With home prices nearly back to where they were when
the housing crisis began, CoreLogic’s principal economist Molly Boesel compares
the duration of the recent cycle to those of other downturns. While there hasn’t been a comparable period
of performance nationwide, she looks at several regional ones.
After hitting peak in 2006, the national price level fell for five years,
finally reaching bottom in March 2011. Most
other sources set the date for the bottom of the market to exactly a year later
which may indicate they are using inflation adjusted numbers. From peak to trough, prices fell 33 percent
nationally. As of July 2017, CoreLogic data shows prices were approximating the
Boesel compares these numbers to those of the Texas oil bust in the mid-1980’s
which resulted in a 16 percent decline over 3.5 years. The peak to recovery cycle
in that downturn took nearly nine years.
In the early 1990s in California, defense and manufacturing job losses
led to home price declines in that state. After falling by 15 percent over five
and a half years, home prices in California fully recovered after eight years. The U.S. home price decreases that started in
2006 were twice as severe as these two regional declines.
While national home price numbers are nearly back to their peak, the
recovery is far from even. Nevada, where prices dropped the farthest of any
state, 60 percent, the 11-year period that has elapsed has left the state 27
percent short of its March 2006 peak. In Colorado, on the other hand, prices
fell 14 percent from an August 2007 peak but have now surpassed that peak by 42
percent. Boesel calls Colorado “an
extreme case” of rapidly rising prices, but says 34 states are now above their
pre-crisis home price levels.
Boesel says inflation should also be factored into the pace of
recovery. From the peak in housing
prices through this past July, the inflation has totaled just under 18 percent.
When home prices are adjusted for that, the trough was deeper, down 40 percent
from the beginning of the cycle, and the recovery shallower; prices remain 17
percent off the peak.