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Housing market firms up

Another step on the road to recovery

Created date

April 22nd, 2014
house graphic with sold sign
house graphic with sold sign

The real estate market has come a long way in the six years since the crash that was the Great Recession. In this time, the world saw stocks plummet and entire economies collapse only to bounce back slowly but surely.

In fact, most recently the good news is manifold, starting with a significant drop in the number of homeowners currently mired in negative equity. According to a newly released report from Zillow, an online real estate marketplace, a national survey revealed that the total population of homeowners underwater on their mortgages has fallen below 20% for the first time in years.

“The peak for negative equity mortgages during the recession was over 31%,” says Svenja Gudell, Zillow’s director of economic research. “Based on our latest Q4 numbers, that figure now stands at 19.4%, which is nearly a 50% drop.”

Positive interaction

As Gudell points out, this is quite promising as far as the whole of the market is concerned, given its close relationship to rising home values—another piece of good news signaling a recovery.

Nationally, home values are up 5.6%, which bodes well for the long-term prospects of a healing economy. 

“We’re seeing a rise of about 5.6% in home values overall, a little lower than our figures for 2013,” she explains. “This is very good because, while we want to see gains, we don’t want them to be out of control or unsustainable.”

Even 5.6% is greater than the roughly 3% increase that characterizes a completely healthy market. Still, Gudell says that a downward trajectory in this case is strong evidence that the economy and, more specifically, the housing sector are beginning to stabilize. 

Throughout much of the recovery, values have appreciated most consistently within the East Coast’s Northern and Mid-Atlantic regions—cities such as Boston, New York, Pittsburgh, and Baltimore, where the 2008 bubble wasn’t so extreme. Conversely, harder-hit markets like Miami, Atlanta, Tampa, and Las Vegas, all of which were playgrounds for housing speculators prior to the recession, continue to lag due to tight inventories and higher rates of negative equity.

But Gudell stresses that the national outlook remains very reassuring.

“After the bubble burst in 2008, the country’s housing market lost trillions of dollars, and when you’re hit that hard, it’s going to take some time to get back to normal,” she says. “Since the recession, however, we’ve regained approximately 44% of what we had lost, so we are definitely recovering.”