November 18, 2017 | Jen Hellmich

10 Years After the Crash, the Boom Times Are Back in Real Estate—but Way Different

As anniversaries go, it's a nerve-racking but  inescapable one: It's been 10 long years since the widespread real estate crash that precipitated the Great Recession, and all the misery  that followed in its wake. So it seems like the perfect time to take a giant step back, peruse and analyze all of the data, and assess what has really happened to the American housing market in the decade since.
So where are we, really?
Ever-steeper home prices: check. Buyers clamoring to get into those precious homes:  check. Real estate newbies scooping up homes to renovate quickly and  sell for a profit (i.e., flip): check. On first or second  glance, things are looking awfully similar to the real estate boom that  preceded the epic bust. But wait: There's no need to start stuffing your  life savings under your mattress for safekeeping just yet. If you look beneaththe surface, there are key differences between then and now, a® analysis of housing and economic data shows.
“As we compare today’s market dynamics to those of a decade ago, it’s  important to remember rising prices didn’t cause the housing crash,”  said Danielle Hale, chief economist for®.  “It was rising prices stoked by subprime and low-documentation  mortgages, as well as people looking for short-term gains—versus today’s  truer market vitality—that created the environment for the crash.”
By  contrast, today’s housing market is characterized by a significant  mismatch between significant job and household growth (the factors  that spur people to buy homes) and much tighter lending standards and  historically low for-sale inventory (the factors that make it difficult  for people to buy new homes). The result: extremely high home prices and a lot of frustrated buyers. (Did you hear about the Northern California home that sold for $782,000 over asking?)
How high, you ask?
Well,  the U.S. median home sales price in 2016 was $236,000, 2% higher than  in 2006. In fact, 31 of the 50 largest U.S. metros are back to  pre-recession price levels. Austin, TX, has seen the largest price  growth in the past decade: 63%. It’s followed by Denver, at 54%, and  Dallas, at 52%. Nationwide, data show that listing prices  have been up by double digits for the majority of 2017.
                      Median home sales prices since 2006        
Median home sales prices since

Financial regulations reshaped the mortgage scene

The  biggest change on the housing scene over the past decade is that  lending standards are the tightest they've been in almost 20 years. The  Dodd-Frank Act, which was passed to tamp down the risky lending that led  to the bubble and its collapse, requires loan originators to show proof  that a borrower can repay the loan. As a result, the median 2017 home  loan FICO score was 734, significantly up from 700 in 2006. The low end  of the range has pulled up as well. The bottom 10% of borrowers have an  average FICO of 649 in 2017, up from 602 in 2006.
“Lending  standards are critical to the health of the market,” added Hale. “Unlike  today, the boom’s under-regulated lending environment allowed borrowing  beyond repayable amounts and atypical mortgage products, which pushed  up home prices without the backing of income and equity.”

Flipping is hot again, but now it's under control

For  just about as long as we've had a housing market in this country, folks  believed that prices would never go down and that a home was always a  good investment. This inspired a lot of flippers and developers to get  into the game (well, HGTV may have also played a part).
Unfortunately, the housing crash exposed this fallacy big-time.
In  2006, the share of flipped homes reached 8.6% of all sales, exceeding  20% in some metros such as Washington, DC, and Chicago. Some of those  flippers took out multiple loans to afford their properties. With  today’s tight lending environment limiting borrowing power, however,  flipping accounted for a more reasonable 5% of sales in 2016.
Similarly,  builders chasing profits as prices rose ended up building more than  what the market was demanding. In 2006, there were 1.4 single-family  housing starts for every household formed, well above the healthy level  of one per household.
But while stricter lending standards  have kept flipping and overbuilding in check, they are contributing to  severely constrained construction levels, which contribute to the  housing inventory shortage—and that's keeping prices elevated. Today’s  market is well below normal construction levels with only 0.7  single-family household starts per household formation.

