Home Prices Boom 10 Years After Housing Crisis

New report reveals surprising data as prices return to bubble levels

Santa Clara, CA – November 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.

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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)

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Largest 50 Markets Price Appreciation Since 2006

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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®.

(1) Single-family home price sales – NAR/Moody’s Analytics Estimates
(2) Urban Institute
(3) Corelogic
(4) U.S. Census Bureau – Moody’s Analytics Estimates
(5) Bureau of Labor Statistics
(6) National Association of Realtors
(7) Census, Housing Vacancy Survey

Media Contact:
Realtor.com®
Lexie Puckett Holbert
lexie.puckett@move.com

CoreLogic Reports Nearly 9 Million Borrowers Have Regained Equity Since the Height of the Crisis in 2011

  • Nearly 91,000 Homeowners Regained Equity in Q1 2017
  • 3.1 Million Residential Properties with a Mortgage Still in Negative Equity
  • Average Homeowner Equity Increased from Q1 2016 to Q1 2017

Irvine, CA – June 8th, 2017 (BUSINESS WIRE) CoreLogic® (NYSE: CLGX), a leading global property information, analytics and data-enabled solutions provider, today released its Q1 2017 home equity analysis which shows U.S. homeowners with mortgages (roughly 63 percent of all homeowners) have seen their equity increase by a total of $766.4 billion since Q1 2016, an increase of 11.2 percent. Additionally, the average homeowner gained about $13,400 in equity between Q1 2016 and Q1 2017.

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In Q1 2017, the total number of mortgaged residential properties with negative equity decreased 3 percent from Q4 2016* to 3.1 million homes, or 6.1 percent of all mortgaged properties. Compared to Q1 2016, negative equity decreased 24 percent from 4.1 million homes, or 8.1 percent of all mortgaged properties.

“One million borrowers achieved positive equity over the last year, which means mortgage risk continues to steadily decline as a result of increasing home prices,” said Dr. Frank Nothaft, chief economist for CoreLogic. “Pockets of concern remain with markets such as Miami, Las Vegas and Chicago, which are the top three for negative equity among large metros, with each recording a negative equity share at least twice or more the national average.”

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Negative equity, often referred to as being “underwater” or “upside down,” applies to borrowers who owe more on their mortgages than their homes are worth. Negative equity can occur because of a decline in home value, an increase in mortgage debt or both.

Negative equity peaked at 26 percent of mortgaged residential properties in Q4 2009 based on CoreLogic equity data analysis, which began in Q3 2009.

The national aggregate value of negative equity was approximately $283 billion at the end of Q1 2017, down quarter over quarter by approximately $2.6 billion, or 0.9 percent, from $285.5 billion in Q4 2016 and down year over year by approximately $21.5 billion, or 7.1 percent, from $304.5 billion in Q1 2016.

“Homeowner equity increased by over $750 billion during the last year, the largest increase since mid-2014,” said Frank Martell, president and CEO of CoreLogic. “The rising cushion of home equity is one of the main drivers of improved mortgage performance. It also supports consumer balance sheets, spending and the broader economy.”

Highlights as of Q1 2017:

  • Texas had the highest percentage of homes with positive equity at 98.4 percent, followed by Utah (98.2 percent), Washington (98.2 percent), Hawaii (98.1 percent) and Colorado (98 percent).
  • On average, homeowner equity increased about $13,400 from Q1 2016 to Q1 2017 (for mortgaged properties). Washington had the highest year-over-year average increase at $37,900, while Alaska experienced a small decline.
  • Nevada had the highest percentage of homes with negative equity at 12.4 percent, followed by Florida (11.1 percent), Illinois (10.5 percent), New Jersey (10.2 percent) and Connecticut (9.9 percent). These top five states combined account for 32.6 percent of outstanding mortgages in the U.S.
  • Of the 10 largest metropolitan areas by population, San Francisco-Redwood City-South San Francisco, CA had the highest percentage of mortgaged properties in a positive equity position at 99.4 percent, followed by Denver-Aurora-Lakewood, CO (98.6 percent), Houston-The Woodlands-Sugar Land, TX (98.5 percent), Los Angeles-Long Beach-Glendale, CA (97.3 percent) and Boston, MA (95.6 percent).
  • Of the same 10 largest metropolitan areas, Miami-Miami Beach-Kendall, FL had the highest percentage of mortgaged properties in negative equity at 15.7 percent, followed by Las Vegas-Henderson-Paradise, NV (14.2 percent), Chicago-Naperville-Arlington Heights, IL (12 percent), Washington-Arlington-Alexandria, DC-VA-MD-WV (8 percent) and New York-Jersey City-White Plains, NY-NJ (5.3 percent).

