Recovery from the Housing Bust Can Vary Greatly Within Markets
Whether a homeowner has regained the value lost during the housing bust is largely driven by how many nearby homes went through foreclosure.
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In most large markets, areas with the fewest foreclosures during the housing bust have recovered significantly more than areas with the most foreclosures, meaning communities that experienced the sharpest downturns a decade ago could find themselves confronting the next one still not yet fully recovered.
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The gap between high-foreclosure and low-foreclosure areas is especially noticeable throughout California and much of the Midwest.
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The median home value nationwide is 9.8 percent higher than it was at the height of the housing bubble.
In the decade since the housing bust, median home values have more than recovered in most of the nation’s largest markets. But within nearly all those major markets there remains inequity — neighborhoods that were hit hardest by the crisis continue to bear an outsized burden even through the recovery.
A new Zillow® analysis shows that homes in ZIP codes that suffered the highest foreclosure rates during the bust are returning to their pre-recession peak value at a much lower rate than homes in nearby ZIP codes with fewer foreclosures. Across the nation’s largest 35 metros, 54.3 percent of homes in areas with the fewest foreclosures have fully recovered, compared with only 39.1 percent of homes in areas with the most foreclosures.
The trend is stark in places like Riverside, Calif., where recovery overall has been slow. Homes there in areas with the fewest foreclosures have regained their pre-recession peak value at a rate more than seven times higher than in nearby areas that saw more foreclosures.
In fact, all six major California metros are among those where recovery has been most divergent across neighborhoods, including in the booming markets of San Francisco, San Jose, Los Angeles and San Diego. That uneven recovery, especially in markets that have seen significant overall growth, has further exacerbated wealth inequality, even for those who were able to keep their homes. Nearly half of the homes foreclosed upon nationwide were in the bottom third in terms of value.
In 19 of the nation’s top 35 markets, areas that saw relatively few foreclosures during the housing bust have seen home value gains at least 10 percentage points greater than areas with a lot of foreclosures. In 13 metros the rate is at least double. In three — Riverside, Las Vegas and Washington, D.C. — it is at least quadruple. In Washington, D.C., for example only 5.2% of homes in high-foreclosure areas have recovered, while 31.3% of homes in low-foreclosure areas have recovered.
Five metros, including Chicago and Miami, have seen the opposite hold true, with high-foreclosure areas recovering at slightly higher rate.
“The past decade has vividly illustrated how more financially secure households are able to weather the economic and societal disruptions of recessions more easily than their less financially secure peers. We have long known that economic downturns leave scars. But these scars cut deeper and persist longer in the most exposed communities.”
-Aaron Terrazas, Zillow Senior Economist
“The Great Recession is far in the rear-view mirror, but economists are beginning to ask how long the current economic expansion can run on. Communities that experienced the sharpest downturns a decade ago could find themselves confronting the next economic downturn – when it does eventually arrive – having not yet fully recovered from the last one.”
During the housing bust, home values nationwide dropped 25.9 percent, and millions of people lost homes to foreclosure. Nearly a third of homeowners who didn’t were underwater on their mortgages.
Taken as a whole, 21 of the top 35 largest metros have recovered their pre-recession high median home values, including four that are more than 50 percent higher. Nationally, median home values are about 9.8 percent above what they were at the bubble’s peak and less than 10 percent of homeowners are underwater on their mortgages.
|
Metropolitan Area |
Share of Homes Recovered in ZIPs with Low Foreclosure Rates |
Share of Homes Recovered in ZIPs with High Foreclosure Rates |
Median Home Value |
Change from Pre-Recession Peak Value |
|
Atlanta, GA |
77.6% |
39.4% |
$209,700 |
13.6% |
|
Austin, TX |
99.0% |
95.5% |
$300,600 |
50.8% |
|
Baltimore, MD |
5.8% |
4.3% |
$265,600 |
-11.0% |
|
Boston, MA |
90.8% |
78.0% |
$458,000 |
19.7% |
|
Charlotte, NC |
78.7% |
84.6% |
$199,400 |
26.0% |
|
Chicago, IL |
11.4% |
14.4% |
$222,200 |
-12.6% |
|
Cincinnati, OH |
61.8% |
56.6% |
$164,500 |
12.5% |
|
Cleveland, OH |
50.4% |
12.8% |
$142,700 |
-0.8% |
|
Columbus, OH |
88.0% |
54.1% |
$184,200 |
22.6% |
|
Dallas, TX |
95.3% |
93.1% |
$233,200 |
53.0% |
|
Denver, CO |
99.2% |
97.8% |
$398,400 |
65.9% |
|
Detroit, MI |
48.8% |
20.9% |
$157,200 |
-0.9% |
|
Houston, TX |
93.7% |
89.6% |
$200,900 |
34.3% |
|
Indianapolis, IN |
84.4% |
40.3% |
$157,200 |
19.0% |
|
Kansas City, MO |
87.2% |
56.9% |
$185,500 |
19.3% |
|
Las Vegas, NV |
8.1% |
1.6% |
$273,800 |
-13.6% |
|
Los Angeles, CA |
82.7% |
38.0% |
$647,100 |
6.2% |
|
Miami, FL |
9.0% |
11.8% |
$278,400 |
-10.7% |
|
Minneapolis, MN |
63.8% |
50.9% |
$263,300 |
9.4% |
|
New York, NY |
34.9% |
32.5% |
$431,000 |
-4.8% |
|
Orlando, FL |
11.4% |
4.8% |
$231,000 |
-12.9% |
|
Philadelphia, PA |
23.3% |
36.1% |
$229,300 |
-3.4% |
|
Phoenix, AZ |
17.7% |
6.2% |
$258,300 |
-9.0% |
|
Pittsburgh, PA |
80.4% |
51.8% |
$142,300 |
28.1% |
|
Portland, OR |
74.6% |
87.5% |
$391,400 |
33.3% |
|
Riverside, CA |
14.1% |
1.9% |
$362,000 |
-11.7% |
|
Sacramento, CA |
24.4% |
7.3% |
$400,600 |
-5.3% |
|
San Antonio, TX |
95.8% |
92.3% |
$187,800 |
31.0% |
|
San Diego, CA |
88.0% |
28.2% |
$589,200 |
9.6% |
|
San Francisco, CA |
95.6% |
45.7% |
$961,200 |
36.4% |
|
San Jose, CA |
99.9% |
86.8% |
$1,288,700 |
73.3% |
|
Seattle, WA |
97.2% |
90.8% |
$486,600 |
27.6% |
|
St. Louis, MO |
50.5% |
14.1% |
$163,100 |
4.6% |
|
Tampa, FL |
27.5% |
16.4% |
$208,400 |
-6.8% |
|
Washington, D.C. |
31.3% |
5.2% |
$401,000 |
-7.9% |
Zillow
Zillow is the leading real estate and rental marketplace dedicated to empowering consumers with data, inspiration and knowledge around the place they call home, and connecting them with the best local professionals who can help. In addition, Zillow operates an industry-leading economics and analytics bureau led by Zillow’s Chief Economist Dr. Svenja Gudell. Dr. Gudell and her team of economists and data analysts produce extensive housing data and research covering more than 450 markets at Zillow Real Estate Research. Zillow also sponsors the quarterly Zillow Home Price Expectations Survey, which asks more than 100 leading economists, real estate experts and investment and market strategists to predict the path of the Zillow Home Value Index over the next five years. Launched in 2006, Zillow is owned and operated by Zillow Group, Inc. (NASDAQ:Z and ZG), and headquartered in Seattle.
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