Fresh data from real-estate website Trulia show that just 34.2 percent of homes have returned to the peak levels registered before the onset of the recession in 2008, reports Marketwatch’s Andrea Requier. What’s more, Trulia estimates it could take until 2025 for a true national recovery in home prices.
That’s almost twice the length of the S&L housing crash that lasted from 1986 to approximately 2006. Why the difference? Because the Great Recession was much worse, with many more homes lost, and incomes for most Americans still below that time. The Great Recession exacerbated already record income inequality, in other words.
Sam Khater, deputy chief economist for CoreLogic, agrees, says Requier. “What’s unusual about this recovery is that it’s been lopsided. Wealth — home equity and financial equity — have recovered. Incomes have not. One-half of all households have participated in the massive run-up of stocks, two-thirds have participated in the gains from home ownership. The flip side is the inverse, the people who have not participated. How has their recovery been?”
Not very good, as mortgage debt has barely dropped from recession highs. As Regions chief economist Richard Moody pointed out in a research note, 30 percent of all owner-occupied households have no mortgage debt at all, meaning that the 50 million households that do have mortgages have less than the 57 percent equity that’s presented in the flow of funds data from the Federal Reserve in December.
“We are absolutely not out of the woods as far as home-value recovery is concerned,” Trulia’s chief economist, Ralph McLaughlin told MarketWatch. “The housing-market crash was pretty monumental. The scarring of the housing market has not gone away and will be visible for the indefinite future.”
That means some two-thirds of homes are still below housing bubble prices that prevailed in 2006-07. Three cities in California, Las Vegas and Tucson, Arizona have suffered the most, but two cities in Florida—Daytona Beach and Ft. Lauderdale—aren’t far behind.
More enlightened economic policies would help—such as universal health care, a major cause of poverty; more spending in education and the research and development of new products, which would increase labor productivity, one of the 2 major ingredients for higher growth. The other ingredient is a growing workforce, and if Republicans succeed in reducing immigration, which supplies most of new workers, it will also dampen growth.
The homeownership rate slid 0.6 percentage point to 62.9 percent in the second quarter, the Census Department said Thursday. Will the homeownership rate continue to decline? Good question. There are many reasons for lower levels of homeownership, as we know, including delayed marriages, higher student loan debt, flat incomes since the recession, for starters.
So unless more is done to boost incomes (e.g, higher minimum wages), to introduce tuition-free public colleges (only in New York at the moment), more progressive taxation, and other stimulus measures, homeownership will not be able to significantly contribute to future economic growth.
And a whole generation may be left out of the housing market.
Harlan Green © 2017
Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen