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Negative equity in US housing market falls considerably
Most major housing markets in the US have seen the number of home owners in negative fall by half since the peak of the economic crisis, new figures show. More than seven million home owners have escaped negative equity since its peak in early 2012, both because of foreclosures and improving home values, says the data from real estate firm Zillow. Overall US negative equity fell to 16.9% in the third quarter, down significantly from its peak of 31.4% in the first quarter of 2012. Zillow expects the negative equity rate will continue to fall to 15.2% by the end of the third quarter of 2015. Roughly 8.7 million home owners remain trapped underwater on their mortgages, but the negative equity rate has halved since 2012 in the markets hit hardest by the recession including Miami, Atlanta, Detroit, Riverside in California and Las Vegas. The firm points out that declining negative equity will have a ripple effect in the housing market, allowing previously stuck homeowners to list their homes for sale and adding to overall for sale inventory just as millennial buyers are expected to begin to enter the market en masse in coming months and years. This new inventory will also help slow home value appreciation, which has been fuelled by high demand for homes and low supply. ‘The market has made terrific strides since bottoming out in late 2011 and early 2012, with millions of underwater home owners freed in just the past few years, and millions more set to surface in coming months and years,’ said Zillow chief economist Stan Humphries. ‘Looking at negative equity helps us understand so many of the currently out of whack dynamics in the housing market, including low inventory, rapid home value appreciation and weak sales volumes,’ he explained. ‘None of these problems will be solved overnight, in large part because negative equity will likely be a part of the housing market for years, and easily into the next decade in some hard-hit areas. But we're moving in the right direction, and time will heal all wounds,’ he added. The research also shows that owners of less expensive homes were more likely to be underwater in the third quarter than owners of more expensive homes, in some cases, much more likely. In Detroit, for example, 49.2% of homes valued in the bottom price tier were underwater, while just 7.6% of the area's highest priced homes were upside down. Similarly, in Chicago, 41.4% of bottom tier homes were in negative equity, compared to 23.9% of middle tier homes and 10.4% of top tier homes. Nationwide, 27.4% of bottom tier homes were in negative equity in the third quarter, compared to 15.7% of middle tier homes and 9.3% of top tier homes. Continue reading
US home prices still rising but rate falls to 5% or below
Home prices in the United States showed continued growth in a majority of metropolitan areas in the third quarter, but all four major regions saw increases at or below 5% from a year ago. The data from the latest quarterly report by the National Association of Realtors (NAR) also shows that the median existing single family home price increased in 73% of measured markets, with 125 out of 172 metropolitan statistical areas (MSAs) showing gains based on closings in the third quarter compared with the third quarter of 2013. Some 47 areas recorded lower median prices from a year earlier but the number of rising markets in the third quarter was mostly unchanged from the second quarter, when price increases were recorded in 71% of metro areas. Sixteen areas had double digit increases in the third quarter of the year, a sharp decline from 54 areas in the third quarter of 2013. Nineteen areas experienced increases in the double digits in the second quarter of this year. According to Lawrence Yun, NAR chief economist, home prices in the third quarter continued to stabilise towards a healthier rate of growth. ‘Home price gains returned to more normalized levels of low to middle single digit rate of appreciation in many metro markets as inventory levels steadily increased,’ he said. ‘Moreover, there are a good number of local markets that are still remarkably affordable with median prices at or under $200,000,’ he added. The national median existing single family home price in the third quarter was $217,300, up 4.9% from the third quarter of 2013. The median price during the second quarter of 2014 increased 4.2% from a year earlier. Total existing home sales, including single family and condo, increased 5.2% to a seasonally adjusted annual rate of 5.12 million in the third quarter from 4.87 million in the second quarter, but are still 3.8% below the 5.32 million pace during the third quarter of 2013. ‘Given the improving labour market and historically low interest rates, more buyers are anticipated to enter the market next year,’ said Yun. The data also shows that total housing inventory continued to make strides at the end of the third quarter at 2.3 million existing homes available for sale, which is 6% higher than a year ago. The average supply during the third quarter was 5.4 months compared to five months in the third quarter of 2013. A supply of six to seven months represents a rough balance between buyers and sellers. NAR president Steve Brown said that traditional buyers are entering a more favourable market. ‘With inventory levels at a rate closer to supporting overall demand, bidding wars are occurring less, giving buyers more time to view homes and secure financing,’ he pointed out. ‘Additionally, Realtors across the country continue to report less investor activity and fewer all cash sales in their markets compared to earlier in the year,’ he added. Distressed homes, that is foreclosures and short sales generally sold at discount, accounted for 9% of… Continue reading
US real estate price growth slows to more realistic level, says latest index
Home value growth has peaked in the United States and the cooling real estate market has banished concerns about a property bubble, according to experts. Home values are still rising in most markets, but the rate of appreciation has slowed considerably, making the housing market less competitive for buyers, according to the latest data from real estate firm Zillow. It means that home buyers who have been priced out of hot markets will welcome the cooling off, and the most recent data should further combat worry about another housing bubble. The rate of annual home value appreciation peaked at 8.1% in April and has fallen in every month since. That means that US home values were up 6.5% year on year at the end of the third quarter, to a Zillow Home Value Index of $176,500. The rate of appreciation is expected to continue to slow. Home values are forecasted to grow at 3%, roughly half their current pace, through the end of the third quarter of 2015, according to the Zillow Home Value Forecast. As the market cools, the dynamic between buyers and sellers is also changing. At the end of the third quarter, there were 18.6% more homes on the market than last year, and more homes listed recently had a price cut. In September, nearly 37% of listings on Zillow had at least one price cut in the past month, up from 33.6% in September 2013. The softening market means home buyers will find less competition. The pace of home value appreciation dropped off significantly in markets that had been among the hottest at times during the housing recovery, particularly in California and the Southwest. In Los Angeles, home price appreciation slowed from 18.5% annually in the third quarter of 2013 to 8.3% over the past year. Annual appreciation in San Francisco slowed to 8.2% compared to 23.5% over the same time period last year. ‘What a difference a year makes. At this time last year, we were worrying about a number of frothy markets that looked like they could be on the edge of another housing bubble, places where homes were appreciating at more than 20 percent per year and where buyers' heads were spinning just trying to keep up,’ said Zillow chief economist Stan Humphries. ‘We always knew these market conditions couldn't last, and it's good to see us now on a more natural and sustained glide path down toward more normal market conditions of roughly 3% annual appreciation and more balance between buyers and sellers,’ he explained. ‘Home values should continue to grow, but that growth will increasingly be driven by traditional market fundamentals like household formation and job growth, and less by artificial stimulants like decreased supply and widespread investor demand,’ he added. Nationally, rents rose 3.5% year on year in the third quarter, to a Zillow Rent Index of $1,335, rising 1.8% compared to the second quarter. Continue reading
