Morning Briefing: 1 in 10 homeowners still underwater

by Steve Randall19 Aug 2016
1 in 10 homeowners still underwater
It’s been five years since the housing crash but while many homeowners have seen their equity recover, 1 in 10 are still in negative equity.

Research from Zillow shows the trend is heading in the right direction; a third of homes were in negative equity following the bust; in the second quarter of 2015 it was 14.4 per cent; a year later it was 12.1 per cent.

However, 13.7 per cent of those in urban areas and 11.2 per cent in suburban regions remain underwater and there are larger gaps between urban and suburban areas in some metros including Chicago and Detroit.

"At its worst, negative equity touched all kinds of homeowners in all kinds of markets," said Zillow Chief Economist Dr. Svenja Gudell. "The type of community a given home was in – urban or suburban – mattered little. Fast-forward a few years, and the relative vibrancy of a given community and how it has performed over the past few years, and not necessarily its location in the city or suburbs, matters a great deal."

Western metros with strong job and housing markets have the lowest rates of negative equity. Less than 5 percent of mortgaged homeowners in San Jose, San Francisco, Portland, Denver, and Dallas are underwater.

Las Vegas (19.5 per cent) and Chicago (19 per cent) have the highest rates of underwater homes.
Housing outlook restrained by inventory
Fannie Mae says that the second half of 2016 should show renewed growth for the US economy following a weaker second quarter with overall growth of 1.8 per cent.

For the housing market its August outlook calls for benefits for homebuyers from improving wage and job growth, low interest rates and favorable lending conditions. Tight inventory and the resulting affordability issues will continue to stifle sales though.

Fannie says that it has evidence that there is a slow return to homebuying among older millennials which may improve the historic low rate of homeownership.
Mortgage rates nudge lower
Average mortgage rates were lower this week with 30-year FRM’s at 3.43 per cent compared to 3.45 per cent last week.

Freddie Mac’s data shows that 15-year FRM’s eased to 2.74 per cent from 2.76 per cent but 5-year ARM’s averaged 2.76 per cent, an increased from last week’s 2.74 per cent.

“For eight consecutive weeks mortgage rates have ranged between 3.41 and 3.48 per cent. Inflation is not adding any upward pressure on interest rates as the Bureau of Labor Statistics reported that the Consumer Price Index was unchanged in July," said Sean Becketti, Freddie Mac’s chief economist.

A year ago the rates were 3.93 per cent (30 year FRM), 3.15 per cent (15-year FRM) and 2.94 per cent (5-year ARM).


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