The U.S. housing market in September rose to 43% of it’s pre-recession peak, according to online real estate marketplace Trulia. While foreclosure rates rose and sales of existing homes fell slightly, both of which reflect poorly on the health of the market, construction starts of new homes rose by 15% compared to August.
In several of the country’s largest housing markets, median home prices were up by more than 10% compared to last year, far more than 2.5% for the nation. Some of these housing markets appear to be doing well, as high home home prices move even higher. In others, the increase may just only be a short-term bounce after homes lost more than 50% of their value during the recession. Based on Trulia’s price monitor for September, 24/7 Wall St. identified the 10 housing markets where asking prices have increased the most compared to a year ago.
In an interview, Trulia’s chief economist Jed Kolko explained that many of these markets are “seeing big price rebounds, but there’s still very little new construction,” noting that construction was well below normal levels in some markets. Indeed, in the 10 cities in which home prices have increased the most, construction levels in six were at less than half the pace they were prior to the recession. In Detroit, construction was at just 24% of normal pace, and In Cape Coral-Ft. Myers, it was just 23%.
Foreclosure rates, which remain extremely high in many of these regions, also reflect the health of real estate in these metro areas. In three of the cities with the largest home price gains, more than 30 homes per 1,000 were in foreclosure. Considering that in most large housing markets the foreclosure rate was less than half this, these foreclosure rates indicate that despite the large home price increases, these markets are still struggling.
In these 10 markets, Kolko explained, prices are rising because buyers are bargain-hunting for cheap property, instead of as a result of new construction and people moving to the area. In seven of the 10 metro areas, home prices fell by at least 40% and by as much as 66% during the recession, and are still well below their pre-recession value. The home price increases in these markets are merely a reflection of how much they dropped and long-term growth in many of these markets is still uncertain.
Other markets, Kolko said, have also had big home price increases without having had huge price declines. These markets have almost fully recovered and are now in full growth mode. Three of the hottest markets barely fell during the recession. In Denver, home prices fell just 9.1% between the first quarter of 2006 and the first quarter of this year. National home prices fell by 33.3% during that time. In Denver, construction is at more than 72% of its pre-recession level. In San Jose, construction has actually completely recovered, and is slightly higher than its historical normal level.
Relying Trulia’s 2012 price monitor, 24/7 Wall St. identified the ten cities with the biggest increases in asking prices between Sept. 2011 and Sept. 2012. Trulia also provided month-over-month changes in asking home prices and year-over-year changes in asking rent from September, as well as Construction starts for the first half of the year. Corelogic also provided us with foreclosure rates, which originally came from RealtyTrac. 24/7 Wall St. also reviewed data from Fiserv about home price projections and decline from peak to the first quarter of 2012. All ranks for all data we included in our analysis are out of the 100 largest metropolitan regions as measured by Trulia. In the case that all 100 metros were not included, ranks are out of these metro areas that were available.