– The number of underwater borrowers declined by 16% in the first three months of 2017
– 350,000 borrowers regained equity in Q1 2017, bringing the total underwater population down to 1.8 million
– The underwater population has fallen by nearly one million borrowers since last year, a 35% annual decline
– Nearly half of remaining underwater borrowers live in the bottom 20% of homes by price in their markets
– Tappable equity has risen by $695 billion from last year, bringing total lendable equity to just under $5 trillion
– Over 40 million Americans have tappable equity available in their homes today; the largest population on record
The Data and Analytics division of Black Knight Financial Services, Inc. released its latest Mortgage Monitor Report, based on data as of the end of May 2017. This month, Black Knight finds that rising home prices have both decreased the number of borrowers underwater on their mortgages while increasing the amount of tappable – or lendable – equity available to homeowners. As Black Knight Data & Analytics Executive Vice President Ben Graboske explained, continued growth in the equity landscape has also improved the net worth of many – but not all – homeowners with mortgages. “The steady upward trajectory of home prices continues to improve the equity positions of many homeowners,” said Graboske. “This is plainly visible in the number of borrowers who are underwater on their mortgages, owing more than their homes are worth. Over the past year, we’ve seen a 35% decline in the total underwater population, with a 16% decline in that population over the first three months of 2017 alone. Home prices rose 2.3% in the first quarter, as compared to 1.8% over the same period last year, helping an additional 350,000 borrowers regain equity in their homes. As of today, there are 1.8 million underwater borrowers remaining, the first time this population has fallen below two million since 2006. “What stands out is the disparity we see in this improvement. As has been the case for some time now, negative equity has become more and more a localized phenomenon. But it’s also becoming concentrated among a particular class of homeowner. Nearly half of all borrowers who remain underwater own homes in the lowest 20% of prices in their respective markets. While the nation as a whole now has a negative equity rate of just 3.6%, among owners in that lowest price tier, it’s over eight%. In fact, these lowest-price-tier properties are more than twice as likely to be underwater as those in the next price tier up, and 6.5 times more likely to be underwater than those living in the top 20% of the market. This is the highest differential we’ve seen between high and low price tiers since we began keeping track in 2005. In some areas, the disparity between the lowest price tier and the highest is staggering. In Detroit, for example, borrowers whose homes are in the lowest 20% of prices are 50 times more likely to be underwater than those in the top 20%.”
Rising home prices are also increasing the amount of equity available for homeowners to borrow against. Looking solely at borrowers with at least 20% equity in their homes, Black Knight found that total tappable (or lendable) equity increased by $695 billion dollars over the last year. “Over 40 million Americans with a mortgage now have tappable equity available in their homes,” Graboske continued. “This is the largest this population has ever been. Growth over the last year brought the total lendable equity market to just under $5 trillion as of the end of Q1 2017. If home prices continue to rise at or near their current rate of appreciation, tappable equity will likely hit record highs by this summer. Though nearly half of the country’s 100 largest metropolitan areas have already reached record levels of tappable equity, as a whole these areas remain geographically concentrated. The majority are found in more coastal areas, specifically in large city centers. In fact, more than half of the nation’s tappable equity lies in the 10 largest metro areas. California alone contains nearly 40% of available equity. While the growth in tappable equity is obviously good news for both homeowners and lenders alike, it does represent some risk as well. Investors in mortgages and mortgage servicing rights – as well as others with a stake in the broader mortgage market – need to be prepared to account for a higher share of equity-driven prepayment risk, as well as an increased chance of borrowers adding on second liens that primary loan servicers and investors may not be aware of.” As was reported in Black Knight’s most recent First Look release, other key results include:
- Total US loan delinquency rate: 3.79%
- Month-over-month change in delinquency rate: -7.13%
- Total US foreclosure pre-sale inventory rate: 0.83%
- Month-over-month change in foreclosure pre-sale inventory rate: -2.97%
- States with highest percentage of non-current loans: MS, LA, AL, WV, ME
