Rising Prices Could Lift 3.5M Homeowners Out of Negative Equity

While almost one-quarter of homeowners remain underwater, rising home prices over the past year have some economists hopeful negative equity could begin to diminish in coming months.

“The negative equity problem is still crippling many homeowners and the wider economy,” Capital Economics stated in a report.

In addition to the almost one-fourth of homeowners who owe more on their mortgage loans than their homes are worth, almost half of homeowners do not meet the 80 percent loan-to-value ratio required for a standard refinancing.

While “[a]dmittedly, the recovery is still in its infancy,” Capital Economics sees the potential for 3.5 million homeowners to move out of negative equity positions over the next 12 months.

CoreLogic reports prices have risen 5 percent over the past 12 months, and Capital Economics reports the greatest movement is occurring in the same locations that experienced the greatest price declines and highest instances of foreclosures and negative equity during the housing crisis.

For example, about 40 percent of homeowners in Arizona and Florida are underwater. However, home prices have risen 18.7 percent and 6.3 percent, respectively, in these two states over the past year.

While Capital Economics is sticking to its prediction that house prices will rise about 5 percent next year, the economists admit “the upside risks to that forecast are clearly rising.”

So far this year, rising home prices have helped 1.3 million households rise out of negative equity, according to CoreLogic.

If home prices were to rise by 10 percent next year, about 3.5 million borrowers would be lifted out of negative equity and 6 million would become eligible for standard refinancing after seeing their loan-to-value ratios fall back to or below 80 percent.

“The faster prices rebound, the quicker the negative equity problem will be resolved,” Capital Economics stated.

With home prices still about 27 percent below their 2006 peak, 10 percent under-valued compared to current rental rates, and 20 percent under-valued compared to per capita incomes, Capital Economics sees no need for concern over another bubble as prices continue to rise.

By Krista Franks Brock @ DSNEWS.com — http://www.dsnews.com/articles/rising-prices-could-lift-35m-homeowners-out-of-negative-equity-2012-11-29

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What’s Really Driving the Rise in Home Prices?

The Wall Street Journal recently cited five significant factors behind the rise in home prices, as numerous markets see significant year-over-year gains. The big price drives are:

1. The rise in housing affordability – which is drawing more buyers out into the market who are looking to cash in on low mortgage rates and fallen home prices compared to a few years ago.

2. The rise in household formation – which is expected to hit 1 million new households this year. That is up from an average of 570,000 over the last five years, according to data by Bank of America Merrill Lynch.

3. The rise in rents – which has prompted more investors to purchase properties to rent out and more renters to second-guess why they are paying so much in rent when they could buy.

4. The decline in distressed sales and foreclosures – which has fallen significantly this past year. While distressed sales are still high by historical standards, they have fallen from their peaks in most markets, helping to alleviate the downward pressure on home prices in many areas.

5. Inventories of homes for-sale are at their lowest levels in nearly 50 years – and builders have cut back on construction and many home owners are waiting to sell until they can recover some equity on their properties.

Source: “Five Reasons Home Prices Have Been Rising,” The Wall Street Journal (Nov. 27, 2012)

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Where Asking Prices Are on the Rise the Most

California metros, as well as hard-hit housing markets such Phoenix and Seattle, are showing some of the largest year-over-year increases in asking prices.

Nationwide, the median list price was $191,500 in September, only about 0.78 percent higher than a year ago, according to the most recent housing data release from Realtor.com. But in several metros across the country, asking prices are more than 10 percent higher than what they were a year ago.

The following metros are showing the strongest rebounds in asking prices in the past year, according to September housing data from Realtor.com.

