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Foreclosed Homes Appreciating Faster than Typical U.S. Home

Homes that were foreclosed on during the housing crisis are rising over 10 percent annually, more than 3.5 percentage points faster than the typical U.S. home

Foreclosed Homes Appreciating Faster than Typical U.S. Home.

The value of homes that were foreclosed on during the Great Recession are appreciating rapidly, up 10.3 percent over the past year, according to a new Zillow® analysis, while the typical U.S. home is appreciating 6.5 percent annually.

Throughout the recovery, foreclosed homes have gained 74.5 percent in value, compared to about 46 percent for all homes. This means that homes that were foreclosed on during the housing crisis have made far greater gains in value than the typical U.S. home.

While the value of foreclosed homes is quickly appreciating – they finally passed their pre-recession peak 10 months earlier than all homes – the people who lost their homes to foreclosure during the housing bust have not benefited from these gains. And because nearly half of all homes foreclosed on during the bust were low-end homes, the housing bust widened the gap between the rich and poor in the U.S.

During the run-up to the housing bubble, many low-income earners were able to qualify for a mortgage and buy a home. Because of this, the homeownership rate rose from about 65 percent in the mid-1990s to almost 70 percent in 2006. When the housing market crashed in 2007, millions of American homeowners had to walk away from their homes, missing out on the opportunity to gain equity as home values recovered in the years to come.

“When the housing market tripped up a decade ago, homes that went into foreclosure fell hard – their value dropping substantially more than homes that didn’t experience a foreclosure. But markets will never overlook a deal, and for much of the economic recovery, homes with a history of foreclosure have been a deal. This remains so today, although somewhat less so than a year ago,” said Zillow senior economist Aaron Terrazas. “While the overall market is facing growing headwinds, homes that were foreclosed upon during the bust are picking up steam, speaking to the enduring appeal of affordability. For families who lost their homes during the housing bust and were locked out of the market for several years thereafter, this was a critical lost opportunity.”

Here are some key findings from the report, which can be found here on Zillow Research:

  • Many lower-income households were able to buy homes in the run-up to the housing bubble, causing the homeownership rate to rise from about 65 percent in the mid-1990s to almost 70 percent in 2006.
  • Of all foreclosed homes, about 45.4 percent were among the least expensive third of homes. Only 16.9 percent were among the most expensive third of homes. San Francisco, Bridgeport, Conn., and San Jose, Calif. had the greatest share of foreclosed homes among the bottom-tier.
  • Foreclosed homes gained value faster than other homes, and in many markets, are more valuable now than ever before. Since the recovery, foreclosed homes have gained 74.5 percent in value, while the typical U.S. home has gained just 46 percent.  Also, while appreciation has slowed over the past year for all homes, it has accelerated for foreclosed homes.
  • In many cases, investors bought foreclosed homes and converted them into rental properties, benefiting from the recovery as home values bounced back. The percentage of single-family homes being rented is up from 2005, but appears to have peaked at 28.4 percent in 2016. Since 2016 it has fallen to 28.1 percent.
Metropolitan
Area
Share of
Foreclosed
Homes in the
Bottom Third,
by Value
Median Home Value
Among Foreclosed
Homes
YoY Median
Home Value
Change
Among
Foreclosed
Homes
Median Home Value
Among All Homes
YoY Median
Home Value
Change
Among All
Homes
United States 45.4% $                      207,000 10.3% $                        216,700 6.5%
New York-Newark-Jersey City, NY 66.0% $                      281,800 11.1% $                        426,300 4.4%
Los Angeles-Long Beach-Anaheim, CA 58.0% $                      501,200 7.1% $                        641,800 5.2%
Chicago-Naperville-Elgin, IL 48.5% $                      175,600 6.2% $                        219,100 4.2%
Dallas-Fort Worth-Arlington, TX 41.2% $                      197,500 10.5% $                        229,400 9.7%
Philadelphia-Camden-Wilmington, PA 56.6% $                      153,100 8.8% $                        227,200 4.2%
Houston-The Woodlands-Sugar Land, TX 41.3% $                      170,800 8.6% $                        198,500 5.3%
Washington-Arlington-Alexandria, VA 54.2% $                      317,800 5.3% $                        397,800 3.2%
Miami-Fort Lauderdale-West Palm Beach, FL 47.8% $                      235,200 10.7% $                        274,000 7.0%
Atlanta-Sandy Springs-Roswell, GA 47.2% $                      168,700 12.2% $                        204,600 10.4%
Boston-Cambridge-Newton, MA 62.1% $                      336,500 7.9% $                        451,500 5.2%
San Francisco-Oakland-Hayward, CA 70.2% $                      582,800 8.8% $                        947,700 9.0%
Detroit-Warren-Dearborn, MI 44.4% $                      111,200 18.2% $                        153,900 7.4%
Riverside-San Bernardino-Ontario, CA 38.9% $                      331,100 7.8% $                        356,600 5.5%
Phoenix-Mesa-Scottsdale, AZ 45.3% $                      224,600 9.1% $                        254,400 6.3%
Seattle-Tacoma-Bellevue, WA 55.7% $                      369,400 8.1% $                        486,800 8.2%
Minneapolis-St. Paul-Bloomington, MN 49.9% $                      228,700 8.7% $                        258,900 5.4%
San Diego-Carlsbad, CA 52.9% $                      477,700 5.3% $                        580,500 4.9%
St. Louis, MO 51.5% $                      114,700 6.9% $                        161,200 4.6%
Tampa-St. Petersburg-Clearwater, FL 45.2% $                      181,400 10.7% $                        205,000 8.9%
Baltimore-Columbia-Towson, MD 49.4% $                      207,100 8.0% $                        263,300 3.9%
Denver-Aurora-Lakewood, CO 54.8% $                      337,500 9.3% $                        396,200 6.2%
Pittsburgh, PA 52.4% $                      101,000 11.5% $                        140,200 6.1%
Portland-Vancouver-Hillsboro, OR 47.8% $                      344,200 6.8% $                        387,900 4.2%
Charlotte-Concord-Gastonia, NC 37.4% $                      173,200 11.1% $                        195,000 8.8%
Sacramento–Roseville–Arden-Arcade, CA 50.8% $                      340,000 6.0% $                        397,100 4.3%
San Antonio-New Braunfels, TX 43.1% $                      163,900 8.1% $                        184,600 4.4%
Orlando-Kissimmee-Sanford, FL 42.7% $                      204,700 10.8% $                        226,300 7.9%
Cincinnati, OH 56.5% $                      123,000 9.1% $                        161,000 5.4%
Cleveland-Elyria, OH 58.9% $                        88,000 6.9% $                        140,400 5.2%
Kansas City, MO 50.0% $                      138,000 11.0% $                        181,300 7.5%
Las Vegas-Henderson-Paradise, NV 37.8% $                      252,700 15.9% $                        263,300 12.0%
Columbus, OH 50.6% $                      142,800 10.2% $                        180,700 6.5%
Indianapolis-Carmel-Anderson, IN 46.2% $                      130,100 12.3% $                        152,700 8.1%
San Jose-Sunnyvale-Santa Clara, CA 67.4% $                      837,100 17.5% $                     1,281,100 22.7%
Austin-Round Rock, TX 56.9% $                      235,200 7.9% $                        296,300 5.3%

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