‘Boom-Bust’ Markets Led Recession, Recovery, and Now: Moderation

The “boom-and-bust” markets, which led the nation in pre- and post-crisis home price trends, are now at the forefront of a new price trend—a deceleration in home price gains across the nation, according to Trulia. The national real estate company released its Price and Rent Monitors last week, revealing trends in asking prices across the country.

Trulia is not the only group to notice the markets that experienced the worst of the recession have been the first to rebound in the recovery: Clear Capital termed the recent recovery a “first in, first out” recovery. However, Trulia is now finding the same markets that led the boom, bust, and recovery are beginning to lead price moderation across the country.

Las Vegas, for example, experienced a 61 percent decline in home prices from peak to trough during the recession. Year-over-year in February, the metro posted a 30.3 percent price gain. However, a look at the quarter-over-quarter price change in February reveals a much lower 5.7 percent gain.

The trend holds true down the ranks. Oakland, California, follows Las Vegas with the second-highest year-over-year price gain in February—a 24.5 percent jump. Oakland’s home prices also took a strong hit during the recession with a 39 percent drop.

However, the metro’s quarterly price change in February is much tamer—a 5.6 percent increase, earning it a sixth-place ranking on the list of highest quarterly gains, according to Trulia.

“Grouping metros by their price declines during the bust shows that the price slowdown over the past 10 months has been sharpest in metros where the bust was most severe,” Trulia chief economist Jed Kolko said in the latest report.

With price changes in the “boom-and-bust” markets beginning to moderate, Kolko says other markets will begin to make their way onto the top 10 lists for price increases. Already, Cleveland, Ohio, tops the list of quarterly price gains for February—a 6.5 percent gain. The Ohio metro experienced an 18-percent price drop during the crisis compared to Las Vegas’ 61 percent.

The national price trend reflects that of the “boom-and-bust” markets, according to Trulia. Home prices increased 10.4 percent over the year in February but just 1.9 percent.

Regardless, Kolko is quick to point out, “even with this slowdown in gains, prices are still rising much faster than the historical norm.”

At the same time, rents are continuing to accelerate across the nation, according to Trulia. Nationally, rents increased 2.4 percent over the year in February, and the vast majority of the largest rental markets, rents are not only rising but also accelerating. “In 20 of the 25 largest rental markets, February’s increase was larger than the year-over-year rent increase from three months earlier, in November,” according to Trulia.