* Q4 2016 data was revised. Revisions with public records data are standard, and to ensure accuracy, CoreLogic incorporates the newly released public data to provide updated results.

For ongoing housing trends and data, visit the CoreLogic Insights Blog: www.corelogic.com/blog.

Methodology

The amount of equity for each property is determined by comparing the estimated current value of the property against the mortgage debt outstanding (MDO). If the MDO is greater than the estimated value, then the property is determined to be in a negative equity position. If the estimated value is greater than the MDO, then the property is determined to be in a positive equity position. The data is first generated at the property level and aggregated to higher levels of geography. CoreLogic data includes more than 50 million properties with a mortgage, which accounts for more than 95 percent of all mortgages in the U.S. CoreLogic uses public record data as the source of the MDO, which includes both first-mortgage liens and second liens, and is adjusted for amortization and home equity utilization in order to capture the true level of MDO for each property. The calculations are not based on sampling, but rather on the full data set to avoid potential adverse selection due to sampling. The current value of the property is estimated using a suite of proprietary CoreLogic valuation techniques, including valuation models and the CoreLogic Home Price Index (HPI). In August 2016, the CoreLogic HPI was enhanced to include nearly one million additional repeat sales records from proprietary data sources that provide greater coverage in home price changes nationwide. The increased coverage is particularly useful in 14 non-disclosure states. Additionally, a new modeling methodology has been added to the HPI to weight outlier pairs, ensuring increased consistency and reducing month-over-month revisions. The use of the enhanced CoreLogic HPI was implemented with the Q2 2016 Equity report. Only data for mortgaged residential properties that have a current estimated value are included. There are several states or jurisdictions where the public record, current value or mortgage data coverage is thin and have been excluded from the analysis. These instances account for fewer than 5 percent of the total U.S. population.

Source: CoreLogic

The data provided is for use only by the primary recipient or the primary recipient’s publication or broadcast. This data may not be re-sold, republished or licensed to any other source, including publications and sources owned by the primary recipient’s parent company without prior written permission from CoreLogic. Any CoreLogic data used for publication or broadcast, in whole or in part, must be sourced as coming from CoreLogic, a data and analytics company. For use with broadcast or web content, the citation must directly accompany first reference of the data. If the data is illustrated with maps, charts, graphs or other visual elements, the CoreLogic logo must be included on screen or web site. For questions, analysis or interpretation of the data contact Lori Guyton at lguyton@cvic.com or Bill Campbell at bill@campbelllewis.com. Data provided may not be modified without the prior written permission of CoreLogic. Do not use the data in any unlawful manner. This data is compiled from public records, contributory databases and proprietary analytics, and its accuracy depends upon these sources.

About CoreLogic

CoreLogic (NYSE: CLGX) is a leading global property information, analytics and data-enabled solutions provider. The company’s combined data from public, contributory and proprietary sources includes over 4.5 billion records spanning more than 50 years, providing detailed coverage of property, mortgages and other encumbrances, consumer credit, tenancy, location, hazard risk and related performance information. The markets CoreLogic serves include real estate and mortgage finance, insurance, capital markets, and the public sector. CoreLogic delivers value to clients through unique data, analytics, workflow technology, advisory and managed services. Clients rely on CoreLogic to help identify and manage growth opportunities, improve performance and mitigate risk. Headquartered in Irvine, Calif., CoreLogic operates in North America, Western Europe and Asia Pacific. For more information, please visit www.corelogic.com.

CORELOGIC and the CoreLogic logo are trademarks of CoreLogic, Inc. and/or its subsidiaries.

Louisiana, Maine, Mississippi, South Dakota, Vermont, West Virginia and Wyoming have insufficient equity data to report at this time.

* This data only includes properties with a mortgage. Non-mortgaged properties are, by definition, not included.

Source: CoreLogic Q1 2017

Contacts

CoreLogic

For real estate industry and trade media:
Bill Campbell
212-995-8057
bill@campbelllewis.com

or

For general news media:

Lori Guyton
901-277-6066
lguyton@cvic.com