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U.S. Economic Outlook: October 2017

Typical “Boom and Bust” Cycles in the Housing Industry

Molly Boesel    |    Videos


It has been more than 11 years since the start of the housing crisis in 2006, and U.S. home prices are nearly back to the peak level they hit in April 2006. Looking at the length of the decline, how far prices fell, CoreLogic has compared this cycle to some other historical declines.

After hitting peak in 2006, the national price level fell for five years, finally reaching bottom in March 2011 after falling 33 percent nationally. CoreLogic data reveals that as of July 2017, prices are nearly back to the 2006 level. (Figure 1: U.S. Line)

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When considering the U.S. housing crisis (from 2006 to 2017) home price declines compared to some other historical declines, this is what we learned. In the mid-1980’s, Texas experienced an oil bust (Figure 1: Texas line), and home prices in that state fell by 16 percent over a period of three and a half years. At that time, Texas home prices took nearly nine years to recover. In the early 1990s in California (Figure 1: California line), 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.

By comparison, the U.S. home price decreases that started in 2006 were twice as severe than these two regional declines.

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As of today, CoreLogic data indicates that the U.S. home price index is almost back to the peak level, but some other areas are far from it. Nevada had the largest drop in home prices of any state. After peaking in March 2006, (Figure 1: Nevada line) prices in Nevada fell 60 percent. After more than 11 years, home prices in Nevada through July 2017 were still 27 percent below the peak level.

Not all areas saw such deep declines in home prices, and some areas are far above where they were before the start of the housing crisis. For example, (Figure 2) Colorado hit a peak in the home price index in August 2007, fell by 14 percent over four years, but since then has surpassed the 2007 peak by 42 percent. While Colorado is an extreme case of rapidly rising home prices, 34 states, including the District Columbia, have surpassed their pre-crisis home price levels.

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Inflation has played a significant part in the U.S. home price recovery, (Figure 3) and inflation since the start of the peak in home prices through July 2017 adds up to just under 18 percent. Therefore, after adjusting for inflation, home prices are still 17 percent below the 2006 peak.

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