Home price recovery index: Which metros have improved the most, least?

Homes in all 100 of the top metro markets fully recovered any value they lost during the last housing bust a few quarters ago, but that doesn't mean there still isn't a race to the top... and up from the bottom, too. The geographic mix of markets with the greatest value increases since previous price peaks continues to change, as does the group of areas where home value recoveries have taken longer and been more meager. While home values in all markets are still above the peaks of the last boom, at least some areas are less so, as home values in some markets have now begun to retreat from pandemic-boom record highs.

HSH.com’s Home Price Recovery Index uses a Federal Housing Finance Agency's (FHFA) Home Price Index as a basis to determine which of the top 100 housing markets have fully recovered value lost (or more) in the last housing bust and which still lag behind in the current housing recovery. The time period covered by the HPI begins with the first quarter of 1991 and runs through the first quarter of 2023. We compare the metro's previous peak value from the mid-2000s boom against present values to determine if a given market has recovered all of its value lost in the 2011-2013 housing market bust.

Quarterly update:
The softness in home prices that began a couple of quarters ago is spreading.

Over the last few quarters, the number of metro areas that saw quarter-to-quarter declines in home prices totaled 48 in the third quarter of 2022, then 39 in 4Q22. In the first quarter of 2023, 49 have now posted quarterly declines in value.

Seasonal declines in home prices aren't unusual, and typically the lowest prices of the year occur in the fourth quarter of the year, with some pickup in the first quarter as the early spring homebuying season gets underway. Not this year. As well, more than a few markets have now put in sequential quarterly declines, so the softening in home prices in some areas goes beyond a simple seasonal adjustment.

Since quarter-to-quarter references can feature considerable swings in values -- seasonality in home sales being what it is -- many folks prefer to compare a current reference point against the same period from a year ago. This tells a slightly different story, but not all that different; compares to the first quarter of 2022, twenty-one metro areas have lower home prices now than they did then. There were only two such markets in the third quarter of 2022 and just six in the fourth quarter, and almost all were in California. Now, 10 of 21 are in California, with the rest scattered in western and southern states -- Washington, Idaho, Oregon, Nevada, Arizona, Colorado -- with just two on the east coast in Maryland and the Washington, DC metro area.

Whether comparisons are quarterly or annual, a majority of locales are still showing increases in home prices, but those gains have become fairly small relative to what we've seen over the past few years. Over the last four quarters, in markets where there have been gains in value, not only has the number of metros posting increases has been shrinking, the size of gains has also been diminishing. For example, in the second quarter of 2022, all metros posted quarterly increases in value, and the median increase was 15.49%. this gain declined to 11.30% in the third quarter, to 8.76% in the fourth quarter, and now to just 5.24% in the first stanza of this year, where just over half of markets still posted increases in value. Nine of them did manage to post double-digit gains, but the 20 percent plus increases so common over the last two years are now nowhere to be seen.

Most recovered group
Eight of the markets that are most above their last-boom peaks saw softening in home values in the latest quarter. Declines ranging from as little as 0.06% (Fort Worth-Arlington-Grapevine, TX metro) to as much as 3.89% in the Austin-Round Rock-Georgetown, TX market. The two that did see home values increase ranged from a just-barely up 0.05% for the Charlotte-Concord-Gastonia, NC-SC to a more-than-solid Greenville-Anderson, SC bounce of 3.16% for the quarter.

A rising (or falling) tide may affect all boats, but to different degrees. There was just a single change in position among the leaders for the first quarter; the sizable rise for Greenville-Anderson, SC saw it jump from #12 in the fourth quarter of 2022 up to #7 for the first quarter of 2023. A devaluation for the Colorado Springs metro area saw it drop out of the top group, falling from #10 last time to #13 this time, and Charlotte, San Antonio and Buffalo all got bumped down one position in the new rankings.

With gains in home value harder to come by, it's not clear if any metros can appreciate enough to push into the top 10 group anytime soon. That said, there are two metros who are just fractionally below the #10 spot, The Raleigh-Cary, NC and Knoxville, TN markets have the best shot at it, but since one saw lower prices in the last quarter and one higher, it may be that Knoxville has the best shot. Only time will tell, and the strongest home values of the year are usually seen in the second quarter, as homebuyers become more active. That seems to be less the case this year than usual, but existing home-sales series from the National Association of Realtors points to firming prices despite rather tepid sales activity this spring.

The group with the smallest improvement over last-boom price peaks isn't immune from the recent softening trend for values. With a 2.08% decline in home values for the quarter, the Bakersfield, CA region sank to the bottom of the list, but the 16.25% increase over it's 2006 peak is still considerable, even if the increase isn't as impressive as the triple-digit increases enjoyed by many metro areas. With a 3.42% quarterly increase in value, the New Haven-Milford, CT powered out of the least improved group, edging up three spots to #89 on the list.

Retiring the HPRI
As we've noted in the last few updates to the HPRI, we knew at some point there would be no more "recovery" in our Home Price Recovery Index. We expect to track the "most recovered" group for a while longer yet, and of course, HSH's Home Value Estimator (MyHPI) will continue to be updated, so you can track changes in your favorite metro as we go along.