- States with the lowest percentage of non-current* loans: OR, ID, MN, ND, CO
- States with highest percentage of seriously delinquent loans:MS, LA, AL, AR, TN
Amazon is quietly rolling out its own Geek Squad to set up gadgets in your home
For 15 years, Best Buy’s Geek Squad installation and repair service has served as one key advantage over Amazon that the e-commerce giant seemed unlikely to match.But over the last few months, Amazon has quietly been hiring an army of in-house gadget experts to offer free Alexa consultations as well as product installations for a fee inside customer homes, multiple sources told Recode, and job postings confirm. The new offering, which has already rolled out in seven markets without much fanfare, is aimed at helping customers set up a “smart home” — the industry term used to describe household systems like heating and lighting that can be controlled via apps, and increasingly by voice. While Amazon has a marketplace for third parties to offer home services like TV mounting and plumbing, these new smart-home-related services seem important enough to Amazon that it is hiring its own in-house experts. And perhaps for good reason. Smart-home gadgets make up one of the fastest-growing segments of the consumer electronics industry, but they can be difficult to set up and integrate with each other. That hurdle has led to higher-than-normal return rates, experts say, so Amazon is likely looking at the in-home services as one way to lower that number. Perhaps more importantly, controlling the smart home by voice is one of the most promising use cases for Alexa, the virtual assistant built into the Echo line of gadgets, which Amazon is betting heavily on. So it’s not totally surprising that Amazon would make the effort to close the education gap for these products by sending its own hires into customer homes. An Amazon spokesman declined to comment. Amazon is charging $99 for installation services like setting up an Ecobee4 Alexa-enabled smart thermostat, though some services are discounted by 20% this week. Multi-device set-ups that take more than an hour may cost more. In eligible cities, shoppers can book the installations during the checkout process.
New York City’s ‘Billionaire’s Row’ is dead — and a record-breaking foreclosure could be the ‘nail in the coffin’
A full-floor penthouse in the landmark One57 condo building is headed to the auction block after it was seized under foreclosure, Bloomberg reported. This is most likely the largest foreclosure in the history of high-end real estate in New York City, experts say. “I don’t know of a foreclosure that’s larger than that,” Donna Olshan, president of Olshan Realty, told Bloomberg. The apartment, which was the eighth-priciest sold in the building, will go to auction on July 19. It was purchased for $50.9 million in 2014, with a $35.3 million mortgage loan from Banque Havilland. It was due to be paid in full a year after purchase, but no such payment was made by the shell company the unit was registered under. Havilland is now forcing the auction to recoup the funds it’s missing, plus interest, according to court filings. One57 is emblematic of New York City’s Billionaire’s Row, a stretch of 57th Street near Central Park, which in recent years has become a magnet for new condos courting high-priced investment. One57 is considered the most expensive of the new buildings, with record-breaking sales that included a $100.5 million top-floor penthouse. This is the second apartment in the building to face foreclosure in the last two months. A unit on the 56th floor, which sold for $21.4 million in July 2015, hit the auction block on June 14. It’s unclear if the property has changed hands yet.
Oil pares losses, but rising supply a worry
Oil dipped on Monday, paring some earlier losses triggered by rising drilling activity in the United States and no let-up in supply growth from both OPEC and non-OPEC exporters, but the outlook remained gloomy. Brent crude futures were last down 11 cents on the day at $46.60 a barrel by 1430 GMT, while US crude futures were last down 13 cents at $44.10 a barrel. “The market is in trouble and looks very vulnerable to lower numbers,” PVM brokerage said in a note. The Organization of the Petroleum Exporting Countries has agreed with some non-OPEC members to curtail production until March 2018 but the move has failed to eliminate a global glut of crude. Several key OPEC ministers will meet non-OPEC Russia on July 24 in St Petersburg, Russia, to discuss the situation in oil markets. Kuwait said on Sunday that Nigeria and Libya had been invited to the meeting and their production could be capped earlier than November, when OPEC is scheduled to hold formal talks, according to Bloomberg. Libya said on Monday it was ready for dialog but added that its political, economic and humanitarian situation should be taken into account in talks on caps. Brent prices are 17% below their 2017 opening despite strong compliance by OPEC with the production-cutting accord.