Study analyzes recession’s impact on housing markets
The Great Recession of 2007 to 2009 created new declining cities, and posed further difficulties for cities already in decline. Some cities may not re-attain home price peaks for many years, and could see some neighborhoods cease to be viable economically, according to a study released from the Mortgage Bankers Association (MBA). The study analyzes the recession's impact on real estate markets in cities in the midst of a severe and persistent economic decline.
The study includes detailed statistical analysis of trends in U.S. metro areas over the past 40 years, paying particular attention to seven large metro areas since 2000, and a comprehensive review of existing academic research on this topic.
Key findings from the study include:
- Substantial home price deterioration occurs in markets that suffer significant declines in population or employment. Such declines in population and employment trigger reduced demand for housing. Because people are more mobile than houses, it often takes many years for supply and demand to become balanced again and for house prices to return to the levels they achieved prior to the negative economic event.
- The impacts among neighborhoods or smaller cities within metropolitan areas experiencing substantial overall decline are likely to be widely disparate and could well threaten the sustainability or long-term viability of some previously stable neighborhoods.
- Both home buyers and lenders will have a tendency to avoid places plagued by high foreclosures, vacancies, and a deteriorating quality of the housing stock due to deferred maintenance.