Last year, we introduced a new means of following changes in home values. Our Home Value Tracker uses a different set of FHFA data that includes both repeat purchases and refinances, so it's a very robust data set. However, as there is no "refinancing season", the data is not seasonally adjusted and so can be more volatile from quarter to quarter. That said, Home Value Tracker covers more than four times the metro areas as did our HPRI covering over 400 metros in all, and provides five value-change reference points -- change from last quarter, two quarters ago and one, three and five years ago. The new HVT contains two tables showing home values changes in the metros with the 10 largest and 10 smallest home price changes over the last year, and a unique lookup tool so you can see your local market's changes over those time points, too.

We've also created a new custom-time-period tracking tool Home Value Tracker-MyHVT, where you can see what's happened to home values in any of the 400+ metros over any time frame you like, including what's happened while you owned your home (or any other period) -- from 1995 to now.

How has your home value changed in the time you've owned it?
The HPRI only reviews trough-to-peak changes for each market in our evaluation, so your local experience in value change from when you purchased your home to today will of course be different. To see what's happened with home prices during the time you've owned your home, check our home value estimator, MyHPI. To see where you are in your mortgage, use our mortgage amortization calculator.

Tracking and projecting your home equity
The combination of home price increases and your retirement of the amount you owe may see you with a larger equity stake than you think. If you're interested in how much equity you've got in your home or are looking to pursue a future home equity goal, you'll want to check out our Home Equity Calculator and Projector.

10 metro areas that have recovered the most

Can some locations or properties still not have achieved recovery?

Since the HPRI compares values that are derived from an entire metropolitan area (some of these quite expansive) it's certainly possible that some homes or neighborhoods have not participated in the home price recovery as strongly as other areas in the same metro. In fact, and although it continues to diminish, CoreLogic reported that in the fourth quarter of 2022, the total number of residential properties with negative equity was still 1.2 million homes, or 2.1% of all mortgaged properties. That's up a little bit from the third quarter, and with home values in many metros softening in the first quarter of 2023 it's likely that somewhat fewer of these homes have moved to a positive equity stake. While it may not be apparent, the problem of some homeowners being "underwater" still persists and may even be poised to re-worsen before long.

However, even if home prices don't increase for such homes or areas, homeowners will eventually come to a positive equity position as they make regular payments on their mortgages. In addition, even small changes in home values will tend to help fill in any value gap over time. In this way, even if the value of a specific home hasn't yet returned to a previous high, it's not as though the homeowner won't ever have any equity.

For example, in the case of a home purchased at a previous price peak in early 2006 (and assuming no refinance of the mortgage) the homeowner would have paid off about 32 percent of the original loan amount by now. This calculation doesn't include any downpayment the homeowner may have made, so the equity stake would be increased by that amount, too. Purchases made before the peak period or after prices began to descend would see this equity stake be increased as well. Given interest rates in place in 2006 -- 30-year FRMs at about 6.5% in the third quarter, odds favor that a homeowner would have refinanced at least once (if not twice) by now to take advantage of falling rates, and a 3.5% refinance in September 2012 would still even see the homeowner with more than a 32% retirement of principal by now.

All now recovered, the remaining 90 metro areas

Here's a look at the remaining 90 metro areas from the FHFA's HPI list.

More about the HPI

The Home Price Index is a broad measure of the movement of single-family house prices. It has been published by the Federal Housing Finance Agency and precursor agencies since the fourth quarter of 1995.

For each market, the index uses 1991 home prices as a basis. Those dollars are "normalized" to a value of 100 for each market; that is, regardless of the actual dollar cost, the index value for a given market becomes 100. For example, a home price in Allentown, PA in 1991 might have been $65,000; this becomes a base value for Allentown of 100, and changes since then are presented as percentage changes from that initial 100 value.

The HPI is based on purchase-only transactions involving conforming, conventional mortgages purchased or securitized by Fannie Mae or Freddie Mac. Only mortgage transactions on single-family properties are included. The HPI does not include property transactions backed by FHA, VA, USDA or non-conforming (e.g. jumbo) mortgages.

The HPI is updated each quarter as additional mortgages are purchased or securitized by Fannie Mae and Freddie Mac.

The HPI is a weighted, repeat-sales index, meaning that it measures average price changes in repeat sales of the same properties.

The HPI shows the relative change in prices in a metropolitan area from quarter to quarter or period to period. HSH.com has pulled out information from each area to show the amount of change from 1991 to the pre-housing-crisis peak, the low achieved during or after the peak, and how much improvement has taken place since that near-term bottom.

The FHFA uses the revised Metropolitan Statistical Areas (MSAs) and Divisions as defined by the Office of Management and Budget (OMB) in Bulletin 20-01. If specified criteria are met and an MSA contains a single core population greater than 2.5 million, the MSA is divided into Metropolitan Divisions.

For more details on the HPI and how it is put together, see http://www.fhfa.gov/Media/PublicAffairs/Pages/Housing-Price-Index-Frequently-Asked-Questions.aspx