Tag Archives for " Housing Recovery "
Courtesy of the Mecklenburg TIMES
By: Roberta Fuchs January 13, 2015
The number of the Charlotte area’s mortgaged homes with negative equity fell to 6.8 percent in the third quarter of 2014 from 8.4 percent in third quarter 2013, according to CoreLogic.
The third-quarter 2014 figure rose slightly, however, from the second quarter of 2014, when 6.7 percent, or 31,652, of the homes in the Charlotte-Gastonia-Concord metropolitan statistical area carried negative equity. In the third quarter, that figure was 32,244 homes.
Negative equity means that borrowers owe more on their mortgages than their homes are worth. The situation can occur because of a decline in real estate value, an increase in mortgage debt, or a combination of both.
The CoreLogic report found that an additional 3 percent of area homeowners with a mortgage in the third quarter had near-negative equity, or less than 5 percent equity in their homes. The number of Charlotte area homes in near-negative equity decreased from the previous year, when 4.1 percent of homeowners with a mortgage had less than 5 percent equity in their properties.
The number of mortgages that were near negative equity in the second quarter of 2014 was 2.9 percent.
John Chesser, senior analyst at UNC Charlotte Urban Institute, says he believes the year-over-year decline in negative and near-negative equity reflects the steady recovery in the overall housing market, and strong growth in the local employment rate, which has boosted Charlotte-area home sales.
“The rise in negative equity during the recession was a natural consequence of the rapid drop in home values,” Chesser said. “Now, lending is tighter, so new home purchases result in a more solid equity position for purchasers and the overall rise in prices is helping reduce the negative equity situation that existing owners have been in over the last few years.”
Nancy Braun, owner and broker-in-charge of Showcase Realty in Charlotte’s South End, agrees. She attributes the drop in negative equity to a strong appreciation in housing prices, which is a reflection of the local economy.
“Plus,” she said, “We still have investors purchasing in the Charlotte-area market, which has bumped up prices as well. Low inventory is also boosting higher offers.”
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The number of mortgage applications surprisingly increased even with the relatively quiet week for interest rates.
According to the Mortgage Bankers Association (MBA), the total number of mortgage applications increased 4.9 percent week-to-week for the week ending November 14, which was mostly brought about by home buying applications. Though refinance applications only increased one percent week-to-week, home purchase applications jumped 12 percent, which has ben the highest since July. These results were adjusted for the Veterans Day holiday as well as the seasonal trends.
“MBA and other data are showing strength in the market for new homes, likely reflecting the boost from continued job growth in recent months,” MBA’s Chief Economist Michael Fratantoni said.
These purchase applications basically indicate the future of home sales since potential homebuyers need to secure a loan before purchasing a property.
Aside from this, homebuilder sentiments also increased this month with builders claiming a rise in buyer traffic according to a report released by the National Association of Home Builders.
However, even with such a huge increase, home purchase applications are still 6 percent lower the year-ago levels and are 9 percent below the level four weeks ago.
“This is historically a volatile time of year for purchase applications, and MBA’s seasonal adjustments made the difference,” Matthew Graham of Mortgage News Daily said.
The week’s increase is certainly good news for the housing market however, the trend has to continue for a long time to push the housing recovery.
In a quarterly survey conducted by Zillow, the findings revealed that out of more than 100 real estate professionals and expert, 40 percent believe that the housing recovery is still three to five years away based on the present trends in home prices and homebuyer activities.
However, about one third of the panelists were hopeful as they predict the housing market will normalize in one to two years while one out of five claim that the market is already stable or will within the next few months.
In another recent study conducted by Zillow, from one quarter in 2000, the number of adults living with at least one roommate has increased to one third in 2012.
Although these numbers mean potential new formations in the next few years, they remain stuck because of a slow growth in their wages and jobs.
Aside from these, Zillow also claims that demographic issues play a role in the current housing market. Millennials are delaying any form of major life commitments like marriage, parenthood and ownership while a lot of Americans nearing the retirement age are choosing to live in their homes longer, which significantly affects the housing recovery.
“We’ve reached a point in the recovery where the only real cure-all is time,” said Dr. Stan Humphries, Zillow’s Chief Economist. “[T]he landscape is slowly changing, as incomes begin to grow, negative equity fades and new households start to form. These shifts won’t occur overnight, but they are happening. Patience will be a virtue over the next few years as we wait for these traditional fundamentals to more fully take hold in the market.”
According to the research recently released by Trulia, despite the weak cycle between the housing and labor market, the latter has been helping boost the housing recovery.
Based on the October report, the percentage (76.2 percent) of 25 to 34-year-old employed individuals is still below the pre-housing bubble rate (78 to 80 percent) but remains to be the highest since 2008. Trulia believes that this is good news for the housing market since 25 to 34 is the key age range for household formation. The 2014 Census data showed that being employed at such age group made a huge impact in the housing market with only 12 percent living with their parents compared to 21 percent of those unemployed individuals belonging in the same age group.
It was recently announced by the Bureau of Labor Statistics that the overall U.S. unemployment rate has reached it six-year low last month.
Furthermore, another important factor to housing recovery is the surge in employment opportunities in “clobbered metros,” which are areas that were hit badly during the housing bust. Reports showed that job growth had a 2.0 percent year-over-year increase last September, which is slightly higher than the national rate of 1.9 percent within the same period. The clobbered metros with the highest job growth last September were as follows: Orlando (3.7 percent), Miami (3.4 percent), Jacksonville (3.3 percent), and Las Vegas (2.8 percent). Overall, out of the 100 metros, clobbered or not, the highest job growth rate was Houston with 4.3 percent while Columbus, Ohio was the lowest with 0.7 percent.
According to Trulia, the residential construction employment, used as an indicator whether the jobs were helping the housing market, experienced their lowest monthly gain last month at 8,000 jobs since May 2014. As for the residential construction job growth year-over-year, it showed a rate of 6.0 percent, which is definitely way ahead the overall national job growth rate (1.9 percent) for that period.
Although it may seem that the growth rate is too slow compared to the 19.5 percent increase in the number of units under construction reported for September, further examination would reveal that the employment growth rate in residential construction is high relative to construction activity.