Zillow Sees Continued Growth in Home Prices

Zillow reports that the continued growth in U.S. home prices does not rule out the possibility of an economic recession.

As U.S. economic growth slows, many market observers worry about a reprise of the housing bust that accompanied the Great Recession. While it is true that housing and the broader economy are linked, there is good reason to doubt that we will see another collapse in prices for the housing market. Evidence from other recessions in the last 23 years shows that it is perfectly possible for the country, and individual states, to go into recessions without accompanying drops in home values.

There have only been two national recessions in the time frame covered by Zillow’s home value data: the dot-com bust from March to November 2001, and the Great Recession from December 2007 to June 2009, as dated by National Bureau of Economic Research. Outside these time frames, however, some isolated parts of the country experienced slowdowns in economic activity.

Several states with large energy sectors experienced the local equivalent of recessions when oil prices fell dramatically. In particular, Alaska, Louisiana, North Dakota, Oklahoma, and Wyoming each fell into recession starting in 2015, for durations ranging from about half a year to 1.5 years. But home values did not fall in any of these states at any point in their localized recessions; in fact, annual home value growth averaged 4.3%, compared to 5.2% average growth in states that experienced economic expansion in 2015 and 2016.

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