Home Values Are Almost Back to Pre-Recession Prices

But as prices climbed, housing inventories have shrunk, making the market less attractive to homebuyers. See how your metro area compares.
by | January 26, 2017
Home values in Portland, Ore., grew more last year than in any other large region. (AP/Rick Bowmer)

Home values continued to climb throughout 2016, with many regions now surpassing or nearing their highs prior to the housing collapse.

According to data published by real estate firm Zillow, the national median home value increased 6.8 percent in 2016 to $193,800. That's only 1.4 percent below the country’s previous high before the housing bubble burst.

If current trends continue, national values should finally beat pre-recession levels within the first few months of the year.

Several larger metro areas where home values plummeted during the recession recently exceeded their prior highs. The Cincinnati and Milwaukee metro areas topped their prior peaks in 2016. Dallas, Nashville and other hot real estate markets surpassed theirs years earlier. In all, 206 of the 549 markets tracked by Zillow recorded all-time highs last year.

Other markets still have a long way to go.

The Bakersfield, Calif., area saw its median home values more than double between early 2003 and 2006 before falling. While values have started to recover, they were still about 30 percent off previous highs last year -- more than any other large metro area.

Other real estate markets where December median home values were more than 25 percent below previous highs include Daytona Beach, Fla.; Fresno, Calif.; Las Vegas; Modesto, Calif.; Stockton, Calif.; and Tucson, Ariz. Although these places haven’t nearly fully recovered, all of them registered solid growth last year.

The biggest increases in median home values last year were in smaller regions, and three of the five top gains were in Florida.

Similarly, several markets in the Pacific Northwest experienced some of the steepest increases nationally. Portland, Ore., registered the strongest growth of any large region tracked by Zillow, increasing nearly 14 percent for the year. Home values in Salem, Ore.; Seattle; Spokane, Wash.; and Yakima, Wash., also climbed more than 10 percent.

No large regions saw prices drop last year. Home values remained essentially unchanged in the Anchorage, Alaska; Fort Wayne, Ind.; and Peoria, Ill., markets.

As prices have climbed, housing inventories have shrunk. Zillow reports that there were 4.6 percent fewer available homes nationally than a year ago. Markets with particularly notable declines include Boston and Minneapolis, where housing inventories dropped about 20 percent.

The combination of rising home values, declining inventories and the likelihood that mortgage interest rates will rise make the current market less attractive for homebuyers.

"Lack of inventory will remain a major concern for homebuyers this year. Especially lack of available entry-level homes coupled with high demand will continue to rapidly drive up home values in the near future,” said Zillow Chief Economist Svenja Gudell in a news release.

If there’s good news for prospective buyers, it’s that they might have more time to search for a home without seeing rents increase. Median U.S. rents climbed just 1.5 percent -- less than half the rate as last year, according to Zillow.

Metro Area Home Value Data

Zillow's home value index represents the median estimated value for all single-family homes, condos and cooperatives, regardless of whether they were sold.

SOURCE: December Zillow Real Estate Market Report