Discussing the number of underwater homes, home price growth, the economy could break a record for growth, several jobs and unemployment reports plus much more!
Number of Underwater Properties Decreases
Attom just reported that at the end of the first quarter of 2018, more than 5.2 million (5,206,446) U.S. properties were seriously underwater. This is the smallest year-over-year drop in the number of seriously underwater properties since ATTOM began tracking in Q1 2013.
At the end of Q1 2018 , 9.5 percent of all U.S. properties with a mortgage were underwater according to Attom. This is slightly up from 9.7 percent in Q1 2017.
When a property is underwater, it means that the market value of the property is lower than how much is owed on the mortgages for the property. When a property is underwater, it means the owner cannot sell unless they bring cash to the closing to make up the difference between what they own on the mortgage(s) and what the property sells for.
Or the seller can do a short sale. A short sale is when the mortgage holder agrees to accept less than they are owed. Short sales were much more common after the housing market crashed and can be very frustrating for everyone involved.
It is amazing that some homes are still underwater after the way home prices have been increasing. Maybe the buyers paid too much or the owners used the equity as an ATM to the point of being seriously underwater.
It is not a good idea to abuse the equity in your home! Your home’s equity is not an ATM!
How Much Has Your Home’s Value Increased?
If fewer homes are underwater because home values are increasing, I am sure some of you are wondering how much your home’s value has increased. In yesterday’s post, I talked about CoreLogic reporting that home prices had increased 7% year-over-year.
CoreLogic looked at their data through February 2018 and looked at home price growth in 4 price ranges. Check out this chart that shows the year-over-year growth from February 2017 to February 2018 for 4 different price ranges:
While CoreLogic is talking about home prices for the entire US, you are going to see something similar happening in our area. Well, not exactly the same but certainly interesting…
I have seen some homes sell recently for much more than I think they should. I understand that demand is strong and competition is fierce in some areas/price ranges…
I am not seeing this as much in any other price range. Not super cheap homes or high end homes. Just homes in the $100,000 to $150,000 range.
Growth in Median Property Values in the South
Home price appreciation is an important topic in today’s economy. Using data from the American Community Survey (ACS), we can analyze the gains and losses of property values over time. I estimated the median property values by state in 2017 using the FHFA index and the median property values from the (ACS). I then calculated the growth rate from 2005 -2017.
Check out the chart for property value growth in the South:
Impressive but it is best that you consult with a local Realtor to see what is happening in your area and for any questions about the value of a specific property.
The Economy Could Break a Record For Growth!
From Cushman & Wakefield:
Today marks the U.S. economy’s second-longest since 1785, according to new research released by global commercial real estate services firm Cushman & Wakefield. If this trend continues through July 1, 2019, the expansion of this economic cycle will officially be the longest on record.
The only other expansion that has been longer occurred from 1991 through 2001, lasting exactly 10 years.
Current estimates of the probability of a recession within the next year are between zero and 25 percent, according to the report, with a majority of forecasters squaring their predictions at between 10 and 15 percent.
Most expect the expansion to continue through 2020.
While this is good news, we must remember that the economy has been growing because it was so bad after it crashed.
Service Sector Grows for 99th Consecutive Month
Economic activity in the non-manufacturing sector grew in April for the 99th consecutive month, say the nation’s purchasing and supply executives in the latest Non-Manufacturing ISM® Report On Business®.
Great news! This growth should lead to more jobs and hopefully more income growth for the average American…
Private Sector Employment Increased by 204,000 Jobs in April
Private sector employment increased by 204,000 jobs from March to April according to the April ADP National Employment Report®.
Great news and manufacturing jobs increased by 44,000 while the service sector jobs increased by 160,000. This is just preview of today’s big Jobs Report from the BLS….
4-Week Average of Unemployment Claims At Lowest Level Since 1973
In the week ending April 28, the advance figure for seasonally adjusted initial claims was 211,000, an increase of 2,000 from the previous week’s unrevised level of 209,000. The 4-week moving average was 221,500, a decrease of 7,750 from the previous week’s unrevised average of 229,250. This is the lowest level for this average since March 3, 1973 when it was 221,250.
While the small increase from the previous week is not good, it is the 4-week moving average that we should watch. And it was good!
But again, it is the Jobs Report we are waiting on…
Unemployment Rate Hits Lowest Level in Over 17 Years
Total nonfarm payroll employment increased by 164,000 in April, and the unemployment rate edged down to 3.9 percent, the U.S. Bureau of Labor Statistics reported today. b gains occurred in professional and business services, manufacturing, health care, and mining.
In April, average hourly earnings for all employees on private nonfarm payrolls rose by 4 cents to $26.84. Over the year, average hourly earnings have increased by 67 cents, or 2.6 percent.
This is below what some experts had forecast but it is still a decent report. Still, wage growth could be stronger but let’s not look a gift horse in the mouth.
The Great Housing Reset
The rise of renting in the U.S. isn’t just about high housing prices, or preferences for city living, but about the flexibility to compete in today’s economy.
The American Dream has long been defined by homeownership, but current trends suggest this aspiration is waning. The U.S. appears to be undergoing a gradual, long-term shift from a society of mostly homeowners to more of a mix of homeowners and renters. This shift is not just about rising home prices, or a greater demand for urban living, but rather the transition from the old industrial economy to the new, highly clustered, knowledge-based one.
Great resets are generational events representing an adjustment to a new economy. We are still in the middle of the shift from an industrial system that was powered in large part by suburban homeownership—and the demand for manufactured products it helped create—to a new, highly clustered knowledge-based system in which cities are the basic platform for economic activity. The shift from homeownership to more flexible rental housing reflects the realities of that broader transformation.
Something to consider is that eventually, more jobs will not require that people actually go to the office. Which means that people will be able to live in places that could allow them to become a home owner.
But when or if that will happen is unknown. Nobody knows what the future holds!
I do not think the decrease in homeownership is due to a change in how people feel about owning a home. It is more of a shift in what they can afford or do at this stage of their life.
CMBS Delinquency Rate Decreases
Thanks to more distressed legacy loans being resolved away (and new performing loans being issued in their place), the overall Trepp CMBS Delinquency Rate resumed its decline after a brief timeout in March. The overall delinquency rate for US commercial real estate loans in CMBS is now 4.36%, a decrease of 19 basis points from the March level. Readings for all five major property types, as well as the rate for CMBS 1.0 loans dropped in April.
While this is tracking delinquencies for commercial real estate loans, it is an important indicator for the economy. If we started seeing CMBS delinquency rate increase, it would be bad for the economy.
Remember, we need a healthy economy for a healthy housing market and a healthy housing market for a healthy economy.
Well that is all I have time for today! As always, if you have any questions about buying or selling real estate in the Anderson SC area, please Contact Me!