This month marks the 10-year anniversary of the market peak prior to the bursting of the housing bubble. The nationwide median home value is currently 9% higher than it was at the peak, but the extent of the recovery varies within areas and markets.

Across the country, 21 of the top 35 metro areas have fully recovered with current values higher than they were before the bust. Areas such as San Jose and Denver have led the recovery with huge gains, while Las Vegas, Orlando, and Chicago have been among the slowest to recover. The Metro Detroit area is ranked right in the middle.

The housing market is still thriving in most areas and price ranges, but signs of change are on the horizon. Inventory has been rising and for the first time in years, it’s higher than it was at the same time last year. Prices generally continue to rise, but the rate of rise is slowing. In many markets, upper-end values have flattened out and some are even declining. Although interest rates are higher than they were, buyers continue to lock in at rates lower than they will be in the near future. 

The last housing bubble was a rare historic moment when markets across the country moved in sync— market movements are typically more regional. As time passes, people are looking for early indicators so they can be prepared for the next bubble.

RED FLAGS AND INDICATORS

Rising Interest Rates

Although mortgage rates have reached a 4-year high, they have not reached the 5% mark since 2011. Interest rates impact real estate markets and history shows that interest rates tend to hit their highs shortly after property values peak.

According to Freddie Mac, interest rates reached their peak at 6.7% in July 2007 shortly after property values had peaked in 2006.

Increase in Mortgage Defaults

Increases in mortgage defaults is another strong indicator that a crash is on the horizon. That being said, U.S. foreclosures dropped to a 12 year low in 2017. Nationwide there has been a continuous drop in foreclosures since 2010. Tighter lending laws have also been a factor contributing to this positive statistic. 

Role of Legislation

The recently-enacted Trump tax bill includes many benefits for real estate investors. As these laws are implemented, time will tell whether the tax plan will have a positive or negative impact on the housing market. 

Local Market Trends

Real Estate markets shift at various speeds depending on factors and conditions within local markets—and even the price ranges within those markets. These Housing Reports are designed to help us stay current with local market trends affecting buyers and seller.