What's driving today's housing market

In  October, unemployment hit a 17-year low, at a rate of 4.1%. In 30 of  the 50 largest U.S. metros, unemployment is less than half of 2010  levels. Employment is particularly robust among millennials, who are  just starting their careers: In September, employment reached 79% in the  25–34 age group, back up to 2006 levels and 5% higher than 2010.
But at the same time, there are 600,000 fewer total housing starts and nearly 700,000 fewer single-family housing starts.
                      Single-family home sales since 2006        
Single-family home sales since
"The healthy economy is creating more jobs and households,  but not giving these people enough places to live," Hale said. "Rapid  price increases will not last forever. We expect a gradual tapering as  buyers are priced out of the market—not a market correction, but an  easing of demand and price growth as renting or adding roommates becomes  a more affordable alternative.”
Millennials made up 52% of home  shoppers last spring, and with the largest cohort of millennials  expected to turn 30 in 2020, their demand for homes is only expected to  increase.

Metros where home prices have rebounded the most

In Austin, local real estate agent Jason Bernknopf has been in the business for about 15 years, currently  with In his view, Austin wasn't hurt much by  the housing market collapse because home prices were already low.  Plus, Austin has a diverse economy with plenty of stable jobs in  government (it is the state capital, after all) and tech companies such  as locally based Dell and Samsung, IBM, and Apple.
                      Price appreciation since 2006        
Price appreciation since
The city has developed a lot in the past 10 to 15 years,  Bernknopf says, as it drew people from far more expensive areas such as  California.
“We didn’t have a downtown living area in the early  2000s," he says. "Now there’s huge apartment high-rises as well as condo  high-rises, and more areas for people to shop and eat in the heart of  town.”
There's also a building boom in the suburbs, where young families are moving in search of more space and better schools.
Denver,  another recent tech hub that was relatively sleepy before the crash,  has seen a similar transformation since the recession, says Jeff Plous, an associate real estate broker at One Realty in Denver.
In 2008, prices slowed, but there were no crazy drops, he says.
“The  suburbs were hit really hard," Plous says. "But the city itself wasn’t  that bad. It took longer to sell, but people were still buying.”
And then things really turned around.
"Bidding  wars went from a sometimes to an always in 2013-14," Plous says. "You  got out of bed, and anything you put on the market was gone in 24 to 48  hours.”
In August, he sold a $400,000 home for $40,000 over asking. The four-bed home in a good neighborhood had netted 12 offers.
“I  don’t necessarily believe we’re in a bubble. We just have so many  people who want to move here. Our inventory is so far below where it  needs to be.”

A slower recovery for some

Time for a reality check: Not every market is booming 10 years after the big crash.
Three  major housing markets—Las Vegas; Tucson, AZ; and Riverside, CA—remained  more than 20% below 2006 price levels at the end of 2016, at 25%, 22%,  and 22%, respectively.
"The recession here in Las Vegas was deeper and longer than nationally," says Stephen Miller, director of the Center for Business and Economic Research at the University of Nevada, Las Vegas.
Miller  points out that after the crash, about 70% of Nevada's home mortgages  were underwater. "If you’re hit harder, it takes you longer to get back  up in the ring.”
The center's research shows that before the  recession, the Las Vegas population was growing about 4% annually. Now  it's growing at about 2% annually, a growth track that still portends  well for the future.
In Tucson, real estate broker John Mijac at Long Realty Co. saw a lot of excitement, speculation, and inflated prices in the market before the crash.
The area was hit particularly hard. Many Tucson-area investors lost homes to foreclosures and short sales.
“For  quite a while, that was the primary movement in our market," he says.  "Now that’s gone away.” He's starting to see more building come back,  along with more home flippers. Again.
Demand and prices are also  back for lower-priced homes, but homes above $200,000 haven't recovered  yet. Sellers don't want to lose money on the sale of these properties,  so they're holding on. "We’re getting close but we’re not quite there.”

Clare Trapasso contributed to this report. 
Cicely Wedgeworth is the  deputy managing editor of She has worked as a writer and  editor at Yahoo, the Los Angeles Times, and Newsday.



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