With the housing market appearing to enter a period of slower growth, market observers have started to conclude that we’re slated for a longer-term recovery. There is still some regional unevenness, but for the most part analyst consensus seems to be pointing toward hope for sow but steady growth in the immediate. However; there are some differing opinions on the matter.
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Housing Recovery: Still Marred by Regional Differences
A recent Washington Post story paints a somewhat more complex picture of the housing market. Citing a newly published study from the Demand Institute, the report notes that regional differences in price stability and growth persist throughout the U.S. One of the most galling takeaways was the disproportionate value difference between major metro regions. Disclosing analysis from the Demand Institute report, the Washington Post pointed out that the top 10% of cities encompassed within the report held 52% of total housing wealth. In terms of financial specifics, the top 10% of city regions held $4.4 trillion in property wealth, while the bottom 40% held only $700 billion (or 8% of the total housing wealth overall).
Granted, some cities will inevitably contain inordinate amounts of valuable property. Economic powerhouses like Los Angeles, Chicago, San Francisco, and New York City would naturally hold a sizable portion of American urban property wealth. What was most surprising about the report was how comparatively lacking the remaining cities were.
As an adjunct to this, the Demand Institute report also analyzed the likelihood of future value gain and the potential increases. States with depressed housing prices were predicted to gain the most value through 2018, with New Mexico and Illinois among those singled out. As a comparison, regions with relatively stable housing prices leading into 2012 were predicted to have the lowest future prices gains. Both Washington DC and New York were ranked among the lowest states in terms of future value gains.
What’s the Takeaway?
Much of this makes straightforward economic sense. Metros whose property suffered the least during the recession had the least room to climb. Places whose property values crashed or gradually dwindled clearly had much more value to recover, and had a longer recovery timeframe as a result. Clearly some of these cities are looking toward well past 2014 until their homes regain their value (if they ever do so fully). Illinois and greater Chicago may well see a new emergence as popular home locations, whereas all signs point toward much of Detroit maintaining its stagnation.
Ultimately, property investors would do well to balance the current property values (or lack thereof) against other hard economic factors – job growth, real estate demand, as well as projections around population growth. As always, the health of local property markets is tied to job figures, and the same can be said for the U.S. housing sector as a whole.
What are your thoughts on the housing recovery? Let’s discuss…