Unfortunately, you won’t like my answer but don’t shoot the messenger. According to well-known financial publishing house HSH Associates, “It’s going to be a long time coming.”
Before we can make any assumptions, we have to look at how far we’ve really fallen. According to the S&P/Case-Shiller Home Price Index, the popular measurement that tracks changes in the value of residential real estate in 20 metropolitan regions, prices have fallen 32.6% peak to trough, between 2006 and the third quarter of 2009. Obviously some areas such as Florida, Arizona, Nevada, and California were hit harder, so it will take even longer to recoup the values once seen there.
But going forward, expect appreciation to be S-L-O-W but steady. Predictions for the first half of 2010 are flat, with a 2.5% increase from July 2010 to August 2011. From there, expect the normal 3% annual appreciation from there. And I can’t imagine we’ll see anything more than that for a while.
With this in mind, let’s look at what happens to the value of a $200,000 house purchased at the top of the market in July 2006. By the time the housing market hits bottom, according to Case-Shiller, that property was worth only $134,800, a decline of 32.6%. Using the above estimates for appreciation, the value of this house won’t get back to the $200,000 until (gasp) July 2022! That’s right, 12.5 years until it gets back to where it was.
Like the stock market at the turn of the century, the housing bubble has a lot of people underwater with yet another asset.
- Fannie Mae’s HomePath Program: 3% Down, No PMI, No Appraisal, and a 3.5% Incentive
- The Fed Raised Rates, What Does This Mean For Mortgage Rates?
- The Housing and Affordability Plan
- Understanding the Home Buyer Tax Credit
Gregg Harris has written 16 articles on LenderCity
