Tag Archives: california
Negative equity still preventing the full recovery of the US housing market
Despite improvements in the negative equity rate, underwater mortgages are holding back the housing market in the United States from full recovery, especially in hard hit areas, a new report suggests. The rate of negative equity among home owners dropped a full percentage point in the third quarter of 2015, from 14.4% to 13.4%, and down 16.9% from a year ago, according to the latest research from real estate firm Zillow. It said that declining negative equity will allow almost a million newly freed home owners who have not yet refinanced or have been waiting to sell to do so before mortgage rates rise, which will likely happen in coming weeks. It also pointed out that negative equity affects not just the home owners who are underwater, but entire markets where high rates of negative equity are slowing recovery. Negative equity is one of the most persistent reminders of the housing market crash. Home owners who owe more on their mortgage than their homes are worth cannot sell, which holds back markets from recovering. So, some eight years after the housing crash, it remains a major barrier to a full recovery in certain markets. In Las Vegas, for example, 22% of home owners remain underwater, and another 19% are effectively underwater, meaning they have less than 20% equity in their home and therefore can't cover the cost of selling their home and buying another. Las Vegas has had the highest negative equity rate in the country for the past four and a half years, and Kansas City and Cleveland, with 16.6% and 16.8% negative equity respectively, are not far behind. San Francisco and San Jose are the only large markets where less than 5% of home owners are underwater. Almost a million home owners were freed from negative equity in the third quarter of 2015. The improving rate means those people may be able to sell or refinance their homes before mortgage interest rates rise, as they are expected to do in the coming weeks. ‘Negative equity has become almost an afterthought in a handful of the nation's hottest markets, but is holding back the recovery in dozens of large markets nationwide,’ said Zillow chief economist Svenja Gudell. ‘Despite steady declines in negative equity, many cities are still facing tight inventory, especially among entry level homes. Those homes that are available are often not in demand and stay on the market for a long time. This can be extremely frustrating for buyers and sellers alike, as they come face to face with the difficult side effects of negative equity,’ she explained. She also pointed out that negative equity affects individual home owners, but markets with high negative equity rates tend to have fewer homes for sale, especially lower priced homes favoured by first time home buyers. In markets with a lot of negative equity, homes generally take longer to sell than in other places. The top five large metros with the smallest share of underwater… Continue reading
Number of first time buyers in the US falls for third year in a row
The share of first time buyers in the United States fell for the third year in a row and remained at its lowest point in nearly three decades, according to a new survey. The overall strengthening pace of home sales over the past year was driven more by repeat buyers with dual incomes, according to the annual survey released by the National Association of Realtors. The survey also found that nearly 90% of all respondents worked with a real estate agent to buy or sell a home which pushed for sale by owner transactions to their lowest share ever. The number of first time buyers was down to 32% from 33% a year ago, which is the second lowest share since the survey began in 1981 and the lowest since 1987 when it was 30%. Historically, the long term average shows that nearly 40% of primary purchases are from first time buyers. According to Lawrence Yun, NAR chief economist, the housing recovery's missing link continues to be the absence of first time buyers. ‘There are several reasons why there should be more first–time buyers reaching the market, including persistently low mortgage rates, healthy job prospects for those college educated, and the fact that renting is becoming more unaffordable in many areas,’ he said. ‘Unfortunately, there are just as many high hurdles slowing first time buyers down. Increasing rents and home prices are impeding their ability to save for a down payment, there's scarce inventory for new and existing homes in their price range, and it's still too difficult for some to get a mortgage,’ he explained. Yun pointed out that this year's survey perhaps offers additional clues to why fewer first time buyers are reaching the market. ‘First time buyers reported that debt in all forms delayed saving for a down payment for a median of three years, and among the 25% who said saving was the most difficult task, 58% said student loans delayed saving,’ he said. ‘With a median amount of student loan debt for all buyers at $25,000, it's likely some younger households with even higher levels of debt can't save for an adequate down payment or have decided to delay buying until their debt is at more comfortable levels,’ he added. With strong price growth in many markets and fewer first time buyers, the results in this year's survey reveal a market with a higher share of married couples at 67% percent, up from 65% last year, who have higher household income than previous years. Married repeat buyers have the highest income among all buyers at $108,600, while the share of single female buyers decreased from 16% to 15% and male buyers remained flat at 9%. ‘Similar to some of the obstacles facing first time buyers, tighter credit conditions and having less purchasing power than households with dual incomes likely led to the share of single female buyers declining to its… Continue reading
Pending home sales fall across the United States, latest index shows
Pending home sales in the United States cooled in September for the second month in a row, taking them to their second lowest index reading in 2015, according to the latest index. All four major regions experienced a pullback in activity in September, the Pending Home Sales Index, a forward looking indicator based on contract signings, from the National Association of Realtors shows. The index declined 2.3% to 106.8 in September from a slightly downwardly revised 109.3 in August but is still 3% above September 2014 when it was 103.7. With last month's decline, the index is now at its second lowest level of the year but has still increased year on year for 13 straight months. Lawrence Yun, NAR chief economist, said that a combination of factors likely led to September's dip in contract signings. ‘There continues to be a dearth of available listings in the lower end of the market for first time buyers and realtors in many areas are reporting stronger competition than what's normal this time of year because of stubbornly low inventory conditions,’ he explained. ‘Additionally, the rockiness in the financial markets at the end of the summer and signs of a slowing US economy may be causing some prospective buyers to take a wait and see approach,’ he added. Despite contract activity softening from the more robust levels seen earlier this year, Yun believes the housing market will still likely be one of the brighter spots in the economy in coming months. ‘With interest rates hovering around 4%, rents rising at a near eight year high, and job growth holding strong, albeit at a more modest pace than earlier this year, the overall demand for buying should stay at a healthy level despite some weakness in the overall economy,’ he added. The PHSI in the Northeast fell 4% to 89.6 in September, but is still 3.9% above a year ago. In the Midwest the index declined 2.5% to 104.7 in September, but remains 4.3% above September 2014. Pending home sales in the South decreased 2.6% to an index of 118.3 in September and are now 0.1% below last September. The index in the West inched back 0.2% in September to 104.4, but is still 6.6% above a year ago. Continue reading
