Yesterday, Zillow released a report stating that since the housing price peak the U.S. housing market has lost more than $9 trillion in value. [For comparison purposes the report stated that $9 trillion was more than the cost of 12 wars in Iraq.] Zillow’s research arm calculated that U.S. homes are set to lose $1.7 trillion in values during 2010 – 63% more than the $1 trillion lost in 2009.
The report also broke down the losses (or gains) since the housing peak of the twenty largest markets that Zillow tracks. For example, Phoenix has lost $222 billion and the Denver housing market has lost $30 billion in value since its peak.
See the report here: Early 2010 Housing Stabilization Fizzles; U.S. Homes Set to Lose $1.7 Trillion This Year
Unfortunately, the Reno/Sparks market was not included in the twenty largest housing markets tracked by Zillow; however my curiosity had been piqued as to what our housing market’s losses have been since its peak. So…
To arrive at a rough estimate I started with a report from UNR’s Center for Regional Studies titled “Geodemographic Analysis – Greater Reno-Sparks – January 2009 estimates” that contained, among other things, the number of housing units for Reno-Sparks. The numbers from the report were:
- 100,231 single family, detached
- 9,200 condominium/townhomes
- 50,108 multi-family units
- 12,580 mobile homes
For this exercise I choose to look at SFRs and Condo/Townhomes only. These totaled 109,431 units. [Granted these are 2009 estimates, and the number of housing units from our peak in 2005 is not the same as the number of housing units today; but this is a number I found to work with and this is my exercise.]
Next I looked at the peak median sold price for SFR and condo/townhomes combined. Their median peaked in July 2005 with a sold price of $345,000. November’s combined median sold price for condos and SFRs was $151,000. The difference from the peak median to todays is $194,000.
$194,000 times 109,431 units yields $21,229,614,000. So, has the Reno-Sparks housing market lost $21 billion in value since its peak in 2005?
I don’t know what methodogloy Zillow used for their calculation. It probably was not the same as mine. And, admittedly, the methodology I used can (and I’m sure will) be debated, but for a quick and dirty estimate $21 billion is the number I came up with.
I know the blog has many intelligent readers with access to a great amount of information. If anyone would like to calculate their own estimate I would love to hear from you. Seriously.
Sully
Guy, assuming your numbers are correct (and I don’t doubt they are) then YES. Hard to believe huh?
However, a better way to look at this is – was the market worth it at the peak?
I could never come up with real valuation for this market at peak prices nor a reason for it being so high – other than blind speculation based on a hope and a prayer and perhaps the DRC’s. The economy here has never been one which supported everyone and their uncle owning a 500K to infinity priced house.
The current prices are much better aligned to this area, at least compared to 2005.
Reno Ignoramus
Sully, it is not hard to know why the real estate market got so high at the bubble peak. It is the same reason why any asset market reaches its bubble high.
It is called the Greater Fool Theory.
Guy, consider that the combined SFR/condo median is down 57% from the bubble high. So the loss you calculate may be quite accurate. I hope you use the term “value” in a loose sense, however.
Sully
RI, I know why the market got that high, I just didn’t think this market had the dynamics to morph that high out of line with incomes. Also, in other areas I’ve seen that had huge building booms there was more commercial building, which translates to jobs! Two dozen new housing developments only create short time jobs and more HOA’s. 🙂
Guy Johnson
RI: “I hope you use the term “value” in a loose sense, however.”
Indeed.
Reno Ignoramus
Sully that’s what the Greater Fool dynamic can do once the frenzy sets in. Remember that once the bubble got rolling, lenders had no concern about the income level of borrowers. What a borrower’s income was became irrelevant. Any lie would do. All that mattered was if the borrower could fog up a mirror, and in a few celebrated cases not even that was required.
MikeZ
Next I looked at the peak median sold price for SFR and condo/townhomes combined.
For your exercise, you should have used average prices, not median.
Guy Johnson
MikeZ,
Thanks for the suggestion.
The *average* sales price (SFRs and condos combined) peaked in July 2005 with an average sold price of $414,963.
November’s *average* combined sales price was $183,027; for a difference of $231,936.
Using this number for the loss in value from the peak, yields $25.38 billion in market value loss – an additional $4 billion loss over using median prices.