Profile of Underwater Properties

According to RealtyTrac, here are some characteristics of seriously underwater properties as of the end of 2015:

  • 41% were non-owner occupied; 59% were owner-occupied;
  • 57% had been owned 10 years or less; 43% had been owned more than 10 years;
  • 63% had a loan originated in 2008 or earlier; 37% had a loan originated in 2009 or later;
  • 33% of all properties valued $100,000 or less were seriously underwater; 8.7% of properties valued more than $100,000 were seriously underwater.

Source: RealtyTrac

Owners will be Focusing on Home Improvements

Home owners are expected to increase their home improvement spending expenditures in the next year, says a new study, and recent increases in home equity are partially behind that anticipated surge. Also, a rise in recent home sales activity is a good indicator for the home improvement market, since recent home buyers usually spend about a third more on home improvements than non-movers, even when controlling for age or income differences, according to Harvard University’s Joint Center for Housing Studies’ Leading Indicator of Remodeling Activity.

JCHS has predicted a surge in remodeling on the horizon in the coming years, driven by a rising number of older adults who will want to outfit their homes with more age-in-place home features as well as projects spurred by an aging housing stock.

Source: “Pick-Up Projected in Home Improvement Activity Moving into 2016,” Joint Center for Housing Studies of Harvard University (July 16, 2015)

Media Pessimism on Housing is Unwarranted

While news reports about a dip in the housing market abound, one economist says they’ve got it all wrong. Mark Fleming, chief economist at real estate insurance company First American Financial Corporation, recently wrote an editorial for The Hill urging “politicians, economists, and homebuyers” to take the media’s doom-and-gloom perspective “with a grain of salt—or better yet, the whole shaker.”

Fleming said part of the problem is the seasonality in the housing market, making one particularly cold slice of the calendar a poor choice to use as an indicator of overall market health. But he also criticized the media for assuming that rising housing prices are bad for buyers, when in reality, current home owners tend to move up when their home values go up, due to increases in their equity.

“More existing home owners have been able to sell their existing homes and purchase new ones. This has resulted in the positive signals that we’re seeing all around us in the housing market. To paraphrase the famous saying, ‘it’s the equity, stupid,'” Fleming wrote.

Source: “How not to interpret January’s housing data,” The Hill (March 4, 2015).

Home Prices Likely to Moderate Soon?

Home owners have been enjoying big home price rises across the country, but those increases – often by double-digit percentages – will likely level off soon, according to CoreLogic’s latest Home Price Index, which reflects February data. The index, which also includes distressed sales, was up 12.2 percent in February compared to year-ago levels.

“As the spring home-buying season kicks off, house price appreciation continues to be strong,” says Mark Fleming, CoreLogic’s chief economist. “Although prices should remain strong in the near term due to a short supply of homes on the market, price increases should moderate over the next year as home equity releases pent-up supply.”

The National Association of REALTORS®’ most recent existing-home sales report showed that the median existing-home price for all housing types was $189,000 in February, a 9.1 percent rise over February 2013. “Price gains have translated into an additional $4 trillion of housing wealth recovery over the past three years,” Lawrence Yun, NAR’s chief economist, said in a statement.

Source: CoreLogic and “Home Prices Will Keep Rising, But Level-Off Soon,” Mortgage News Daily (April 1, 2014)

Lenders More Upbeat about ‘Housing Recovery’

Lenders are more optimistic about the direction of the housing recovery, with 71 percent recently surveyed saying home prices are “rising at a sustainable pace,” according to a quarterly survey of U.S. bank professionals conducted by FICO.

Nearly 60 percent of the bankers surveyed say they expect the supply of credit for residential mortgages to meet demand over the next six months.

What’s more, 39 percent say they expect mortgage delinquencies to fall in the next six months, while 45 percent of those surveyed say they expect delinquencies to remain flat. According to FICO, that represents the most optimistic data on delinquencies in the 12 quarters since the survey began.

“The latest survey results, combined with data that indicates the real estate market is improving in many regions, paint a positive picture for a sector of the economy that has been slow to join the recovery,” says Andrew Jennings, chief analytics officer at FICO and head of FICO Labs. “Mortgage lenders have been understandably guarded over the past five years. The improvement in their sentiment should be welcome news, and I wouldn’t be surprised to see lenders cautiously expanding their mortgage and home-equity lending businesses.”

Source: FICO