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Foreclosed homes in US increased in value almost twice as much as others
Homes that were foreclosed during the housing crisis in the United States have gained almost twice as much value as other homes, according to a new analysis. But the original owners of those homes have not benefited from that recovery as low end homes were much more likely to be foreclosed, the report from real estate firm Zillow shows. It explains that during the run-up to the housing bubble, many low income earners bought homes, and the home ownership rate rose from about 65% in the middle of the 1990s to almost 70% in 2006. However, when home values crashed in 2007, millions of home owners had to walk away, abandoning their initial investment and missing the opportunity to gain equity as home values recovered. It also points out that the rich-poor divide is growing in the US. In 2000 high income households made an average of six times as much income as the lowest third of households. In 2015, the top third made nearly seven times as much as the lowest third. Of all foreclosed homes, some 46.7% were among the least expensive third of homes. Only 16.6% were among the most expensive third. Foreclosed homes gained value faster than other homes, and in many markets, are more valuable now than they've ever been. Since the lowest point in the housing bust, the average US home has risen 22% in value, while the average foreclosed home has risen 39% in value. The report suggests that in many cases, investors bought foreclosed homes and converted them into rental properties, benefiting from the recovery as home values bounced back. The percentage of single family homes being rented out has risen from 13% to 19% over the past decade. ‘Income inequality is an important topic in the US right now, because the gap between the richest and poorest Americans is growing,’ said Zillow chief economist Svenja Gudell. ‘Many lower income Americans lost their homes during the foreclosure crisis, forcing them to pay ever increasing rents and locking them out of the benefits of the housing market recovery,’ she added. Meanwhile, a separate report from the National Association of Realtors shows that at a national level, housing affordability is down from a year ago as higher prices continue to outpace household income growth. Housing affordability declined from a year ago in April pushing the NAR index from 167.5 to 162.4. The median sales price for a single family home sold in April in the US was $233,700 up 6.3% from a year ago. Regionally, all four regions saw declines in affordability from a year ago. The Midwest had the largest decline of 5.6%, the South had a decline in the affordability index of 3.4%, followed by the West with 2%. The Northeast had the smallest dip in affordability at 1%. By region, affordability is down in all regions from the previous month. The Midwest with a fall of 6.2% had the biggest decline, followed by the South and West… Continue reading
London residential rental market disparate due to Brexit uncertainty
Rents in London have peaked in many locations with the market currently stagnant and facing uncertainty due to the UK deciding to leave the European Union, the latest analysis suggests. While Benham & Reeves Residential Lettings' Heat Map generally shows relatively consistent trends across the capital, second quarter results show a disparate market. For example rents were up more than 4% in Chelsea but in nearby South Kensington they were down more than 4%. Similar contradictory results were to be found across London with adjacent areas showing wildly different fortunes. The report explains that even in the early part of this year, uncertainty over Brexit was affecting the prime central London rental market. Non-nationals were awaiting the result of the referendum while UK nationals were finding better value in East London and the suburbs. Rents in central London were falling, much to the frustration of landlords who were also suffering from the double blow of stagnating capital growth. Rental value growth was to be found in outer London until recently. However, the most recent figures from Benham & Reeves Lettings demonstrates that rental values have finally peaked there, as well. Most areas outside of prime central London saw rents plateau or boast only nominal growth. The report says it is perhaps noteworthy that there is a lack of definable trends. Hampstead Garden Suburb saw growth of over 4.5% while adjacent North Finchley saw rents fall by over 10%. The report suggests that the contrast may be due in part to the reopening of the Northern Line interchange at Tottenham Court Road. The eastern part of the City also saw double digit growth, thanks in part to the release of some highly anticipated new developments in the area, while the western part of the City saw rents fall by over 4%. ‘There is nothing the property market hates more than uncertainty. While the referendum result may not have been what many London residents wanted, it has provided us with an answer,’ said Marc von Grundherr of Benham & Reeves Lettings. ‘Our quarter two results are a reflection of what was happening in the market in the run up to the vote. If anything, the referendum result could be just what the market needed. The rental market always benefits in financially volatile times as people would rather rent than commit to buying a property,’ he explained. ‘Demand is still strong and since the referendum, we are receiving an average of 17 applicants per property compared to 13.9 at this time last year. Notably, many of the applicants have been from the EU,’ he added. Continue reading
UK housing market sees marked drop in activity, particularly in the south
Uncertainty fuelled by the European Union referendum has resulted in a marked drop in activity in the UK housing market with new buyer enquiries down significantly across the country. In June some 36% more chartered surveyors nationally reporting a fall in interest, the lowest reading since the middle of 2008, according to the latest month residential market survey from the Royal Institution of Chartered Surveyors (RICS). The South of the UK has been the hardest hit, with anecdotal evidence suggesting both the EU result and the tax changes, which took effect at the beginning of April, as having an impact on sentiment. There was a further fall in the supply of properties coming available for sale across the UK in June, with the exception of Northern Ireland. This highlights the continuing challenge presented to the market by the lack of stock, according to Simon Rubinsohn, RICS chief economist. The report also shows that 45% more chartered surveyors saw a fall in new instructions in June from a net balance of -31% in May, the steepest fall on record and extends a trend that has been in place since 2014. The market has also seen further decline in sales this month with a third successive monthly drop in activity. Contributors expect this trend to continue with 26% more respondents anticipating a further drop in sales across the UK over the next three months. This is the most negative reading for near term expectations since 1998. House price growth saw a reduction in June and although prices are still rising, they are doing so at a more moderate pace with 16% more respondents reported having seen prices rise rather than fall across the UK. London remains the only region where respondents are seeing prices fall with a -46% net balance but this is largely being concentrated in the central zones. ‘That said, near term price expectations are now in negative territory across the whole of the UK with 27% more respondents across the UK expecting to see prices fall rather than rise over the next three months,’ Rubinsohn pointed out. He also pointed out that looking further ahead over the next 12 months, sales expectations have turned negative for the first time in four years with 12% more contributors expecting transactions to fall rather than rise. Significantly, over the next 12 months the dip in prices is only expected to persist in London and East Anglia with net balances of -39% and -34% respectively, and longer term, prices are still expected to rise, albeit a little less than previously anticipated, with a cumulative increase of 14% projected for the next five years. Rent expectations over the same time horizon remain more resilient and are still broadly consistent with an increase of just over 20%, the report also shows. ‘Big events such as elections typically do unsettle markets so it is no surprise that the EU referendum has been associated with a downturn in activity. However, even without… Continue reading
