Home Prices Are Returning to Peak Levels--What Does that Mean for You?

This summer several national housing market reports have announced that home prices have reached—or will soon reach—the peak prices they achieved at the height of the housing boom in 2007. From now on, every year-over-year price increase will be a new all-time high. What does that mean for homeowners? In other words, it has taken eight years for prices to return to the levels at which millions of American families bought their homes. At that time, those prices were the result of price “bubbles,” where a local market that was so hot that price increases far outpaced the increases in consumer income. The housing crash was the inevitable result. Hopefully, today’s price levels, achieved after major reforms designed to reduce risk for buyers and lenders, will be more sustainable. While the “national” achievement is an important milepost for the housing recovery, what it really to means to consumers varies depending on where you live and whether you are an owner or a buyer. Like all things in real estate, there is no such thing as a national “peak” price since there is no national housing market.  What’s important to homeowners are the price levels reached in individual markets across the nation. Which markets are doing the best? Homes.com has been tracking the price rebounds in several hundred local markets. Unsurprisingly, their findings at the local level differ significantly from the national averages. Among the nation’s top 300 markets, Homes.com reports that 142 markets (47%—not even half) had achieved full pricing recovery through June. The markets that have made the least progress are also those that soared the highest during the boom, crashed the hardest, and produced waves of foreclosures. The bottom five markets on the Homes.com list—all with median prices lower than 75% of their peaks—are:

• Las Vegas-Henderson-Paradise, NV
• Stockton-Lodi, CA
• Cape Coral-Fort Myers, FL
• Palm Bay-Melbourne-Titusville, FL
• Deltona-Daytona Beach-Ormond Beach, FL

For first-time buyers and investors looking for bargains, these are good places to start. For current homeowners in need of equity, they are not such good places. Markets at the top of the Homes.com list are generally places that missed the worst of the boom and the bust. Among the five topping the list, all lost less than 10% of value, making the return to recovery a lot easier. The Homes.com top five are:

• Dallas-Fort Worth-Arlington, TX
• Denver-Aurora-Lakewood, CO
• Austin-Round Rock, TX
• Houston-The Woodlands-Sugar Land, TX
• San Antonio-New Braunfels, TX

Obviously, these are going to some of the hardest markets in the nation to find affordable housing. Most of these markets reached their peak median months ago and prices have been reaching new all-time heights every month. To find your market, go to http://www.homes.com/Home-Prices/ The bottom line? The housing recovery, including returning to peak prices, is not a place as much as it is a process. Recovery is occurring market by market and literally house by house; individual properties change value at rates different than their neighbors. Though price rebounds are difficult to track at a very local level, they are still quite real and their will continue to document the return of health of our real estate economy.