90% recovery in both high and low foreclosure areas in Seattle, and similarly more than 70% in Portland. Houston and Austin experienced similarly higher recovery rates with homes in both types of areas recovering almost 90% of their pre-recession values.
Even though these metros represent the highest increases in home value recovery and growth, most of them still follow the national trend with lower recovery in high foreclosure areas.
Foreclosure rates have a strong correlation with home value recoveries across the United States. Since the housing market crash in 2008, home value recovery rates generally are dependent on the rate of foreclosures in the area, with higher foreclosure areas seeing less home value recovery and vice versa.
Experts, therefore, question whether the neighborhoods that have seen low home value recovery will be able to recover their pre-recession values before the next market swing.
Marimark Mortgage is based in Tampa, Florida and serves the mortgage needs of homebuyers, homeowners, and investors in Florida, Virginia, and Pennsylvania.
We specialize in conventional home mortgages, FHA, VA and USDA mortgage options, refinance loans, and reverse mortgages. We’ve worked extensively with cash-out refinancing, and help clients with HARP refinancing to lower their monthly mortgage payments.