Clear Capital recently released a report referring to what's being called the "lost decade." This is the 10 years between 2004 and 2014 during which national house prices have remained largely unchanged. According to their Home Data Index TM (HDI) Market Report, housing prices have fallen back to 2004 levels even when inflation is taken into account.
Unfortunately this does mean that many homeowners have little or no equity compared to when they first bought their property, and the article in RisMedia points out this period in time is highly unusual. Typically house prices have risen by 55% over each 10 year period since 1985. If home price growth continues to slow then this so-called lost decade could become extended. In August home price growth dropped by 0.4% compared to July, to 8%. Yearly gains have now declined for the last eight consecutive months.
While the last decade has affected prices and growth within the property market, it's also damaged the perception of home buyers. The market recovery was initially boosted due to high investor activity, where individuals and companies looked to purchase distressed property and homes at the lower end of the market. However numbers of first-time buyers and so-called move-up buyers are still low. This may in part be due to low confidence, or because they don't have sufficient access to funding. These factors are prolonging the recovery, and it's anticipated that growth will continue to be moderate at just 1.8%.
However national averages don't tell the whole story, as property in the Midwest has stagnated for the last 15 years and home prices are now the same as in 1999. This is the only region predicted to see price increases of more than 3% through to the end of next year, but this would only take home prices back to levels seen in 2000. It's quite a different story in Denver and Honolulu where home prices are at historical highs. In Denver property prices are 10.6% higher than in 2004, while in Honolulu prices are an amazing 70.3% higher, and property now cost 14.3% more than at peak levels.
Real estate experts point out the recovery has only been going on for two and a half years, which isn't nearly long enough for the market to recover from the so-called lost decade. Growth levels are predicted to be low through next year, showing the housing market is still weak. The concern is that decline in investor demand and limited demand from home buyers could drag out the recovery.