Full Recovery of Home Values Maybe by 2017

Recent indicators clearly show home values in nearly half of the country’s largest metro areas will not reach their pre-recession peak levels again for another three years or more. The data I have been seeing using REIAComps during the first half of this year are proof the recovery is still very much in its middle stages.

Nationally, home values remain double digit percentages below their 2007 peak. Looking ahead, U.S. home values are expected to rise through the early part of 2015. Really though, It will take another 3+ years for national home values to recover their pre-recession levels, assuming a steady rate of appreciation. And this is not every where. Las Vegas will take another decade.

For those of you already connected to REIAComps, the control and feeling of confidence you have over your deals is priceless. These new statistic add power and knowledge to your tool belt. Using REIAComps to investigate the value of houses as they come to market, against other less reliable sources continues to be a no brainer.

In dozens of markets, homeowners that bought at the peak of the market in 2006 or 2007 will have to wait until nearly 2018 or later to get back to the breakeven point on their home, a lost decade in which they will have built up no home equity. This is reflected in stubbornly high negative equity and effective negative equity rates, with more than a third of Americans with a mortgage lacking enough equity to realistically list their home for sale and buy another. This came from Chief Economist Dr. Stan Humphries, someone in the valuation field I respect. But there is a silver lining as we navigate these tricky middle innings of the recovery. Because home values remain so far below their peak levels in so many areas, it is still possible for buyers to find bargains. This will be critical to maintaining home affordability over the coming years, especially as mortgage interest rates rise.

Today, U.S. home values have climbed 6.3 percent year-over-year in the second quarter of 2014 to $174,200, the slowest annual pace of appreciation recorded so far this year and a sign that the market is returning to more normal levels. In a more normal market, home values appreciate at roughly 3 percent per year. Home values nationwide were up 1 percent compared to the first quarter of 2014 and 0.5 percent from May.

Take these musings in realm of homes across the country seek to recover their value and turn some extra profit. Of course, use REIAComps to determine the best acquisition and ARV for every deal you look at. Don’t for one moment let someone tell you the value of a deal. Let REIAComps show you for yourself.