Realty Trac reports first quarter U.S. Home Equity & Underwater Report

Realty Trac recently reported in its first quarter U.S. Home Equity & Underwater Report there were more than 7 million residential properties across the country “seriously” underwater (the sum of owner’s debt secured by their property is at least 25% higher than the property’s estimated market value). These properties constitute about 13% of all properties with a mortgage. At the end of last year, underwater properties were at their lowest share of the real estate market. According to this report, the largest change in the market was owners having a 20 and 50% equity position in their homes was “a net decrease of nearly half a million” by the end of the first quarter of this year as compared to the end of last quarter of 2014.

The homeowners having at least 50% positive equity at the end of the first quarter comprised about 20% of the homes across the country. Distressed properties with positive equity amounted to slightly over 42% of the market and surpassed those seriously underwater (35.1%) in the first quarter of this year. The states with the highest percent of distressed properties having positive equity exceeding 60% included: Colorado (Denver), Texas (Austin, McAllen), California (San Jose), Hawaii (Honolulu), Pennsylvania (Pittsburgh), and New York (Buffalo). Homeowners’ equity is continuing to improve as home prices increase from the economic downturn. The building of home equity enables more people to move and which drives and strengthens the real estate market.

Realtor.com reports median home list prices increased 9% year-over-year. As home prices increase, properties are staying on the market for less time. The median number of days on the market was 73 in April (a decrease of 12 percent over last year). Inventory of homes available for sale nationwide increased five percent in April as compared to March. However, inventories of homes remain low in many markets and at various price points. Buyers are viewing homes in the following markets two-to-three time more frequently than the national average: Texas (Dallas, Fort Worth, Arlington, and California (Santa Rosa, Vallejo-Fairfield, San Diego-Carlsbad, San Francisco-Oakland-Hayward, Santa Cruz-Watsonville, San Luis Obispo-Paso Robles-Arroyo Grande, Oxnard-Thousand Oaks-Ventura, Sacramento-Roseville-Arden-Arcade).

Household formations increased in the first quarter of this year adding more demand for homes. The number of Americans forming new households increased 1.5 million year-over-year. An increase in house formation will improve home sales, housing starts, and consumer spending. The main factor driving housing formation is the number renters. Housing analysts predict that as many young adults leave their parent’s home, household formations will further rise. Economists also predict homeownership rate will further stabilize in the near future as the labor market strengthens and the government eases credit conditions for first-time home buyers.

Mary Ann Clark is a Realtor with Coldwell Banker at 177 West Putnam Avenue in Greenwich. Questions or comments may be emailed to [email protected]

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