Housing Market: A Bounceback

Why the Housing Market bounced back in this year’s first quarter, in comparison to the big property crash back in 2010.

The first quarter of this year particularly have been very prosperous for the housing market – equity has been building for homeowners, as well as soaring property prices.

The median home price alone has increased from $166,100 to $222,400, which is a staggering leap of 6% for this year.

In contrast to the last property crash, in 2010, where properties were not selling, and homeowners faced repossessions – mainly caused by massive job losses and redundancies.

New Home Sales Status Today –> https://t.co/YWQNzLPeuw pic.twitter.com/MDXkgsQ1u9

— The Capitalist (@Capitalist_Site) April 28, 2016

How did the real estate market crash in 2010?

The USA, Real Estate market, was experiencing a housing bubble previous to the downfall, where prices swiftly rose until valuations became greater than household incomes – ultimately halting unaffordable sales to the majority while others faced home repossessions from high rents.

As other factors of the recession contributed to wide-scale job losses, no one could afford the mortgage they already had or be a first-time buyer.

Although the reasons for the property bubble bursting are tough, it is mainly due to these following grounds:

• A tax policy which exempted housing from capital gains.
• Very low-interest rates.
• Unregulated lending standards.
• Nations like Hong Kong, Spain, United Kingdom, South Korea, Hungary and Poland also suffered from a property crash.
• Confidence on the whole shattered by speculative fever.
• Rent-to-price ratios

What have we seen since the 2010 property crash?

From 2010 – 2015, the US housing market was rocky and seemed somewhat of eternity for it to ever recover.

In a brief timeline, we will look at the general property market conditions:

2010, US Property Market

By mid-year, more than 1.30% of households were facing foreclosures (a total estimation of 1,961,894) – a figure which rose staggeringly from 2009.

The end of 2010, foreclosures had reached 3,825,637, which was a 2.23% of all households. 

2011, US Property Market

When the real estate market approached the mid-year up to 1,170,402 of properties still received foreclosure, however, in comparison to 2010, repossessions went down by 29% (which hit a 0.9% of all households).
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By the end of 2011, the total of foreclosure notices reached a total of 1,887,777, but that was 34% less than the previous year. 

2012, US Property Market

This year would carry on the trend of fewer foreclosures than 2011 as the figure now peaked around 1,045,801 by mid-year – there was a 2% increase over the past six months, but on the whole it was 11% less than the same period of 2011.

The year-end total of foreclosures reached 1,836,634 properties, which was down by 3% from the previous year (1.39% of households were in a state of the foreclosure process).

2013, US Property Market

It is for the first year that the real estate median prices had appreciated by 12.5%, while some cities even experienced an appreciation of over 40%. Fitch ratings had evaluated that by November 2013, home prices were now 17% overvalued.

By Mid-year, foreclosures had dropped by 23%, with only a total of 801,359 properties (a decrease of 19% over the past six months while 0.61% of all households were in a stage of repossession).

The year-end saw the total of foreclosures hit over 1,361,795 properties, affecting 1.04% of all households (compared to 1.39% in 2012)

2014, US Property Market

Only 613,874 properties faced repossession by the mid-year, which was a 19% decrease from the past six months and 23% down from the same time in 2013; with now only 0.47% of all households being affected.

For year-end of 2014, the total of foreclosures reached 1,117,426 (18% drop from 2013 and a 61% drop from 2012) – this was the first time figures reached the lowest since 2006, with only 0.85% of households facing some form of home repossession.

2015, US Property Market

2015 was a slower year than 2014; however, the figures were still decreasing. The number of foreclosures by mid-year was a total of 597,589 properties (13% decline from the last six months, and 3% drop from the same period in 2014).

The number of repossessions was 37% above the number of foreclosures in the first half of 2006.

By the year-end, the total number of foreclosures hit 1,083,572, with a 3% drop in comparison to 2014, and was the lowest number in 9 years (affecting only 0.82% of all households). 

A look at 2016, the first quarter…

2016 has offered fewer foreclosures, and a median house price rise of 6%, while home buyer figures soared up to 5.3 million – in comparison to under 4 million in 2010.

What to look out for:

Many speculate that this current housing bubble can end up with the same or worse result, similar to the previous property crash. Many economists are warning homeowners to:

• Get out of debt.
• Fixed interest mortgages.
• Saving a healthy nest egg, to help in more difficult times.
• First-time buyers should realistically save up to 50% of the property value, to ensure they can afford the rent over an extended duration.