Affording your home and paying your mortgage are important factors of financial wellness for any homeowner. In the years between 2007 and 2011, Americans experienced one of the worst housing crises in our nation’s history. While the overall housing market has mostly recovered, we can still learn something about the whole process.
To spot a housing recovery, you must first identify a housing crisis. This means anywhere that experiences a significant decline in home prices. You can then look at home prices in the area regularly and take note when prices return to or go beyond their pre-crisis numbers.
Other signs of housing recovery include rising interest rates, a declining number of foreclosures, and a more equal mix between buyers and sellers in the marketplace. This signifies that the number of houses available matches demand and the prices are relatively stable. This means both existing-home and new-home sales.
Recovery can be especially clear when single-family home construction exceeds the rate of multifamily building, which provides jobs and helps inventory levels rise in markets that need it. Our housing recovery began in 2012 and reports put the end of the recovery (and therefore return to normal) when the ratio of housing wealth to GDP normalizes, fewer buyers pay cash, and price-to-rent ratios as well as homeownership return to near their long-term average.
During this housing recovery, some local markets are doing better than others. SmartAsset looked at data from the Federal Housing Finance Agency and the National Association of Realtors on home prices in 100 of America’s largest metro areas to find which recovered most strongly. Only those that experienced a decline of at least 10% were considered. The analysis found that Southern cities are bouncing back better overall, and some places in California, such as San Francisco, are actually experiencing a boom. Some cities — such as Nashville; Columbus, Ohio; and New Orleans — have maintained affordability through recovery.
Understanding what a housing recovery is and how to spot one is important, but knowing how these things affect you personally is even more vital. It can help you be more prepared for the future.
Obviously, if you are in the market to sell your home when prices suddenly decline, you will probably not get the price you once expected. You can still try to sell and accept a loss or wait until you start to see recovery signs. If you are hoping to buy a new home in a crisis, this can be great, but you should be wary of where you buy. You want to purchase a property in an area that will likely experience strong a recovery. You can make the best case for yourself with buyers by getting pre-approved for a mortgage, which requires a good credit score in most cases, some down payment money and other financial details your mortgage lender and real estate agent can help walk you through.
If you are already a homeowner during a housing crisis and you can’t afford your current mortgage or your home value slips below your mortgage balance during a housing crisis, you can look into refinancing options. However, if you are trying to get a new mortgage during recovery, look out for rising rates and pickier lenders.
More on Mortgages & Homebuying:
- Why You Should Check Your Credit Before Buying a Home
- How to Get a Loan Fully Approved
- How to Search for Your Next Home