Real Estate Market Trends: How The Decade Impacted Home Values

Real estate market trends have vacillated wildly over the last decade. After the housing bubble burst and the financial crisis swept the nation, millions of Americans defaulted on their loans and were forced into foreclosures. The Great Recession had a crippling effect on home values across the country. After 18 months, the downturn finally came to a close at the end of the second quarter of 2009.

Now, 10 years later, has the housing market recovered? Have home values appreciated in the United States since the end of the recession? These questions are not as easy to answer as you may think. Before we embark on 2020, we’ve decided to review how home values have changed in U.S. cities between the second quarter of 2009 and the second quarter of 2019.

Whether you’re thinking of selling your home, buying one or are just interested in the housing market, this article will help you understand where the last 10 years have left the real estate market.

To examine how real estate market trends have changed since 2009, we consulted data collected by the Council for Community and Economic Research. Each quarter, C2ER releases a Cost of Living Index that analyzes the prices of housing, utilities, health care, transportation, groceries and miscellaneous goods and services in cities across the United States to determine how each metropolitan statistical area compares to the national average.

In order to investigate how home values have changed in the last decade, we compared the data that C2ER collected for the second quarter of 2019 to the data they collected for the second quarter of 2009. Since C2ER acquires data from the chambers of commerce (or similar organizations) of the cities that are willing to participate each quarter, the number of cities included varied from 2009 Q2 to 2019 Q2.

To compensate for the discrepancy, we eliminated all cities that were not included in both surveys. Therefore, while 320 cities were included in 2009, and 255 cities were included in 2019, only 207 cities were examined for the purpose of this article. Once the two datasets were equivalent, we ranked the cities according to their cost of living.

Home value is a relative measure that is directly determined by how much buyers are willing to pay for property at a specific point in time. This means that the best indicator of home value is an area’s median home price. Therefore, to determine each city’s home value, we analyzed C2ER’s data on median home prices.

Using this data, we determined the percent of change for home values from 2009 – 2019 for each city and adjusted it for inflation, based on information taken from the U.S. Bureau of Labor Statistics’ CPI Inflation Calculator.

To gain a clearer picture of the context in which home values have fluctuated in these cities, we sourced data from the U.S. Census Bureau. Any data presented on population size represents 2018 estimates, while all other Census data is based on 2017 figures.

How National Home Value Has Changed

·     Median home value today: $311,927

·     Median home value in 2009: $262,225

·     Percent change from 2009 – 2019: 19%

·     Percent change adjusted for inflation: 0%

According to the St. Louis Federal Reserve, the gross domestic product has increased by 49%, and the unemployment rate has decreased by 5.8% since 2009. However, the economic expansion that our country has experienced over the last 10 years is not reflected in the national housing market. Over the last decade, inflation has increased by a total of 19%. So, although it appears that national home values have rebounded since the recession in 2008, the $50,000 increase in median home values across the U.S. can be accounted for by inflation alone. Therefore, it appears that property values have not appreciated since 2009.

How Home Value Has Changed In The 5 Most Expensive Cities In The U.S.

On a national level, home values may appear stagnant, but that’s not the case when you examine prices on a city level. In the most expensive cities in the U.S., home value has appreciated at a much faster rate than inflation.

5. Washington, District of Columbia

·      Cost of Living: 63.4% above the U.S. average

·      Median home value today: $1,069,329

·      Median home value in 2009: $645,221

·      Percent change from 2009 – 2019: 65.7%

·      Percent change adjusted for inflation: 46.7%

According to the U.S. Census Bureau, the population of the nation’s capital has increased by more than 100,000 people in less than a decade. However, as Washington, D.C. has grown to include over 700,000 residents, the housing supply has struggled to follow suit. The city’s building restrictions date back to 1910 when Congress passed a law to limit the heights of new developments to 20 feet more than the width of the building’s adjacent street or avenue. Since buildings are restricted to roughly 11 stories, residents suffer from limited housing options. As a result, the D.C. housing market consistently favors sellers and has led home values to escalate over the last decade. The city’s median home value is over $1 million and 3.4 times the national average.

4. Brooklyn, New York

·      Cost of Living: 83.2% above the U.S. average

·      Median home value today: $1,346,308

·      Median home value in 2009: $953,319

·      Percent change from 2009 – 2019: 41.2%

·      Percent change adjusted for inflation: 22.2%

Brooklyn has not experienced the same level of appreciation in home value as other cities on this list, but that doesn’t mean housing is any more affordable. Home values in this New York City borough are steep but have been consistently so for the last decade. As Brooklyn has grown in popularity, neighborhoods farther away from Manhattan have continued to gentrify. So, individuals, who’ve been priced out of more expensive neighborhoods, are finding more affordable homes in areas like Crown Heights, Sheepshead Bay and Downtown Brooklyn. This expansion helps to explain why Brooklyn home values have not appreciated at the same rate as the nation’s other priciest cities despite the fact that the median home value is 4.3 times the national average.

