All Real Estate is Local: Analyzing the Post-Recession Housing Market at the State and Metro Level
Home price growth began falling just before the start of the Great Recession and continued declining rapidly throughout 2008 and 2009. Over the past decades, state and metro housing markets have experienced numerous highs and lows in terms of home price and overvalued markets. The latest CoreLogic special report looks back at some of the areas hardest hit by the housing bust and how they’ve fared throughout the current economic expansion.
Home Prices, Population Growth, and Unemployment in Select States
In 2009, home prices dropped by 11.2% nationally, with North and South Dakota being the only states to see an annual growth that year. Meanwhile, Nevada experienced the largest decline at 25.5% - followed by Arizona (-21.3%), Florida (-19.7%) and California (-14.5%).
While California’s home prices grew considerably from 2013 to 2018, affordability issues in the state have since hampered growth with the state’s average annual home price dropping from 7.4% in 2018 to 4.9% in 2019. However, other western states are seeing the opposite. Between July 2017 and July 2018, Idaho and Nevada not only became the fastest-growing states, but they also led the country in annual home price growth.
During this same time, New York, Connecticut, and Alaska were three of only nine states experiencing population decreases. Connecticut has been one of the slowest-appreciating states for the past five years with home price growth varying from 2.4% in 2014 to 0.9% in 2019. New York and Alaska have also experienced similar modest growth over the past few years.
In May 2019, when the U.S. unemployment was at 3.6%, both New York and Nevada’s unemployment were above the national average at 4%. Idaho had the fifth-lowest unemployment (2.8%), while Connecticut’s was just slightly higher than the national average (3.8%) and Alaska’s took the spot for the highest unemployment rate in the nation at 6.4%.
Affordability and Millennial Homebuyers
The CoreLogic Market Condition Indicators (MCI) categorizes home prices in individual markets as undervalued, at value or overvalued, by comparing home prices to their long-run, sustainable levels, which are supported by local market fundamentals (such as disposable income).
According to CoreLogic MCI, 32.4% of the 392 metro areas analyzed were overvalued in May 2019. This number more than doubled in September 2006, during the last expansion, to 70.2%. The largest increase in the share of overvalued metros occurred between 2012 and 2013 when the average annual share jumped from 9.9% to 15.8%.
Millennial homebuyers are moving away from overvalued markets and toward more affordable areas. Of the top 10 metros for millennial buyers in May 2019, four were undervalued (Pittsburgh; Rochester, New York; Wichita, Kansas, and Grand Rapids, Michigan), five were at value (Buffalo, New York; Milwaukee; Albany, New York; Provo, Utah and Des Moines, Iowa) and only one was overvalued (Salt Lake City).
What Can We Expect Next?
With current economic expansion being the longest in U.S. history, and with local housing markets stabilized from the aftershocks of the Great Recession, it’s only natural to wonder about what comes next. While some experts remain split on if there is another recession in the near future, most signs are positive.
“We expect the housing market to enter a normalcy phase over the next 24 months,” said Ralph McLaughlin, deputy chief economist for CoreLogic. “With prices neither rising too fast nor too slow, and with a growing stream of young households looking to buy homes over the next two decades, the long-term view looks healthy.”
Click here to read the full report, The Role of Housing in the Longest Economic Expansion (June 2009 – July 2019 and Counting).