Most U.S. Homes Are Worth Less Than Before the Crash

(Bloomberg) -- You can't blame a homeowner in Fresno, California, for viewing the thriving metropolis to its northwest with both envy and dismay. While San Francisco home values have surged since the recession, Fresno's housing market is stuck in a rut. Less than 3 percent of homes in the city and its environs have returned to their pre-recession peak, according to a new study from Trulia. Median home values are a teeth-clenching $78,000 below their pre-recession peak.

The difference between the two California markets helps explain a key dynamic of U.S. housing a decade after the foreclosure crisis. Popular measures of the landscape, like S&P CoreLogic Case-Shiller Index and the FHFA House Price Index, show the market has recovered to levels last seen before the housing market went bust. But according to Trulia, this isn't the whole, significantly bleaker picture.

Nationally, just 1 in 3 homes are worth more now than they were at their peak. While tech hubs in the Bay Area and Denver and job centers like Dallas or Nashville have seen home values explode past earlier highs, there are more losers than winners when you look across the country, Trulia's analysis shows. And it's really bad news if you live in Las Vegas, Tucson—or Fresno.

Many of the losers aren't just losing—they're getting trounced. There were 28 metros where fewer than 10 percent of homes have recovered their value since the bubble burst. Las Vegas has seen less than 1 percent of its homes returning to or surpassing what they were worth before the recession. The median sales price there is down a full $91,000 from its peak.

“It's a reflection of just how well a metro area has recovered, broadly speaking,” said Ralph McLaughlin, chief economist at Trulia, adding that his findings largely correlate with other measures of metro-level growth, such as gains in income and total population.  

As a result, it's tempting to view these results through the prism of the 2016 election. Many of the metropolitan areas where home values lag the most are Rust Belt towns with little prospect for an immediate comeback, or Sunbelt cities whose peak home values were a product of the bubble that preceded the collapse.

McLaughlin says a zip code-level analysis offers a more nuanced view of the haves and have-nots. In much of the middle of the country, cities have stagnated while less populated regions lead the recovery. While it's true coastal markets have experienced the lion's share of appreciation, the majority of homes in pricey markets like New York, Los Angeles, Silver Spring, Maryland, and Fairfield County, Connecticut, are still worth less than a decade ago. 

To be sure, Trulia's research is based on its own estimates of home values, while the big indices are based on actual sales. Other research suggests a hot economy gives rural workers more choice, causing an outflow of potential employees to better jobs, often in the cities or on the coasts, potentially speeding a decline in home value elsewhere. 

McLaughlin offers two more takeaways from his research. The high percentage of homes that have yet to recover their peak values shows that any talk of a housing bubble is premature. Also, the slow recovery may play a key role in a theme bedeviling local housing markets: There were fewer homes for sale in March than at any point since 2012, according to McLaughlin. The lack of full recovery may be causing some homeowners to delay listing their homes.

“If people are aware of what their house was worth 10 or 12 years ago, and the house is worth less now, they may be holding back,” he said. “They may be waiting, like you might with a stock, for it to get to a certain price—and then they will unload.”

To contact the author of this story: Patrick Clark in New York at pclark55@bloomberg.net.

To contact the editor responsible for this story: David Rovella at drovella@bloomberg.net.