– Nearly 91,000 Homeowners Regained Equity in Q1 2017
– 3.1 Million Residential Properties with a Mortgage Still in Negative Equity
– Average Homeowner Equity Increased from Q1 2016 to Q1 2017
CoreLogic released its Q1 2017 home equity analysis which shows US homeowners with mortgages (roughly 63% of all homeowners) have seen their equity increase by a total of $766.4 billion since Q1 2016, an increase of 11.2%. Additionally, the average homeowner gained about $13,400 in equity between Q1 2016 and Q1 2017. In Q1 2017, the total number of mortgaged residential properties with negative equity decreased 3% from Q4 2016* to 3.1 million homes, or 6.1% of all mortgaged properties. Compared to Q1 2016, negative equity decreased 24% from 4.1 million homes, or 8.1% of all mortgaged properties. “One million borrowers achieved positive equity over the last year, which means mortgage risk continues to steadily decline as a result of increasing home prices,” said Dr. Frank Nothaft, chief economist for CoreLogic. “Pockets of concern remain with markets such as Miami, Las Vegas and Chicago, which are the top three for negative equity among large metros, with each recording a negative equity share at least twice or more the national average.” Negative equity, often referred to as being “underwater” or “upside down,” applies to borrowers who owe more on their mortgages than their homes are worth. Negative equity can occur because of a decline in home value, an increase in mortgage debt or both. Negative equity peaked at 26% of mortgaged residential properties in Q4 2009 based on CoreLogic equity data analysis, which began in Q3 2009. The national aggregate value of negative equity was approximately $283 billion at the end of Q1 2017, down quarter over quarter by approximately $2.6 billion, or 0.9%, from $285.5 billion in Q4 2016 and down year over year by approximately $21.5 billion, or 7.1%, from $304.5 billion in Q1 2016. “Homeowner equity increased by over $750 billion during the last year, the largest increase since mid-2014,” said Frank Martell, president and CEO of CoreLogic. “The rising cushion of home equity is one of the main drivers of improved mortgage performance. It also supports consumer balance sheets, spending and the broader economy.”
Highlights as of Q1 2017:
– Texas had the highest percentage of homes with positive equity at 98.4%, followed by Utah (98.2%), Washington (98.2%), Hawaii (98.1%) and Colorado (98%).
– On average, homeowner equity increased about $13,400 from Q1 2016 to Q1 2017 (for mortgaged properties). Washington had the highest year-over-year average increase at $37,900, while Alaska experienced a small decline.
– Nevada had the highest percentage of homes with negative equity at 12.4%, followed by Florida (11.1%), Illinois (10.5%), New Jersey (10.2%) and Connecticut (9.9%). These top five states combined account for 32.6% of outstanding mortgages in the US
– Of the 10 largest metropolitan areas by population, San Francisco-Redwood City-South San Francisco, CA had the highest percentage of mortgaged properties in a positive equity position at 99.4%, followed by Denver-Aurora-Lakewood, CO (98.6%), Houston-The Woodlands-Sugar Land, TX (98.5%), Los Angeles-Long Beach-Glendale, CA (97.3%) and Boston, MA (95.6%).
– Of the same 10 largest metropolitan areas, Miami-Miami Beach-Kendall, FL had the highest percentage of mortgaged properties in negative equity at 15.7%, followed by Las Vegas-Henderson-Paradise, NV (14.2%), Chicago-Naperville-Arlington Heights, IL (12%), Washington-Arlington-Alexandria, DC-VA-MD-WV (8%) and New York-Jersey City-White Plains, NY-NJ (5.3%).
Wholesale inventories slide 0.5% in April, falling short of estimates
US wholesale inventories dropped 0.5% in April, falling short of economists’ expectations, the Commerce Department announced on Friday. Economists were expecting a gain of 0.2% in April, according to a poll by Thomson Reuters. Last month, the Commerce Department announced wholesale inventories climbed 0.2% for March. Sales by merchant wholesalers for April, excluding manufacturers’ sales branches and offices, and after adjustment for seasonal variations, were $462.3 billion, down 0.4% for the latest period, the group added on Friday. Total inventories by merchant wholesalers were $591 billion at the end of the month. The April inventories/sales ratio came in at 1.28, compared to 1.35 a year ago. For the first quarter overall, inventory investment was on the weaker side, taking away from growth. Wholesale inventories data for May will be released on July 11, the Commerce Department announced.
