Home Equity Increasing

The Mortgage Corner

Home Equity Increasing

CoreLogic, a real estate analytics firm, today released new analysis showing approximately 791,000 more residential properties returned to a state of positive equity during the third quarter of 2013, and the total number of mortgaged residential properties with equity currently stands at 42.6 million.

This is helping November home sales in the South Coast, with closed transactions holding strong and huge price increases year-over-year, reports Gary Woods for MLS. 

“Year over year sales are up just slightly from 2012 with the median sales price up to about $940,000 for approximately a 19 percent rise. The average sales price is also up going from about $1.36 million in 2012 to approximately $1.43 million in 2013 for a 5 percent rise while the numbers of escrows are down with 1,203 in ’12 to 1,168 in ‘13 with the median list price on those escrows up about 15 percent to approximately $960,000.

The CoreLogic analysis indicates that nearly 6.4 million homes, or 13 percent of all residential properties with a mortgage, were still in negative equity at the end of the third quarter of 2013. This figure is down from 7.2 million homes, or 14.7 percent of all residential properties with a mortgage, at the end of the second quarter of 2013.

Graph: Calculated Risk

This is a result of the sharp rise in housing values this year.  Of the 42.6 million residential properties with positive equity, 10 million have less than 20 percent equity. Borrowers with less than 20 percent equity, referred to as “under-equitied,” may have a more difficult time obtaining new financing for their homes due to underwriting constraints.

Under-equitied mortgages accounted for 20.4 percent of all residential properties with a mortgage nationwide in the third quarter of 2013, with more than 1.5 million residential properties at less than 5 percent equity, referred to as near-negative equity. Properties that are near negative equity are considered at risk should home prices fall.

“Rising home prices continued to help homeowners regain their lost equity in the third quarter of 2013,” said Mark Fleming, chief economist for CoreLogic. “Fewer than 7 million homeowners are underwater, with a total mortgage debt of $1.6 trillion. Negative equity will decline even further in the coming quarters as the housing market continues to improve.”

California has the twelfth worst negative equity with 13.2 percent of those homes holding mortgages.  Nevada had the highest percentage of mortgaged properties in negative equity at 32.2 percent, followed by Florida (28.8 percent), Arizona (22.5 percent), Ohio (18.0 percent) and Georgia (17.8 percent). These top five states combined accounted for 36.4 percent of negative equity in the U.S.

 

Harlan Green © 2013

Southern California Home Prices Stay Flat in November; Sales Fall

The regional median home price, $385,000, has been about the same since June after a rapid run-up earlier in the year. But prices are expected to start rising again next year.

By Andrew Khouri

December 17, 2013

Southern California home sales plunged in November as prices stayed flat, continuing a cooling trend that started this summer.

But experts expect a jolt in prices soon.

Home prices "will start rising again in the spring, because that's when demand heats up," said Christopher Thornberg, founding partner at Beacon Economics.

The regional median home price, $385,000 in November, has stayed essentially the same since June after a rapid run-up in prices in the first half of this year, according to San Diego research firm DataQuick. Most economists expect prices to rise again next year, though at a slower pace. Mortgage rates are also expected to rise next year, especially if the Federal Reserve pulls back on its stimulus program.

Both trends could add up to higher costs for home buyers, who already have been priced out of many local markets. Higher interest rates could temper prices slightly, but aren't likely to curtail demand much, said Leslie Appleton-Young, chief economist for the California Assn. of Realtors.

"People are kind of used to it and expecting it," she said.

A recent string of positive national economic data has also boosted optimism that the housing market will move toward a more sustainable recovery. Many economists now forecast that the nation's economic growth rate will rise to 3% in 2014, compared with a 2% average annual pace for the last 41/2 years.

"A stronger economy equals more jobs, which equals more household formation, which equals more potential home buyers," Appleton-Young said.

For now, the housing market is muddling through the traditionally slower fall season. Many buyers put off their home search around the holidays.

November prices remained essentially flat for the fifth straight month, inching up just 0.3% from October, DataQuick said Monday. But the median is still 19.9% higher than last year because of rapid price gains last winter and spring, driven by low supply and high demand, particularly from investors.

The current slowdown has been partly seasonal. Buyers scooped up 17,283 new and resale condos and houses in November, down 14.2% from October. But sales were also 10.4% below November 2012.

Sales were 19.8% below average for November, DataQuick said.

Sales were held back by waning investor demand and a continuing shortage of homes for sale, particularly at the lower end of the market. The partial government shutdown in October may have also hurt November real estate closings, the research firm said.

Absentee buyers — mostly investors as well as some second-home buyers — purchased 26.1% of Southland homes last month, down from 27.1% in October and 28.7% in November 2012. Higher prices have made those investments less attractive. The declining availability of distressed properties has also given investors fewer options.

Foreclosed-on homes constituted 6.3% of resales in November, down from 15.4% last year, DataQuick said. Short sales — or sales for less than the amount owed on the home — also declined.

Even if prices start to rise again next spring, the market will be more tame than last spring, with fewer cash buyers and bidding wars, economists said.

"It will be a calmer experience for buyers, but of course a more expensive one," said Jed Kolko, chief economist with real estate firm Trulia.

The California Assn. of Realtors forecasts that the number of listings will expand next year. An increasing number of owners will list homes for sale because they no longer owe more on their mortgages than their homes are worth, the trade group said.

The increasing supply is one reason that the group expects the statewide median price, based on its data, to rise 6% next year, compared with 28% in 2013.

"It's going to be a slower price appreciation," Thornberg said. "That is a good thing."