Homeownership is considered a crucial step to wealth accumulation. However, the Great Recession tested this long-held belief. From the start of the Great Recession in April 2006 to the first signs of economic revival in March 2011, the CoreLogic Home Price Index (HPITM) declined 33%. Thanks to stable job growth, mortgage funding and underwriting, the housing market has recovered from its historic crash. The latest CoreLogic special report, “The Role of Housing in the Longest Economic Expansion,” digs further into these factors and analyzes the housing market’s performance during the current economic expansion.
Increased Home Prices Pull Up Equity
The total number of U.S. residential properties in negative equity has dropped by more than 21 percentage points since the first quarter of 2010. The period between 2012 and 2013 was a turning point for the market when the percentage of homes in negative equity went from 22.4% to 15.5%. During this time, the average homeowner gained $35,100 in home equity – a welcome reprieve after seeing negative returns in 2011. By the first quarter of 2019, total home equity had reached a record $15.8 trillion, compared to just $6.1 trillion 10 years prior.
The Return of the Homeowner
The recession led to an influx in renters as homeowners grappled with home value loss. From the third quarter of 2009 to the fourth quarter of 2012, the homeowner population plummeted, while 12.9 million households joined the rental market. Fast forward to the end of the first quarter of 2019, and the tables have turned with 1.1 million new homeowners and only 458,000 new renters. However, the lack of inventory continues to drive up home prices throughout the country with increasing costs of labor and materials further compounding the issue.
Renewed Energy in Home Flipping
In the first quarter of 2006, flipped homes made up 11.3% of the market. However, by the end of the recession, the share of flipped homes dropped to just 4.9%. The flip rate has increased since this time and reached its highest point (11.4%) in the first quarter of 2018. In addition to a more encouraging market, changes in homes and buyers have made flipping more sustainable – professionals are flipping older homes with the median age of the homes being 39 years.
Is the Future Ripe for Continued Growth?
While the U.S. economy at large looks positive, experts are split on whether another recession is on the horizon. However, most signs point to continued good news for the housing market. The CoreLogic HPI Forecast predicts a moderate but healthy 5.6% acceleration in annual home price growth from June 2019 to June 2020.
For additional forecasts, analysis and predictions download The Role of Housing in the Longest Economic Expansion (June 2009 – July 2019 and Counting).