Most U.S. Homes Worth Less Than Before the Recession

Homes are worth more now than their pre-recession levels in some areas of the country, but that’s more the exception than the rule, according to a new study by real estate website Trulia. In fact, two out of three homes still haven’t risen to pre-recession levels.

Trulia’s research found that, on average, home prices are $78,000 below their pre-recession peak values, with some areas hit even harder. The study looked at the 100 largest U.S. metro markets and compared the prices of homes as of March 1, 2017 with those on December 1, 2007 – the onset of the Great Recession. The study found that only 34.2% of homes nationwide had recovered their value.

An Uneven Recovery

Trulia uncovered something even more disturbing: the uneven nature of the recovery. In Denver, San Francisco and Oklahoma City, 94% of homes had recovered their value, but in Las Vegas, Tucson and Fresno, California, only 3% had. What's more, sometimes the best and the worst communities are only a short drive away. Just a three-hour drive separates one of the best markets – San Francisco – from one of the worst – Fresno.

Other struggling markets include Camden, N.J.; Fort Lauderdale, Fla.; New Haven, Conn.; and Riverside-San Bernadino, Calif. In total, fewer than 10% of homes in 28 metros had recovered. In hard-hit Las Vegas, where fewer than 1% of home prices have rebounded, median sales prices have plummeted $91,000 from their peak.

On the positive end of the tally, Nashville, Fort Worth, Colorado Springs, Dallas and Honolulu are among the other winners.

What Explains the Different Rates?

Study authors found that income growth, population and vacancy rates directly correlated to recovery rates. When incomes in an area increased 1%, 3.5% more homes made a full recovery. When the area’s population grew 1%, 2.8% more homes reached recovery. By contrast, when the vacancy rate rose 1%, there was a 1.7% decrease in recovery.

If those statistics sound a little confusing, think of it this way: When people earn more money, they’re willing to spend more on a home and when more people move to an area, the demand for homes rise; as demand rises, so do prices. Better economic conditions in a metro area have driven prices higher. “On the other hand,” the study notes, “vacant homes act as excess supply, which tends to put downward pressure on prices.”

Best Areas to Buy

Investors looking to buy homes at a bargain should check out coastal states. All of Florida and California, except for a few localized areas, have seen unimpressive recovery. States along the east coast, including Maryland, Delaware, New Jersey, Massachusetts and New Hampshire, are experiencing the same struggles.

If you’re looking for states that are booming, your best bets may be Oklahoma, Colorado, Nebraska, Kentucky and Tennessee. Keep this in mind: Although most states have areas that have bounced back, not far away are markets that continue to suffer.

How Long Will a Full Recovery Take?

Since the low point in 2009, the housing market has seen a 5% to 6% recovery each year. At that rate, the country won’t see a 100% recovery until late 2025, according to the report. But as economic conditions improve more rapidly in some areas and top out in others, the map of winners and losers could continue to change before the country as a whole sees a full recovery.

The Bottom Line

For those sounding the alarm that a possible housing bubble may again be forming, experts say that these data don’t support that fear. In fact, the depressed home market might be its own worst enemy. As homeowners see that home prices in their area remain stubbornly low, they may put off listing their homes. If given a choice, why would they sell now, knowing that just a decade ago their home was worth significantly more? (See: 6 Tips on Selling Your Home in a Down Market and 7 Tips on Buying a Home in a Down Market.)