NAR – 5 root causes for US’s depressed homeownership rate
Despite steadily improving local job markets and historically low mortgage rates, the US homeownership rate is stuck near a 50-year low because of a perverse mix of affordability challenges, student loan debt, tight credit conditions and housing supply shortages. That’s according to findings of a new white paper titled, “Hurdles to Homeownership: Understanding the Barriers” (link is external) released today in recognition of National Homeownership Month at the National Association of Realtors® Sustainable Homeownership Conference at University of California, Berkeley. Led by a group of prominent experts, including NAR 2017 President William E. Brown, NAR Chief Economist Lawrence Yun and Berkeley Hass Real Estate Group Chair Ken Rosen, today’s conference addresses the dip and idleness in the homeownership rate, its drag on the economy and what can be done to ensure more creditworthy households have the opportunity to buy a home. “The decline and stagnation in the homeownership rate is a trend that’s pointing in the wrong direction, and must be reversed given the many benefits of homeownership to individuals, communities and the nation’s economy,” said Brown, a Realtor® from Alamo, California. “Those who are financially capable and willing to assume the responsibilities of owning a home should have the opportunity to pursue that dream.” One of Brown’s main objectives as president of NAR is identifying ways to boost the homeownership rate in a safe and responsible way. The research, which was commissioned by NAR, prepared by Rosen Consulting Group, or RCG, and jointly released by the Fisher Center for Real Estate and Urban Economics at the University of California, Berkeley Haas School of Business, identifies five main barriers that have prevented a significant number of households from purchasing a home.
– Post-foreclosure stress disorder: There are long-lasting psychological changes in financial decision-making, including housing tenure choice, for the 9 million homeowners who experienced foreclosure, the 8.7 million people who lost their jobs, and some young adults who witnessed the hardships of their family and friends. While most Americans still have positive feelings about homeownership, targeted programs and workshops about financial literacy and mortgage debt could help return-buyers and those who may have negative biases about owning.
– Mortgage availability: Credit standards have not normalized following the Great Recession. Borrowers with good-to-excellent credit scores are not getting approved at the rate they were in 2003, prior to the period of excessively lax lending standards. Safely restoring lending requirements to accessible standards is key to helping creditworthy households purchase homes.
– The growing burden of student loan debt: Young households are repaying an increasing level of student loan debt that makes it extremely difficult to save for a down payment, qualify for a mortgage and afford a mortgage payment, especially in areas with high rents and home prices. As NAR found in a survey released last year, student loan debt is delaying purchases from millennials and over half expect to be delayed by at least five years. Policy changes need to be enacted that address soaring tuition costs and make repayment less burdensome.
– Single-family housing affordability: Lack of inventory, higher rents and home prices, difficulty saving for a down payment and investors weighing on supply levels by scooping up single-family homes have all lead to many markets experiencing decaying affordability conditions. Unless these challenges subside, RCG forecasts that affordability will fall by an average of nearly 9 percentage points across all 75 major markets between 2016 and 2019, with approximately 5 million fewer households able to afford the local median-priced home by 2019. Declining affordability needs to be addressed with policies enacted that ensure creditworthy young households and minority groups have the opportunity to own a home.
– Single-family housing supply shortages: “Single-family home construction plummeted after the recession and is still failing to keep up with demand as cities see increased migration and population as the result of faster job growth,” said Rosen. “The insufficient level of homebuilding has created a cumulative deficit of nearly 3.7 million new homes over the last eight years.” Fewer property lots at higher prices, difficulty finding skilled labor and higher construction costs are among the reasons cited by RCG for why housing starts are not ramping up to meet the growing demand for new supply. A concentrated effort to combat these obstacles is needed to increase building, alleviate supply shortages and preserve affordability for prospective buyers.
Trump announces push to speed up ‘desperately-needed infrastructure’
President Donald Trump on Friday pledged new efforts to speed approvals for highways and other projects as part of his proposal for a $1 trillion boost to fix aging US infrastructure. At the US Transportation Department, Trump said his goal was to solve “one of the biggest obstacles to creating this new and desperately-needed infrastructure – and that is the painfully slow, costly and time-consuming process for getting permits and approvals to build.” Trump said the White House is moving ahead with “massive permit reform” and setting up a new council to help project managers navigate bureaucratic hurdles. “This Council will also improve transparency by creating a new online dashboard allowing everyone to easily track major projects through every stage of the approval process,” Trump said. He said the council will make sure that any federal agency that “consistently delays projects by missing deadlines will face tough, new penalties. We will hold the bureaucracy accountable.”