From bust to boom: US housing markets hit new peak since the 2007 bubble

US real estate markets recovers

While you’re too preoccupied with Sydney’s skyrocketing property prices, the US real estate markets are bouncing back in a big way.

The mother of all real estate market crashes has taken a decade to return to the boom levels achieved in 2007.

“The fact that it took the Zillow Home Value Index a decade to return to this point, let alone exceed it is a testament to how far the market fell when it crashed,” explains  Zillow chief economist Svenja Gudell.

“It’s also a reflection, of course, of how outlandishly high it had climbed.”

Without sounding overly pessimistic, that last sentence should be a warning to those who have overpaid for a property in Sydney and Melbourne.

US real estate markets hit a new peak

According to Zillow Home Value Index, America’s national median home value is now higher than the peak it achieved during the bubble-era of 2007.

Over the year to April, median home values surged by 7.3% to $198,000.

At the height of America’s housing boom in April 2007, median home values peaked at $197,000.

US real estate markets surge to a new high. Source: www.zillow.com

Prices rose rapidly between 2000 and 2007. However, prices started to plummet in April 2008 as the banking crisis escalated.

The real estate market eventually hit the bottom in October 2011 when median values plunged to $152,000.

Property prices didn’t start rising again until June 2012. From then on, prices grew steadily as the economy recovered.

From its 2012 lows to the current level, median house prices have jumped by 30%.

Booming US real markets spark bubble talk

As expected, the exceptionally strong property market performance has triggered speculation of another bubble forming.

However,  Zillow’s Gudell believes a property bubble is unlikely at this point.

“Now that the typical U.S. home is worth more than ever, people may be tempted to ask if we’re in another national housing bubble,” says Gudell. “We aren’t in a bubble, and won’t be entering one anytime soon.”

The main reason why in Gudell’s view is the fact that this time around, the market is driven by sound fundamentals.

“Unlike last time when the real estate market was fuelled by oversupply, speculations and loose credit. This time around, the healthy homebuyer demand is triggered by a stable economy and the fact that Americans continue to see value in owning a home.”

Gudell points out that housing supply has been slow to catch up to this strong demand, causing home values to grow at a faster rate than expected.

The Zillow data shows that the number of homes available for sale dropped 8% from a year ago.

On top of that, the US real estate market’s fundamentals look largely healthy too according to Gudell.

“Homes are largely more affordable in most markets today than they were prior to the bust, and will remain so for the foreseeable future, even if mortgage rates rise. Americans clearly continue to see the value in homeownership, especially young Americans, which bodes well for the future.”

How America’s major markets performed

Metropolitan Area Zillow Home

Value Indexvi

(ZHVI)

Year-over-

Year ZHVI

Change

Zillow Rent

Index (ZRI)

Year-over-

Year ZRI

Change

Year-

over-Year

Inventory

Change

Peak ZHVI Percent

Fall from

Peak ZHVI

United States $          198,000 7.3% $         1,412 0.7% -7.7% $ 198,000 0.0%
New York/ Northern New Jersey $          414,800 8.0% $         2,380 -1.7% -15.7% $ 445,200 -6.8%
Los Angeles-Long Beach-Anaheim, CA $          604,400 6.0% $         2,655 4.2% -11.3% $ 604,400 0.0%
Chicago, IL $          209,200 6.3% $         1,622 -1.7% -10.6% $ 247,000 -15.3%
Dallas-Fort Worth, TX $          207,300 11.1% $         1,574 3.0% 4.7% $ 207,300 0.0%
Philadelphia, PA $          217,300 4.7% $         1,564 -0.4% -13.5% $ 230,600 -5.8%
Houston, TX $          174,100 2.4% $         1,543 -2.6% 6.2% $ 175,800 -1.0%
Washington, DC $          383,300 3.6% $         2,117 -0.2% -17.0% $ 427,600 -10.4%
Miami-Fort Lauderdale, FL $          250,700 8.4% $         1,847 -1.4% 4.5% $ 305,200 -17.9%
Atlanta, GA $          177,100 7.3% $         1,340 3.0% -3.7% $ 177,100 0.0%
Boston, MA $          422,300 7.2% $         2,357 3.7% -18.9% $ 422,300 0.0%
San Francisco, CA $          848,400 5.0% $         3,354 -0.2% -11.1% $ 848,400 0.0%
Detroit, MI $          139,900 10.4% $         1,172 -0.1% -17.7% $ 157,100 -10.9%
Riverside, CA $          324,600 6.6% $         1,768 2.7% -16.7% $ 403,900 -19.6%
Phoenix, AZ $          233,200 6.1% $         1,311 1.9% -0.1% $ 273,500 -14.7%
Seattle, WA $          432,400 11.8% $         2,114 6.1% -20.4% $ 432,400 0.0%
Minneapolis-St Paul, MN $          244,800 8.5% $         1,577 3.2% -27.3% $ 244,800 0.0%
San Diego, CA $          537,200 5.7% $         2,457 2.8% -18.0% $ 543,600 -1.2%
St. Louis, MO $          149,100 5.5% $         1,140 0.1% -13.0% $ 158,900 -6.2%
Tampa, FL $          183,900 10.9% $         1,353 2.5% -13.0% $ 214,300 -14.2%
Baltimore, MD $          259,800 3.7% $         1,717 -0.9% -18.0% $ 289,100 -10.1%
Denver, CO $          366,000 9.4% $         1,998 0.4% -4.4% $ 366,000 0.0%
Pittsburgh, PA $          136,300 4.8% $         1,065 -5.2% -8.2% $ 136,300 0.0%
Portland, OR $          361,300 6.4% $         1,808 3.8% 4.7% $ 361,300 0.0%
Charlotte, NC $          172,000 7.7% $         1,254 0.9% -13.6% $ 172,000 0.0%
Sacramento, CA $          363,700 8.4% $         1,727 4.6% -18.4% $ 420,800 -13.6%
San Antonio, TX $          158,800 5.2% $         1,327 1.1% 5.6% $ 158,800 0.0%
Orlando, FL $          204,400 10.0% $         1,402 3.1% -13.3% $ 256,300 -20.2%
Cincinnati, OH $          151,500 6.5% $         1,254 1.4%

Source: Zillow.com

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