Home prices peaked in April 2006, and have yet to rise above that level. More than a decade and thousands of foreclosures later, advisers are still dealing with problems from the housing collapse.
The S&P/Case-Shiller 20-City Composite Home Price Index hit 206.65 in April 2006, and swooned down to 137.04 in January 2012 – a 51% decline. For buyers who put down 20% back then, the decline in prices wiped out their entire investment, and then some. The index's most recent reading of 198.38 is still 4.2% below its 2006 high.
Among the problems plaguing the housing market today:
• Tight inventory. "We have a lot of willing buyers unable to find a home," said George Ratiu, managing director of housing and commercial research for the National Association of Realtors. Some homeowners are still underwater from the housing collapse. Another reason: The great migration of baby boomers to smaller houses hasn't materialized. "They like the space," Mr. Ratiu said. "Their current homes are more accommodative to family visits."
• Labor shortages. During the housing downturn of 2006-2012, many workers abandoned construction altogether, and shortages still plague the construction market. Currently, for example, 33% of builders surveyed by the National Association of Home Builders say that there is a severe shortage of framers, and 29% say there's a severe shortage of rough carpenters.
• Declining affordability. As home prices have recovered, incomes have not risen proportionately. The NAR's housing affordability index has declined from 165.8 in 2014 to 153.3 in the most recent quarter, Mr. Ratiu said. "It's still in good territory, but it's not a good trend." And many young first-time home buyers are saddled with student debt and uncertain job prospects.
An estimated 7 million to 10 million homes were lost to foreclosure during the housing collapse, and that surge has largely ended. Forclosure filings peaked at 2.87 million in 2010, according to RealtyTrac. They fell to 933,045 in 2016.
But the effects of the crisis linger.
"I do have a couple of clients with little to no equity in their homes, which makes dragging that debt and those payments into retirement a drag on other assets and cash flows," said Matt Chancey, an Orlando financial planner.
Others say they have clients with real estate investments that still haunt them. Steve Branton, a financial planner with Mosaic Partners in San Franciso, notes that housing prices there have recovered. "But I do have clients who bought vacation homes in Nevada which, after the housing collapse, became public or affordable housing. That investment will never recover," he said.
And others are simply disappointed with the returns from their homes, which is often the largest chunk of Americans' savings.
"Most people today don't understand why their house is worth only slightly more than it was 12 years ago," said Ray Ferrara, CEO of ProVise Management Group. "The good news is that prices have mostly recovered, but there has really been little appreciation from where prices were at the peak — unlike equity prices, which recovered and went on to set new highs."
Clients are also struggling with how to help their children afford homes. One solution — albeit a sometimes uncomfortable one — is to have them live at home for a few years so they can build a nest egg.
And, Mr. Ferrara noted, any financial help to children buying a home has to be a gift. "The lingering effect of that is that mom and dad have less money to enjoy retirement with," he said.