Housing Played Role in Post-Recession Economic Expansion

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From staff reports

It’s no secret that housing took a huge hit during the last recession. But during this long period of economic expansion that followed — a record 121 months as of July 2019 — how did the market fare?

A special CoreLogic report, “The Role of Housing in the Longest Economic Expansion,” takes a look at the years from 2008 (the start of the Recession) to July 2019. 

“June 2009 marked the trough of the Great Recession, after which gross domestic product (GDP) and industrial production resumed growth,” the report said. “Since then, the economy has continued to grow. With housing comprising approximately 15 percent of GDP since 2010, the real estate market is an important indicator of economic health.”

How did that factor in Texas? The report refers to the CoreLogic Home Price Index, which uses public records, real estate databases and other data, as well as more than 40 years of repeat sales transactions to analyze home price trends. 

At the start of the Recession, Texas’ HPI was negative 4 percent before it began to rebound, staying in the negative digits until it jumped from negative 0.3 percent in 2011 to 4.2 percent in 2012. It’s highest point was in 2013 and 2014, where it held at 7.4 percent for two years. As of July 2019, it is 4.6 percent.

Nationally, the number of homes with negative equity has decreased as home values have improved. The number moved from 25.9 percent in the first quarter of 2010 to 4.1 percent in the first quarter of 2019. 

In fact, by the end of the first quarter of 2019, total home equity reached $15.8 trillion, up from $6.1 trillion in 1Q 2009. 

“Between the first quarter of 2010 and the first quarter of 2019, the average equity per borrower increased from approximately $75,000 to approximately $171,000,” CoreLogic said. There was an average $13,600 gain in equity per borrower in 2018.

“Home prices have increased steadily since 2011, creating record amounts of home equity and putting homeowners in a good position to weather future downturns,” said Molly Boesel, CoreLogic principal economist.

Home prices and rents have recovered from their Recession era rates as well. Through May 2019, home prices rose 50 percent (cumulatively) and single-family rents increased 33 percent. Rental vacancies were 7 percent in 2019 1Q, and 1.4 percent for homeowners.

“We expect the housing market to enter a normalcy phase over the next 24 months,” said CoreLogic deputy chief economist Ralph McLaughlin. “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.” 

But are we headed toward a recession? While unemployment is at a 50-year low, inflation rates are below the Federal Reserve Board’s 2 percent target, and the GDP is exhibiting strong growth in 2019 so far, there have been concerns, the report noted.

“However, as the economy continues to progress, concerns over an imminent recession have been rising,” the report said. “The 10-Year Treasury Yield dropped to roughly 2 percent in June 2019 from 3.2 percent in November 2018, a sign that the bond market fears a slowdown.”

The report also points to a bumpy stock market over the past 15 months as a worry as well. 

“Experts have also hinted to a likely recession,” CoreLogic said. “Forty-nine percent of the respondents in the Wall Street Journal’s Economic Forecasting Survey expect a recession to occur in 2020 while 36.6 percent expect one the following year.”

NABE Outlook Survey panelists also agreed and predicted real GDP growth would slow to 2.4 percent in 2019 and 2 percent in 2020. 

“In the housing economy, while home prices are still growing, they are doing so at a slower pace,” the report said. “Home prices increased just 3.6 percent year over year in May 2019, down from 4.1 percent in January. Additionally, housing starts in May 2019 underperformed, dropping 0.9 percent below the revised April estimate.”

But there are still signs of good news. The overall mortgage delinquency rate hit a record low in April, and mortgage rates are currently at a two-year low, improving loan affordability for hopeful homebuyers.

“The CoreLogic HPI ForecastTM expects a moderate, 5.6 percent acceleration in annual home price growth from June 2019 to June 2020,” the report said.

To see more, head to CoreLogic’s website.

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