By As I cruised through real estate headlines this past week, two stood out as big wins for the industry and homeowners:
Rising home prices bring 700,000 homeowners above water (Inman News)
Housing passes a milestone (Wall Street Journal)
The underwater story
This is a big one. The problem runs deep, has political implications and also has created a major hurdle for the recovery.
Underwater homeowners can’t sell like other homeowners can. Therefore, unless they’re looking for a short sale or have to sell due to other circumstances, they’re not putting their houses on the market. This actually has created constrained inventory in some markets where demand is really healthy – leaving buyers with few options and competitive bidding situations.
The report last week from CoreLogic that rising home prices helped more than 700,000 homeowners regain equity in their homes during the first quarter was a glimmer of good news on the negative equity front.
The number of U.S. homeowners with negative equity declined 6% in the first quarter, leaving 23.7% of all homes with mortgages underwater (down from 25.2% in the fourth quarter).
This is solid, positive news based on data. But we also can’t forget that 11.4 million borrowers still owe more on their mortgage than their homes are worth. It will take some time for the market to absorb and fully recuperate from this. The good news is that things are heading up in a big way.
The milestone story
The Wall Street Journal has proclaimed, “The housing bust is over.”
While many of us might point to various statistics that have hinted at this story over the last few months already, this feels like a bigger deal because of where it’s coming from – the business press.
The Journal cites the following stats to make the case:
Nearly 10% more existing homes were sold in May than in the same month a year earlier.
The fraction of homes that are vacant is at its lowest level since 2006.
Builders began work on 26% more single-family homes in May than in May 2011.
A WSJ survey of forecasters found that 44 believe the housing market has reached its bottom; only three don’t.
The Journal states: “From here on, housing is unlikely to drag the U.S. economy down further. It will instead reflect the strength or weakness of the overall economy: The more jobs, the more confident Americans are about keeping their jobs, the more they are willing to buy houses.”
The biggest threat however is the shadow inventory we hear a lot about. We’ll save that for another post and take the good news in stride today.
It’s going to be another interesting year for housing markets!
