Half of housing markets in the US have now recovered from the downturn
Half of all homes in the US now have a higher value than they did before the recession as median prices have increased by 8.3% in the last 12 months to $217,300, the latest index shows.
In seven of the 35 largest housing markets more than 95% of homes are worth more than their peak value during the housing boom with homes overall 8.4% higher, according to the data from real estate firm Zillow.
In places that have seen some of the strongest growth since the market crashed, nearly every home is now more valuable than it was during the boom years. In Denver, the typical home is worth $397,700, some 65.6% percent higher than its highest point in June 2006. In that market, 99.6% of all homes are worth more than they were during the bubble.
However, while half of the country’s homes have regained all of their lost value, several markets are still trailing in the housing recovery. Despite strong median home value growth in recent months in Las Vegas where prices have grown at a double digit pace for 15 consecutive months, less than 1% of homes there have fully recovered from the housing bust.
‘Even a decade after the 2008 Financial Crisis, and five plus years into the recovery, it’s clear that the housing boom and bust was felt very differently in various markets and is still being felt today in many,’ said Zillow senior economist Aaron Terrazas.
‘In markets like Las Vegas that got farthest ahead of themselves during the boom, and consequently fell the most, a large majority of homes are still not worth as much today as they were a decade ago,’ he explained.
‘But in markets like Denver that were more stable a decade ago, many more homes are worth more now than ever before. Despite widespread and consistent home value growth today, the scars of the recession still run deep for millions of longer term home owners, and it may take years of growth for their home to regain the value lost a decade ago,’ he pointed out.
‘And while stabilizing growth in rents is likely a relief for those renters saving to become homeowners, many of those would-be buyers in a number of the nation’s hottest markets will be contending with home prices that are as high as they’ve ever been,’ he added.
A limited supply of homes for sale remains a challenge for home buyers, the report also points out. Inventory was down 4.8% from this time a year ago, although the pace of the decline has slowed considerably. In June 2017, inventory was falling at a 12.3% annual pace. Atlanta saw the biggest annual decline in inventory, falling 15.7 % from June 2017.
The index also shows that in the lettings market the overall median rent rose 1.3% in the last year to $1,440, led by growth in Riverside, California. However, rent appreciation has slowed nationwide for four straight months and has now been below the overall rate of inflation for two consecutive months.
Housing supply needs to broaden to meet Government targets, says new analysis
House building growth could stall in England and despite the efforts to increase construction when figures are released for the 2017/2018 period they are unlikely to be significantly higher than the previous year, a new analysis suggests.
This is despite planning permissions reaching record levels and in London where there is a severe shortage of affordable housing, the supply slowdown is more robust and affecting overall national output, according to a new briefing note from real estate firm Savills.
The Savills forecast model predicts that net additional dwellings for the year to March 2018 will be around 218,000 homes, compared to 217,000 for the 12 months prior.
It also reveals a clear regional divide in performance, with London set to fall by around 15%, the North likely to see annual growth of around 10%, and smaller increases in the South and Midlands.
The report points out that housing supply has increased from a trough of 125,000 in 2012/2013 to 217,000 in 2016/2017, growth of 74% in four years, according to the official net additional dwellings data, the Government’s favoured measure of supply.
But the early indication is that this rapid expansion won’t be sustained, at least in the short term. This is despite positive drivers such as major house builders’ growth ambitions, the emergence of large housing associations as bigger players in the development market, and a generally supportive Government policy environment.
It suggest that to increase supply builders need to expand the range of homes they are building to suit demand such as that from retirees, tenants in the expanding Build to Rent sector and more affordable homes.
Supply in the North West increased by 15% in 2017/2018 compared to the previous year while London saw the largest falls in output on this measure with a drop of15%. These changes broadly align with recent regional housing market performance as the Savills Repeat Sales Index reported the lowest annual price growth in London in its latest Housing Market Update in July with stronger growth seen in the Midlands and North West.
The analysis explains that the relationship between price growth and increasing delivery is important, suggesting that it will be difficult to expand overall housing supply without a pickup in market performance in the wider South East.
Indeed, recent changes in total transactions show a similar pattern along North/South lines. Sales numbers are relatively stable in the Midlands and North, but 25% lower in London and 10% lower in the South in the year to March, compared to the same period three years previously.
‘If an active market is a key requirement to absorb more new homes, the outlook for increased supply is poor. Our five year forecasts for house prices and transactions set out limited real terms value growth even for the regions we expect to outperform, and we anticipate transactions in 2022 to be broadly in line with 2017,’ the report says.
‘Changing non-residential space, mostly offices, into homes has been making a significant contribution to net supply since permitted development rights were expanded in 2012, but the stock of suitable properties for conversion is a finite resource. This source of new homes is likely to drop away in the near future, a further barrier to continuing to increase housing supply,’ it explains.
But it also points out that despite the subdued sales market potentially limiting absorption, especially in the least affordable areas, housing need remains very high in many locations. ‘Moving outside the traditional sales market is essential to get closer to delivering the target of 300,000 new homes per year. That means more affordable, Build to Rent and retirement housing on top of more homes where there is sufficient market demand,’ it concludes.