03 Aug Update on the US Market: Substantial Progress Post-Recession
Update on the US Market: Substantial Progress Post-Recession
June marked the longest period of economic expansion for the U.S. market, reaching 121 months. According to a recent report by CoreLogic, the housing flip rate, home prices and rents are up. One of the biggest evidence of change is the drastic correction of homes with negative equity. Low unemployment and rising GDP growth rates are a few of the contributing economic factors.
“During the last nine years, the expansion has created more than 20 million jobs, raised family incomes and rebuilt consumer confidence,” says Frank Nothaft, chief economist at CoreLogic. “The longest stretch of mortgage rates below 5 percent in more than 60 years has supplemented these factors. These economic forces have driven a recovery in home sales, construction, prices and home equity wealth.”
The first quarter of 2010 there was 25.9 percent of homes with negative equity. Earlier this year, that number had dropped to a shocking 4.1 percent, leaving homeowners in a much stronger profit margin. Home equity across the U.S. totaled $15.8 trillion which is a massive improvement over the $6.1 trillion in early 2009. The average homeowner saw an equity increase of $75,000 to $171,000.
There has been a steady growth in the rental market, and since June 2009, home prices increased by 50 percent while single-family rents got a 33 percent increase. A rising cost in labor and materials could also be a contributing factor, as well as a low supply of construction workers.
Pre-recession, investors worked to turn a profit quickly and at the peak in 2006, there were 11.3 percent of homes being flipped. Post-recession, that number dropped to a dramatic 4.9 percent. However, in 2018 that number had bounced back to 11.4 percent. This is not necessarily a sign of an upcoming recession, but rather more informed and prepared investors who are making sustainable decisions.
A strong unemployment rate coupled with an increase of potential homebuyers, and decreased negative equity are all contributing factors.
“We expect the housing market to enter a normalcy phase over the next 24 months,” said Ralph McLaughlin, deputy chief economist at CoreLogic, in the report. “With prices neither rising too fast nor too slow, and with a growing stream of young households looking to buy homes over the next two decades, the long-term view looks healthy.”
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