Once U.S. house prices start recovering, how long will it take to return to the peaks of a few years ago?
A new study from the Federal Housing Finance Agency suggests that we shouldn’t be holding our breath.
The study by the FHFA, the agency that regulates government-backed mortgage companies Fannie Mae and Freddie Mac, looks at local and regional housing busts over the past several decades based on its own price indexes. It finds that it can take more than 10 years for prices to return to their previous peaks after they start to fall. The drop from the peak tends to be much swifter than the recovery.
For cities with busts between 1975 and the present, the study examines the duration from the start of a decline in real, or inflation-adjusted, prices to the return to the prior peak. The median duration was 10.75 years, but sometimes downturns can be much longer. For instance, in Midland, Texas, inflation-adjusted prices fell 56% between 1982 and 2000 before starting to recover. They still haven’t returned to the 1982 level
Source: Wall Street Journal