1. Santa Barbara-Santa Maria-Lompoc, Calif.

  • Median list price: $725,000
  • Year-over-year increase: 32.05%

2. Phoenix-Mesa, Ariz.

  • Median list price: $190,000
  • Year-over-year increase: 26.66%

3. San Francisco

  • Median list price: $750,000
  • Year-over-year increase: 18.11%

4. San Jose, Calif.

  • Median list price: $579,000
  • Year-over-year increase: 17.50%

5. Seattle-Bellevue-Everett, Wash.

  • Median list price: $367,950
  • Year-over-year increase: 14.98%

6. Sacramento, Calif.

  • Median list price: $239,000
  • Year-over-year increase: 14.23%

7. Oakland, Calif.

  • Median list price: $387,503
  • Year-over-year increase: 13.97%

8. Boise City, Idaho

  • Median list price: $170,000
  • Year-over-year increase: 13.33%

By Melissa Dittmann Tracey, REALTOR® Magazine Daily News

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Rents Keep Rising

Rents are forecasted to rise nationally 4.6 percent next year, and that’s following a 4.1 percent increase this year, according to the National Association of REALTORS®.

What’s more, rents are expected to continue to climb for the foreseeable future, rising more than 4 percent a year for 2014 and 2015, forecasts Reis, a market research firm.

“The pendulum has definitely swung back in favor of landlords, not renters,” Ryan Severino, senior economist for Reis, told USA Today.

Rents are rising even more rapidly in some areas. For example, rents in San Jose, Calif., and San Francisco have been climbing at a 13 percent to 15 percent annual rate as of late last year, according to MPF Research. Other metro area seeing rent increases of more than 5 percent by the end of September include Oakland, Calif.; New York; Denver; Houston; Nashville; and Columbus, Ohio, MPF reports.

The rise in rental costs are causing more renters to consider home ownerships, says Greg Willett, MPF vice president. Mortgage rates are at historical lows and home prices are up, but still way below their 2006 peak.

Source: “Rents Expected to Climb Steadily, According to Forecast,” USA Today (Nov. 27, 2012)

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Home Shoppers Reveal Preferences in Old vs. New

What do home shopper prefer about new homes versus older homes? A study commissioned by BHI Inc. examined consumer preferences in new homes versus existing homes among 984 prospective buyers who plan to purchase a home within the next 12 months.

The survey found that consumers generally prefer existing homes over new homes, but many will still consider a new home offered by a builder. Seventy-five percent of the buyers say they are considering buying an existing home compared to 20 percent who say they want a new home. Five percent say they have no preference whether the home is old or new, according to the survey.

For home shoppers who prefer existing homes, their preferences tend to be driven by the mature landscaping, larger lot sizes, and sense of community that they say existing homes tend to offer. Some reported that more established neighborhoods of existing subdivisions tended to have a “warmer inviting feel,” “better constructed,” and “better privacy, homes are not on top of each other and cookie cutter.”

Meanwhile, home buyers who prefer newer homes tend to cite energy efficiency, the ability to customize the home to their needs, and lower maintenance costs as top drivers. Also, those surveyed say that new homes tend to offer more living space, but that tends to come at the expense of smaller yard and lot sizes.

Source: “Don’t Let Buyers Shop New Homes Without You,” Inman News (Nov. 14, 2012)

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Phoenix – One of the Top 8 Markets Where Homes Are Selling the Fastest

The median age of inventory of for-sale homes has dropped nearly 12 percent compared to year-ago levels, according to October housing data from Realtor.com.

With inventories shrinking nationwide and hovering at historic lows, homes are selling faster in many parts of the country.

“Lower inventories, combined with somewhat higher median list prices, suggest that the housing market ending the 2012 home-buying season is in better shape than it was a year ago,” according to a Realtor.com release.

California boasts the most number of housing markets seeing some of the lowest median age of inventory in October. In Oakland, Calif., the median age of inventory is the lowest in the country at 21 days, a 57 percent decrease over year ago levels.

