Most Cities Still Won in Housing Boom
CNBC Real Estate Reporter
I love January because we get all these wonderful data pictures of the previous year, all packaged up in neat little bundles, supporting or denying all the claims we made ad nauseum month to month.
Today S&P/Case Shiller Home Price Indices released "A Year in Review."
There are some interesting tallies in the 2009 report: Home prices began bouncing back moderately, up 6.3 percent on the National Index from its trough in Q2 2006.
Peak to trough decline was 32 percent nationally. But one chart really stood out to me.
Take a look:
At a cursory glance it seems to just show that, with the exception of Detroit, the cities that saw the biggest boom also saw the biggest bust. We knew that. But if you look closer, you can see that while losses abound across the board, most cities are still ahead of where they were in 2000, despite the epic crash.
For example, Boston saw about an 82 percent jump in home values from 2000 to its peak in 2005, and saw only a 15% drop from the peak through October of 2009. Chicago saw about a 65 percent jump to its most recent peak and only a 22 percent drop. Even Miami, with its 48 percent price drop from peak didn't wipe out the 170 percent gains it made in the first half of the decade.
Overall, over this historic decade in housing, the top twenty markets gained more than they lost in value.
Of course the argument then is, well what about all those people who bought right around the peak?
Yes, of course, they're the ones in trouble. According to the National Association of Realtors, in 2005 and 2006 together (peak years), 13.4 million existing homes were purchased. According to the Commerce Department, 2.2 million newly constructed homes were bought in those two years as well, bringing the total to a little over 15.5 million. Granted existing home data is single family and condos, so it's not exactly apples to apples with Case Shiller, which only counts single family homes in its data, and the commerce department is all single family and not included in Case Shiller, but you get the basic idea.
According to the US Census, in 2007 there were about 128 million total housing units, so a little more than 12 percent of homes changed hands. Now 35 million of those units are rental, which could still be bought and sold, but even taking that away, it's only around 16 percent. I give you that my math and methodology are far from exact, but suffice it to say that an awful lot of people stayed in their homes from 2000 to 2009, and so should still be ahead.
But wait, there's more. Many of those folks who didn't move pulled a lot of cash out in the form of home equity loans, equity that vanished and then put them underwater on their mortgages. Double edged sword.
So what am I getting at here? Not that you don't already know this, but the overall housing market is still a very solid investment, even in the worst of times. It's just greed that gets us all into trouble.
Questions? Comments? RealtyCheck@cnbc.com