Home value declines experienced during the recession have been, or are close to being, erased in nearly 20% of metro housing markets nationwide, according to Zillow Real Estate Market Reports first quarter assessment.
Nationally, home values climbed 5.7% year-over year in the first quarter to $169,800. Values rose 0.5% in the first quarter compared with the fourth quarter, the ninth straight quarter of increasing values, and they are expected to rise another 3.3% through the first quarter of 2015, according to a Zillow forecast.
Values remain 13.5% below a 2007 peak, after falling 22.6% during the recession and hitting a floor in 2011. But in 1,080 of the more than 8,700 cities and towns covered by Zillow, the housing recession appears to be over. Values already are at or expected to reach pre-recession levels in the next year, including in many hard-hit areas. Among 6,781 cities and towns that experienced home value declines of 10% or more during the recession, values in 527 either have fully recovered or are expected to do so by the first quarter of 2015.
Among the more than 300 metros covered by Zillow, home values in 60 already have exceeded or are expected to exceed their pre-recession peaks in the next year - including in Dallas, Houston, Denver, Pittsburgh, San Antonio, San Jose and Austin. In most metro areas, housing affordability is and will remain strong even as prices keep rising. But homes in a handful of metros - including San Francisco, Los Angeles, San Jose and San Diego - are already unaffordable, with the share of residents' incomes devoted to monthly mortgage payments exceeding historic norms.
"The lows of the housing recession are becoming an increasingly distant memory as home values reach new highs and homes become more expensive than ever in many areas. This is a remarkable milestone coming only two and a half years after the end of the worst housing recession since the Great Depression, and is a testament to just how robust this housing recovery has been," said Zillow Chief Economist Dr. Stan Humphries.
"So far, this steady appreciation has not created affordability issues in the majority of places. But there are a handful of markets where affordability is again a challenge, even with mortgage interest rates incredibly low. Mortgage interest rates won't stay low forever. And rents have also been marching steadily higher for several years," he added. "As a result, the housing affordability issues we're already seeing in select markets could become a much more widespread concern a few years from now. As affordability worsens, more residents will be forced to search for affordable housing farther from urban job centers, and home values in some areas may have to come down."