April 2017 Market Report: A Decade Later, Home Values Return to Bubble-Era Peak
- The national median home value was $198,000 in April, climbing 7.3 percent from a year ago and surpassing the pre-recession peak of $196,600 set in April 2007.
- Rents rose just 0.7 percent year-over-year in April to a Zillow Rent Index (ZRI) of $1,412, the slowest annual growth pace in any month since November 2012.
- There were 7.7 percent fewer homes on the market in April than a year earlier, with Minneapolis, Columbus, Ohio, and Seattle each posting inventory drops of more than 20 percent.
It only took a decade. The national median home value has finally passed its bubble-era peak, climbing 7.3 percent year-over-year in April to a Zillow Home Value Index of $198,000, eclipsing the $196,600 level first hit in April 2007.[1]
The biggest annual home value gains came in Seattle, Dallas, Tampa, Fla., Detroit and Orlando. In each of those markets, home values rose by 9.9 percent or more from April of last year. The smallest annual gains were in Houston, Washington, D.C., Baltimore and San Jose, Calif., all of which posted gains below 4 percent. None of the country’s top 35 metro areas saw a drop in home values.
Some people will ask whether passing the 2007 peak means the housing market is in another bubble. It’s not. In most markets during “normal times,” home values typically rise over time to some degree, and absent any large shocks, each month will represent a new peak. The fact that it took the ZHVI a decade to return to this point, let alone exceed it, is a testament to how far the market fell when it crashed. It’s also a reflection, of course, of how outlandishly high it had climbed.
Not All Markets Are Back
Not all homes have regained their lost values — and not all markets follow the national trend, which makes it important to look at individual markets. They tell different stories, including many that have not yet returned to their former peaks. Las Vegas remains the most behind. Now at $220,700, the median home value in Las Vegas is well above the national median of $198,000 — but still 27.6 percent below its May 2006 peak of $304,700. There’s no telling how long it will take to get back there.
Read more about Las Vegas and other individual markets.
Affordability and Inventory
The market is driven by economic fundamentals like supply and demand, and the dynamic between those variables is what’s driving prices now. What’s more important than ZHVI alone is how it relates to other variables — especially income. That dynamic tells us whether people are able to afford houses, and on the whole, they are: In the fourth quarter, homeowners spent 15.8 percent of their incomes on a mortgage, which is below the 21 percent that homeowners spent, on average, from 1985 to 2000.
In fact, rent affordability is worse, taking 29.2 percent of renters’ incomes, up from an average of 25.8 percent between 1985 and 2000. After years of growth, the Zillow Rent Index has finally flattened in the past couple months to just 0.7 percent growth — which could have implications for home buying. In April, the ZRI stood at $1,412.
Inventory, which drives home values and, indirectly, rents, continued to worsen in April: There were 7.7 percent fewer homes on the market in April than a year earlier, with Minneapolis, Columbus, Ohio, and Seattle each posting inventory drops of more than 20 percent. The markets with the greatest inventory growth were Las Vegas (24.9 percent) and Austin, Texas (20.5 percent).
Related:
- Home Values Are Back, Except Where They’re Not
- How the Bay Area Bounced Back From the Dot-Com Bust
- An Inventory Quandary: Three Theories for Why People Are Moving Less
[1] The index actually passed its decade-ago peak in March: Additional home sales data from March led to restatement of initially reported March ZHVI upwards by $600, or 0.3%, to $197,100.