Check out any one of the many national home price reports, and headlines scream of new peaks and growing gains each month. Home prices are rising faster than inflation, faster than incomes and faster than some potential buyers can bear. Those reports are heavily weighted toward large metropolitan housing markets.
In fact, most of the U.S. housing market has not recovered from the epic crash of the last decade.
Only about one-third of homes have surpassed their pre-recession peak value, according to a new report from Trulia, a real estate listing and analytics company. Price growth in most markets is so slow that it will take about eight years for the national housing market to fully recover — that is, for all home values either reaching or surpassing their previous peaks.
Huge price gains during the last housing boom were juiced almost entirely by an incredibly loose mortgage lending market that no longer exists.
To say that the housing recovery has been uneven is an understatement. Some markets that have seen huge employment and population growth in the last decade, such as Denver, Seattle and San Francisco, lead the news with bubble-worthy headlines.
Not only have home prices there surpassed their recent peaks, they continue to rise at double-digit paces. Nearly all the homes in Denver and San Francisco (98 percent) have exceeded their pre-recession peak, according to Trulia. Other less obvious markets, like Oklahoma City and Nashville, Tennessee, have also seen the prices of most homes surpass their peak.
In areas hit hardest by the foreclosure crisis, fewer than 4 percent of homes have recovered to pre-recession price peaks. These include Las Vegas; Tucson, Arizona; Camden, New Jersey; Fort Lauderdale, Florida; and New Haven, Connecticut.
Rising incomes are the leading cause of home price growth, according to Trulia, which looked at four factors: job growth, income growth, population growth and post-recession housing vacancy rates. Income growth showed the greatest correlation to home price growth.
The intuition here is this: "Housing is what economists call a 'normal good,' so when incomes rise, households tend to spend more on housing, which pushes up prices," wrote Ralph McLaughlin, Trulia's chief economist, in the report.
Job growth didn't correlate at all because more jobs don't necessarily mean higher incomes. Of course job growth does matter tangentially, as more jobs often mean a growing population.
More people create more demand, which can push prices higher if there is not enough supply. Colorado Springs, Colorado, is a good example of that: Population has grown dramatically in the last decade, but incomes have not followed pace. Home prices are near their pre-recession peak there and continue to rise.
The very limited supply of homes for sale has dominated the narrative in this spring's market and also been blamed for bubble-like prices in some areas. That is definitely a factor, but only at certain price points and in certain areas.
"In essence, income growth led home value recovery coming out of the recession, but low inventory is now increasingly playing a role in recent price appreciation across the largest U.S. housing markets," said McLaughlin.
Overall, the housing recovery has been limited to a mix of markets in the West seeing huge economic growth and in parts of the South where the housing crash didn't hit as hard. Outside of major markets, the recovery is strongest in the heartland and the Pacific Northwest, which are both seeing bigger employment and income growth.
Watch: Homebuyer demand falling as inventory shrinks