During the housing boom, investment in mortgage-backed securities led to high demand for sub-prime mortgage assets across the country, and many markets became overheated. When interest rates rose, monthly payments increased on adjustable rate mortgages, leaving many borrowers unable to pay their mortgages. The latest Special Report from Corelogic, “Evaluating the Housing Market Since the Great Recession,” analyzes the price fluctuations in the housing market across the country over the past 12 years.
The housing market peaked in April 2006. At this time, 65 percent of the most populated metro areas in the U.S. were listed as overvalued (Figure 1), and only five metro areas – Bay City, Michigan; Cape Girardeau, Missouri; Kalamazoo-Portage Michigan; Miles-Benton Harbor, Michigan; and Sioux City, Iowa (or 1 percent of the most populated metro areas) – were considered undervalued. This peak marked rapid growth in the housing sector, beginning in 2000 when the majority of housing prices (87 percent in January 2000) were considered at value – or at their long-run, sustainable levels, supported by local market fundamentals such as disposable income.
The market bottomed out in March 2011 when only 27 markets – or 7 percent of the most populated metro areas – were listed as overvalued. The drop in home prices, which boosted affordability, coincided with other economic factors to trigger the beginning of the housing recovery. In March 2011, the unemployment rate fell to 8.8 percent, down from a high of 10 percent in October of 2009. Meanwhile, real GDP – which had dropped by 1.5 percent during the first quarter of 2011 – grew the following quarter by 2.9 percent. Apart from a slight dip in the first quarter of 2014 (-0.9 percent), GDP continued to grow from 2011 through 2017.
As of December 2017, the most populated metro areas in the U.S. remained at an almost even split between markets that are undervalued, overvalued and at value, indicating that while housing markets have recovered, many homes have surpassed the at-value price.
The report examines how the nation and specific markets were impacted by the crisis and where they stand now. For more information about how each state has recovered, which metros are prospering and which are taking longer to bounce back, download: Evaluating the Housing Market Since the Great Recession.
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