Property values for homes that were foreclosed on during the Great Recession are outpacing the nation's average house price appreciation, according to Zillow.
Home values for properties foreclosed during the crisis shot up 10.3% over the past year, while the price of a typical property is only growing at an annual rate of 6.5%. Foreclosed homes gained 74.5% in value since the recovery, compared to 46% for all properties.
Nearly half of the homes foreclosed on during the recession were low-end homes. And as these otherwise more affordable houses continue growing in value, entry-level housing, which has been in particular short supply during the nation's housing drought, is pushed further out of reach for first-time homebuyers. This presents a challenge for lenders, as millennials comprise the nation’s largest cohort of house shoppers.
Homeowners who were unable to hold onto their home during the housing bust also missed out on seeing substantial growth in their house's value, which could've put them in a much better financial position in a market where affordability remains a top issue.
"While the overall market is facing growing headwinds, homes that were foreclosed upon during the bust are picking up steam, speaking to the enduring appeal of affordability. For families who lost their homes during the housing bust and were locked out of the market for several years thereafter, this was a critical lost opportunity," Aaron Terrazas, Zillow's senior economist, said in a press release.
Homes that were foreclosed on during the recession gained the most value in Detroit, where prices shot up 18.2%.
