House Prices: When Will 2006 Values Return?

There is a lot of optimism regarding house prices with the underlying question: When will 2006 values return?

The most recent Home Price Expectation Survey projects a 3% -3.5% increase in values for each of the next 5 years, and there is general agreement that most parts of the country will see varying levels of appreciation over that time.

“An organic recovery in the housing market really took hold in the latter half of 2012, and this
improvement is echoed in some of the most optimistic price projections we’ve seen in years…,” said Dr. Stan Humphries of the Expectation Survey.

However, to be realistic, we must realize that 2006 values will not return any time soon.

Barclays’ U.S. residential credit strategy team recently predicted that 2006 values would return in 2021. From an article in DSNews:

“While the floor appears to have materialized, they stress that home prices are likely to recover slowly over the next 4 to 5 years.

“We expect on average a 3-4 percent annual increase in home prices [nationally] in coming years,” they said in an updated market outlook.

At that rate, Barclays’ analysts explained, home prices will be slightly below their 2006 peaks even in 2020, finally returning to pre-crisis peak levels in June 2021.

In an article for CNNMoney, the analytics firm Fiserv projected that 2006 prices would not return until 2023:

“Fiserv forecasts prices will bounce back an average of 3.7% a year for the next five years — a rate that would still leave prices 20% below the peak. At that forecasted growth rate, the national average high of $238,000 would not be hit again until 2023.”

If you are waiting for 2006 values to return before selling your house, realize it will likely take years.

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