Over 90 percent of Chicago homes have not recovered their pre-recession value

by Joe Ward

The prevailing sentiment in the housing market is that it’s a great time to sell, as housing prices and demand has steadily creeped up. While that may be the case, such a rosy portrait of the market doesn’t tell the full story, which is that only one-third of all houses in the United States have fully recovered their value from their pre-recession peak. In Chicago, the problem is even worse.

That’s according to Trulia, which looked at individual home values in the 100 largest U.S. markets to determine what percent of their peak value they have recovered. Their findings show that just 34 percent of homes nationwide are now worth more than their pre-recession peak. At this rate, home prices nationwide will not recover their full value until 2025.

While the nationwide number is pretty bleak, a market-by-market look shows that home-value recovery varies wildly by location. In Las Vegas, only 3 percent of homes have recovered the value of their pre-recession peak, while cities like Denver and San Francisco both have at least 98 percent of its homes worth the same or more than their highest value before the 2007 recession, according to Trulia.

In Chicago, just 7.6 percent of homes have recovered their pre-recession peak value, good for 80th out of 100 U.S. markets and easily the worst recovery of any of the country’s top markets, according to Trulia. The median home value as of March was $225,051, a significant post over the peak-recession median home value of $274,092.

% of homes recovered peak pre-recession value Median home value, March 2017 Pre-recession peak Median home value Post-recession income growth Post-recession job growth
Chicago 7.60% $225,051 $274,092 7.30% 5.80%

Job market drives home price recovery

Why does Chicago have one of the worst home value recoveries in the country? There are three factors Trulia identifies as driving home prices: income growth, population growth and post-recession housing vacancy rates.

For example, a 1-percentage-point increase increase in an area’s income growth correlates to a 3.5 percent increase in the percentage of homes that have recovered their value, according to Trulia. Chicago’s post-recession income growth is 7.3 percent, the 75th-worst rate in the country. It’s post-recession job growth rate is the 80th-worst rate in the county, and helps illustrate why Chicago has is also 80th in home price recovery.

“The intuition here is this: housing is what economists call a ‘normal good,’” Trulia’s report reads. “So when incomes rise, households tend to spend more on housing, which pushes up prices.”


Competing portraits of the market

Trulia’s report diverges from the housing market portrait painted by entities like the S&P/Case-Shiller U.S. National Home Price Index. The S&P index just reported that home values have risen at the sharpest rate in three years. In January, the index hit its consecutive all-time high.

Though both the S&P and the FHFA House Price Index have exceed their pre-recession peak, those measures pull data only from homes that sell. A majority of the homes not listed for sale have not recovered, and that truth is obscured in the other indexes, Trulia claims.

“The U.S. housing market recover looks very different when examining the value of individual homes,” the report reads.

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