3. Honolulu, Hawaii

·      Cost of Living: 91.4% above the U.S. average

·      Median home value today: $1,391,767

·      Median home value in 2009: $702,484

·      Percent change from 2009 – 2019: 98.1%

·      Percent change adjusted for inflation: 79.1%

Honolulu’s median home value is nearly 4.5 times the national average and has appreciated more than almost any other city in the United States. The city’s high quality of life has caused housing to be in great demand, but the tremendous increase in home value is more attributed to Honolulu’s limited housing supply. New construction is a problem for the city, given that Honolulu has a rigorous review process for new residential developments and far more regulations than any other metropolitan area within the country. Furthermore, 92% of the 50-kilometer area that centers around Honolulu’s downtown business district cannot be developed. With housing so scarce, Urban Honolulu’s prices have skyrocketed.

2. San Francisco, California

·      Cost of Living: 101.7% above the U.S. average

·      Median home value today: $1,344,190

·      Median home value in 2009: $813,154

·      Percent change from 2009 – 2019: 65.3%

·      Percent change adjusted for inflation: 46.3%

San Francisco residents may have to contend with high housing prices, but their salaries help compensate for the added expense. As a tech hub, the Bay Area has benefited from a median household income of $96,265. However, with a wealth of high-paid software engineers buying up real estate, home value in San Fran has also risen considerably. The city’s median home value is 4.3 times more than the national average because the housing market has a limited supply that cannot keep up with its demand. Low inventory is the result of both topographical and legal restrictions regarding new construction. Since the city is surrounded by water, San Franciscan developers can only build up. However, zoning laws in most of the city’s districts prevent new developments from being built above 40 feet.

1. Manhattan, New York

·      Cost of Living: 142.5% above the U.S. average

·      Median home value today: $2,045,349

·      Median home value in 2009: $1,161,302

·      Percent change from 2009 – 2019: 76.1%

·      Percent change adjusted for inflation: 57.1%

As the most expensive city in the U.S., Manhattan’s median home value of $2,045,349 is 6.5 times the national average. Manhattanites pay $1,733,422 more for their homes than the average American – this difference alone is actually greater than the median home value of any other city in the country. Despite the fact that home prices have appreciated by just over 57% since 2009, Manhattan is in the midst of a buyer’s market. There’s an influx of apartments currently being listed, but buyers don’t seem to be biting, given that sellers have been hesitant to budge on price. So, it appears that home prices are on the verge of dropping, which shouldn’t be surprising as this growth is unsustainable, even for the ritzy New York borough. After all, Manhattan’s median household income is $79,781, which is only $22,129 greater than the nation’s.

How Home Value Has Changed In The 5 Least Expensive Cities In The U.S.

Unlike the most expensive cities, home values in the least expensive cities in the U.S. have depreciated to varying degrees. Although housing costs are a tremendous determinant of a city’s cost of living, notice that just because a city is more affordable than another doesn’t necessarily mean that its home prices are cheaper.

5. Joplin, Missouri

·      Cost of Living: 20.8% below the U.S. average

·      Median home value today: $195,861

·      Median home value in 2009: $225,000

·      Percent change from 2009 – 2019: -13%

·      Percent change adjusted for inflation: -32 %

Although Joplin is ranked as the fifth least expensive city in the U.S., it has the lowest median home value of any other city. In Joplin, property value is 37% below the national average. The city’s home values have taken a catastrophic blow in the last decade due to the EF5-rated multiple-vortex tornado that demolished the city on May 22, 2011. According to a housing market analysis conducted by Novogradac & Company LLP, the tornado killed 162 people, destroyed 500 commercial properties and ravaged well over 4,000 residential properties. The devastation impacted more than 33% of the city. Although Joplin residents banded together and worked tirelessly to rebuild the city, many decided to relocate. While many homes remain neglected, construction has tapered off in the last few years, making it challenging for buyers to find a home available in their price ranges.

4. Muskogee, Oklahoma

·      Cost of Living: 21% below the U.S. average

·      Median home value today: $249,500

·      Median home value in 2009: $210,333

·      Percent change from 2009 – 2019: 18.6%

·      Percent change adjusted for inflation: -.4%

Muskogee is another city that’s property values have suffered from major natural disasters over the years. The city is no stranger to storms that have caused damage to homes and businesses. However, in late May of this year, the Arkansas River rose to over 45 feet, nearly exceeding the record crest. The historic rainfallcaused hundreds of road closures, 833 properties to flood and 500 families to lose all of their belongings. Muskogee County is now faced with around $250 million worth of damages, and with the impact that the flooding has had on local businesses, the unemployment rate has increased by 2%. Although property prices in Muskogee have only fallen by just under half a percent in the last decade, the median home value is still 20% below the national average.

