All kinds of pictures these days show a housing recovery that it's hard to love.
Here, from Harvard's Joint Center for Housing Studies senior research associate Daniel McCue, is a look at housing market recovery on two time horizons, each of which tell a different story for home buyers and investors.
McCue first compares currently trending home values with those in the same markets during the mid-2000s peak. The big take-away here is that markets that cratered the most from the mid-2000s run-up have, by and large, appreciated the fastest over the past few years, but haven't regained their full peak value. At the same time, with a few exceptions, the markets that best sustained home values, declining the least, are the ones whose current price ranges eclipse the April 2006 peak.
Comparing the same current price trends with an earlier, year 2000, data set yields a dramatically different insight, per McCue. It's this rather counter-intuitive nugget:
In many of the metro areas that are still well below mid-2000s peaks, net appreciation in home values since 2000 has actually been greater than in areas currently well above mid-2000s peaks that have had more modest rates of appreciation.
The point here is that recovery has not been even-handed.
What's happened for the most part as housing has worked back from it disastrous, paralyzed deep-freeze in 2008 through 2010 is that the vulnerabilities and risks that the Great Recession exposed have been further defined and accentuated by the recovery since.
Our national housing recovery's broad brush may mean something to Wall Street, and it may mean something to Capitol Hill, but there are many many Main Streets that don't know from recovery. Zillow economist Svenja Gudell writes here:
While the Pacific Northwest may be red hot, with a booming job market that’s attracting lots of new residents, parts of the Midwest are still struggling to shake off the hangover from the recession (figure 2). Home values in Indianapolis actually fell year-over-year in July, down 3.5 percent from a year ago to a Zillow Home Value Index of $130,800 – the only large U.S. metro to experience home value declines. Annual home value growth in Cleveland, Columbus, Chicago, Cincinnati and St. Louis was slower in July than the U.S. average. And despite periods of very rapid growth over the past few years, home values fell so far in certain Southwestern and Southeastern U.S. markets that they won’t be near peak levels again for years. Median home values in Las Vegas, Orlando, Riverside, Miami and Tampa are all more than 20 percent below pre-recession peaks, despite all growing faster than the U.S. average in July.
Peel back a layer or two of geographical differences, and look at what's really going on here. The recovery has really started to benefit those who'd already had a financial, social, political, and cultural foothold, even as it has made those benefits more elusive and mercurial to those without a foothold.
Interestingly, "lower-income" households and would-be households in this equation are the ones without a foothold. And in this case, those households and would-be households include younger adult--i.e. millennial--singles and couples whose housing preferences and options are in a formative stage.
So, apart from financial hurdles to clear in the long tail of the Recession, lower-income households now face local governments' powers to zone them out, which as Brookings Institution fellows Richard V. Reeves and Dimitrios Halikias, explain:
By using local government powers to zone out lower-income families, upper middle class Americans protect the value of their homes. (Federal policy helps, of course, by regressively supporting richer home owners through mortgage interest deductions.)
The risk local governments are taking is not just the loss of essential human services such as first responders, city workforces, and local educators. It's the depletion of fresh blood, new energies, innovative solutions, a renewable human resource that would tell of a truly healthy locality.
This is part of the reason home builders' and residential developers' and their investors' work is so critical now. Another way to say that there is a housing shortage is to say that many people's need for housing is underserved. That's a prime opportunity for enterprises to meet that need, but only if they're operationally lean, well-resourced, and offering products that begin to compete more ably with $189,000 median prices of resales. They'll need all the financial, operational, and political firepower they can get. As Reeves and Halikias note:
Zoning is one form of “opportunity hoarding” that sharpens the divisions between ordinary and upper middle class Americans (a theme I develop in my forthcoming book, Dream Hoarders). There are hopeful signs that state legislators are waking up to this problem. Two separate bills in the Massachusetts state legislature, for example, would have required towns to create more multi-family zoning districts, though both died in the session that ended this July. Given the powerful vested interests involved in exclusionary zoning, reform will require some serious political determination.