The following are the top eight markets with the lowest median age of inventories in the country:

Oakland, Calif.: 21 days
Stockton-Lodi, Calif.: 26 days
Sacramento, Calif.: 32 days
Denver, Colo.: 40 days
San Francisco: 44 days
Fresno, Calif.: 44 days
Phoenix-Mesa, Ariz.: 47 days
San Jose, Calif.: 47 days

By Melissa Dittmann Tracey, REALTOR(R) Magazine Daily News

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Phoenix, Arizona home price gains lead the nation (again)

Not so surprisingly, yet another national housing report — this time from the Federal Housing Finance Agency — has determined that home price gains this year in both metro Phoenix and Arizona have once again far outpaced the rest of the country.

The FHFA data released Tuesday shows Arizona landed the No. 1 spot for the biggest year-over-year increase — about 20 percent — in median sales prices in the third quarter. The District of Columbia trailed behind in second place with a 15.5 percent jump during the same period, followed by Idaho’s 9.5 percent rise, according to the report.

Arizona home prices are up 20 percent from a year ago. 

Click here to read the full article…

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Nov 2012 ARMLS® Subscriber Confidence Index™

Similar to the Consumer Confidence Index published by the Conference Board, the relevance of the SCI lies in being the only economic indicator derived from the firsthand, up close observations of REALTORS® who operate at the front line of real estate in the Valley.

All three indices headed downward in November, perhaps as a reaction to the outcome of the Presidential election and the looming Fiscal Cliff.

  • The Subscriber Confidence Index dropped 10.3 points to 75.6%.
  • The Present Confidence Index fell 3.3 points to 80.5%.
  • The Expected Confidence Index declined 15.6 points to 71.9%.

All representing the steepest decline in any of the three indices since ARMLS began tracking Subscriber Confidence in December 2010.

Similar to the Consumer Confidence Index, the SCI mirrors Subscriber reaction to changing market conditions and their experience with current Buyers and Sellers. This sentiment influences Subscriber investment and strategy regarding their professional real estate activities.

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November 24, 2012

Metro Phoenix Housing¹ Market Snapshot
November 24, 2012
City Active Pending Sales DOM² Avg $/SF
Anthem 163 66 56 57 $106.62
Chandler 776 443 364 59 $116.59
Fountain Hills 209 55 64 82 $145.40
Gilbert 868 566 386 49 $106.18
Glendale 723 509 303 49 $87.61
Laveen 177 143 78 61 $64.70
Maricopa 615 195 138 53 $60.33
Mesa 1,292 746 534 57 $94.28
Phoenix 3,677 2,042 1,417 59 $104.79
Queen Creek 979 474 294 57 $79.19
Scottsdale 1,819 439 409 93 $184.82
Tempe 249 152 107 51 $118.43
Note¹ – Housing = Single Family Homes, Note² – DOM = Days On Market
Data Source: Arizona Regional Multiple Listing Service (ARMLS)
For other cities or area, please call (480)292-8281 or email gchen@az-realty.com
Above data was compiled by Gary Chen, Associate Broker, ABR, CIAS, CNE, SFR
Original data complied by The Cromford Report
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Phoenix Among Best Cities For Veterans

Top spots for veterans

1. Pittsburgh
2. Phoenix
3. Dallas
4. Cleveland
5. Atlanta
6. Warren, Mich.
7. Ann Arbor, Mich.
8. Cincinnati
9. Columbus, Ohio
10. St. Louis

Phoenix ranks among the nation’s best cities for helping veterans make the transition back to civilian life, according to a study that evaluated job and education opportunities, living costs, quality of life aspects and more.

Pittsburgh ranked as the best place for military personnel returning to civilian life in the study commissioned by financial-services giant USAA and Military.com, a site geared to benefits, careers and other topics of interest to veterans.

The study looked at military-focused variables for 379 U.S. metro areas. The variables were weighted based on what veterans said is most important to them.

Midwestern cities dominated the most-favorable list for veterans. Phoenix was the only top city in the West.

Metro areas with significantly high jobless rates, living costs or crime rates were excluded.

USAA, which operates a large campus in north Phoenix, provides insurance, bank products, investments and more for military personnel and their families.

Click the link for the full article: http://www.azcentral.com/business/news/articles/20121108phoenix-among-best-cities-vets.html

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