3. Kalamazoo, Michigan

·      Cost of Living: 23% below the U.S. average

·      Median home value today: $214,627

·      Median home value in 2009: $261,300

·      Percent change from 2009 – 2019: -18%

·      Percent change adjusted for inflation: -37%

As the third least expensive city in the U.S., home value in Kalamazoo has the fourth-highest amount of depreciation of all cities in the country. The areas of the city to the north and east are greatly impoverished, being populated by older, less educated residents. Yet, the downtown area of Kalamazoo has become more popular with the younger generation, causing the average age of the city to decrease as the level of education increases. Despite the fact that Kalamazoo’s downtown has begun to pick up, the younger residents are not buying homes. So, while rents in the city have been increasing, home prices have been decreasing to the point where the median home value is now 31% below the national average.

2. McAllen, Texas

·      Cost of Living: 24.2% below the U.S. average

·      Median home value today: $218,500

·      Median home value in 2009: $207,225

·      Percent change from 2009 – 2019: 5.4%

·      Percent change adjusted for inflation: -13.6%

The median home value in McAllen is 30% below the national average, having depreciated by 13.6% over the last decade. Among the reasons for the drop in home value is the fact that Mexican citizens no longer feel welcome in the city. McAllen is a border city, and according to the U.S. Census Bureau, 85.2% of its 143,433 residents are Hispanic. The city’s close proximity to Reynosa, one of the most dangerous cities in Mexico, once led many Mexicans to buy property in the area in order to escape the drug-related violence they experienced in their hometown. Now, with political tension rising due to debates over the border wall, down payments are higher and financial scrutiny is far more intense for Mexicans, causing fewer citizens to invest in McAllen.

1. Harlingen, Texas

·      Cost of Living: 26.2% below the U.S. average

·      Median home value today: $218,333

·      Median home value in 2009: $215,200

·      Percent change from 2009 – 2019: 1.5%

·      Percent change adjusted for inflation: -17.5%

Just 35 miles away from McAllen, Harlingen is another South Texas border city that is struggling. Although Harlingen is the least expensive city in the U.S., its median home value is higher than seven other cities in the country, including Joplin and Kalamazoo. Still, the median home price is 30% below the national average. According to the U.S. Census Bureau, the median household income in Harlingen is $38,122, and 29.8% of residents live below the poverty level. For the United States as a whole, the median household income is $57,652, and the poverty rate is 11.8%. So, Harlingen residents make around $20,000 less than the average American and are 2.5 times more likely to live in poverty.

Cities With The Greatest Change In Home Value

While these two cities may not have the highest or lowest cost of living in the U.S., their home values have shifted tremendously in the last decade. While Plano, Texas has experienced the greatest appreciation in home value since 2009, Fort Wayne, Indiana has shown the greatest depreciation.

Plano, Texas

·      Cost of Living: 7.2% above the U.S. average

·      Median home value today: $449,394

·      Median home value in 2009: $223,800

·      Percentage change from 2009 – 2019: 100.8%

·      Percent change adjusted for inflation: 81.8%

In Plano, Texas, the cost of living may be only 7.2% higher and the median home value just 1.4 times greater than the national average, but the housing market is booming. Thanks in large part to the influx of major corporations like Frito-Lay, Toyota, Pizza Hut and Keurig Dr Pepper, the median home value in the area has increased by nearly 82% in the last 10 years – and that’s even after adjusting for inflation. However, there are signs that suggest that this growth is unsustainable. According to Community Impact Newspaper, the average home spent 41 days on the market from 2018-2019, which is 10 days more than the previous year. The number of homes sold has also dropped by 11% over the last year, with 386 fewer homes sold this year compared to last. So, it appears this rapid appreciation is beginning to slow down.

Fort Wayne, Indiana

·      Cost of Living: 13.5% below the U.S. average

·      Median home value today: $213,850

·      Median home value in 2009: $275,030

·      Percentage change from 2009 – 2019: -22.2%

·      Percent change adjusted for inflation: -41.2%

Fort Wayne is the second-largest city in Indiana, after Indianapolis. While home value in Indiana’s largest city has also depreciated, the median home value in Fort Wayne has dropped by 27% more than it has in Indianapolis. The city’s extreme depreciation is due to the fact that Fort Wayne is still struggling to recover from the Great Recession. Thousands of homeowners lost their homes after the housing bubble burst. Now, the median home price is $213,850, and, according to the U.S. Census Bureau, the median household income is $45,853, making them respectively 31% and 20% below the national average. Although sales have struggled, the median monthly rent is now $781, which is 1.2 times what it was in 2009.

While there are cities that have been fortunate enough to experience appreciation in home values since 2009, less than half of the 207 cities studied have benefited from rising housing prices. Many areas within the United States are still recovering from the Great Recession. Still, there are some economists who believe that the economic expansion we’ve been experiencing may soon come to an end. As we enter 2020, it’s crucial that we keep an eye on areas of the U.S. where home values may be overinflated as another recession may be approaching our doorsteps.