Homeowner Equity Gain Averages in Double Digits

 Housing Market News from Core Logic
Homeowner Equity Gain Averages in Double Digits
Nine years after what is acknowledged as the start of the housing crisis about 2.5 million homeowners remain underwater, but that number is down by 0.7 million since the third quarter of 2016. CoreLogic said today that those homeowners remain in negative equity despite rapid increases in the equity of homeowners nationwide. Negative equity applies to borrowers who owe more on their mortgages than their homes are worth, and can occur because of a decline in a home’s value, an increase in mortgage debt or both.

The company’s third quarter 2017 equity analysis shows homeowners with a mortgage (approximately 63 percent of the total) have seen their equity increase by 11.8 percent year-over-year, an average of $14,888 per homeowner and a nationwide aggregate of $870.6 billion.

Negative equity nationwide had an aggregate value of approximately $275.7 billion at the end of Q3 2017, down quarter-over-quarter by approximately $9.1 billion, or 3.2 percent and year-over-year by approximately $9.5 billion, or 3.3 percent, from $285.2 billion in Q3 2016.

Between the second and third quarters of this year, 260,000 mortgaged properties regained equity and the negative equity tally decreased by 9 percent. The current rate of underwater homes is 4.9 percent. Negative equity peaked at 26 percent of mortgaged residential properties in Q4 2009 based on CoreLogic equity data analysis, which began in Q3 2009.

No surprise, given the rapid acceleration of home prices in the region, that equity increased the most in western states. Homeowners in Washington gained an average of $40,000 in home equity and those in California an average of $37,000. There were no states that experienced a decline.

Homeowner equity increased by almost $871 billion over the last 12 months, the largest increase in more than three years,” said Dr. Frank Nothaft, chief economist for CoreLogic. “This increase is primarily a reflection of rising home prices, which drives up home values, leading to an increase in home equity positions and supporting consumer spending.”

“While homeowner equity is rising nationally, there are wide disparities by geography,” said Frank Martell, president and CEO of CoreLogic. “Hot markets like San Francisco, Seattle and Denver boast very high levels of increased home equity. However, some markets are lagging behind due to weaker economies or lingering effects from the great recession. These include large markets such as Miami, Las Vegas and Chicago, but also many small- and medium-sized markets such as Scranton, Pa. and Akron, Ohio.”

Sources: sharpcredit.com

Top 3 Economic Factors Impacting Housing Affordability
As 2017 starts to wind down, CoreLogic’s Chief Economist Frank Nothaft analyzes what he predicts will be the central theme for the 2018 housing market—the continuing erosion of affordability.

Although the challenges of affordability have already spread to many high-cost markets, according to Nothaft, the issue is likely to extend to more moderate-cost places across the nation. So what 2017 economic factors are driving this expansion of diminishing affordability into 2018?

As the Federal Reserve continues to signal its plan to spike up interest rates, this is the first concern for housing affordability—as it pushes up other short-term interest rates including initial rates on adjustable rate mortgages and reduces its portfolio of long Treasuring and mortgage-backed securities.

“And while fixed-rate mortgage rates remain at historically low levels, they are already up about three-fourths of a percentage point above their record low,” Nothaft said. “Fixed-rate loans are forecast to rise in 2018 by at least one-half a percentage point to as much as a full percentage point.”

The second factor is the increasing home prices. As previously reported, CoreLogic’s National Home Price Index rose 6 percent year-over-year, with the less expensive homes rising the fastest.

According to Nothaft’s analysis, when combined with the rise in mortgage rates, the price increase for lower-priced homes translates into an estimated 15 percent rise over the last year in the monthly principal and interest payment for a first-time buyer.

“We expect this trend to continue in 2018, with the CoreLogic Home Price Index for the U.S. up another 5 percent,” Nothaft said.

The final factor is the lack of homes for sale, and Nothaft specifically mentions starter homes and first-time buyers experiencing the greatest impact.

As low inventory creates competition for the rising desire for homeownership by a growing population of millennial homebuyers, Nothaft notes that home sale conditions will favor the seller by two main aspects. First, multiple contracts per home. Second, more homes that sell at or above listing prices.

However, the final prediction made is that the affordability problem could be solved by new construction and rehabilitation of housing stock.

“We expect housing starts to increase 5 percent in 2018, but more building is necessary to alleviate the affordability challenges in many higher-cost American cities,” Nothaft forecasts.

To view the full U.S. Economic Outlook: December 2017, click here.

Source: themreport.com