Tuesday, April 8, 2014

Rebound in home sales expected now that winter is over!

Although we still have a ways to go to make a full recovery, more signs are coming in that the housing and mortgage markets continue to make steady progress.

Nearly every major U.S. county — 96% of them to be exact — is better off than it was four years ago, when foreclosures peaked, according to a new report from RealtyTrac. And 80% of county housing markets are better off than in 2012, when median home prices hit bottom.

While that's certainly great news, the report also found that only 30% of counties are better off than they were in 2008, at the beginning of the Great Recession, and only 8% are better off than they were in 2006, before the housing bubble burst.

"The housing recovery has taken root in hundreds of counties across the country and almost all local housing markets are better off than they were four years ago, when foreclosure activity peaked in 2010," said Daren Blomquist, vice president at RealtyTrac.

The company looked at four different categories of housing market health to make its evaluation: home price appreciation, affordability, percentage of bank-owned (REO) sales and the unemployment rate. The 410 counties analyzed in the report account for 63% of the U.S. population.

"Home prices in three-fourths of the counties analyzed are still below 2006 levels, but low inventory has helped home prices accelerate past pre-recession levels in some markets like Seattle, San Francisco, Denver and Oklahoma City," Blomquist noted. "Those rapid home price gains are causing a concerning drop in affordability rates in some cities, but homebuilders and homeowners with regained equity should help provide more supply to balance out many of those markets in 2014."

Meanwhile, many of the places hardest hit by the housing collapse have made huge price recoveries in the past year.

Realtor.com recently published a list of the top 10 local real estate markets with the largest year-over-year median home price increases. Stockton, CA, topped the list with a 38.9% jump. Six other metro areas in California made the list. Several of the hardest-hit areas, including Las Vegas (up 26.9%), Reno (+26.8%) and Detroit (+26.3%) also made the list. The biggest metro area to make the rankings was Los Angeles (+20%).

Finally, the total balance of first mortgages outstanding reached nearly $8 trillion in February, the highest figure in two years, according to Equifax. That was up nearly 3% from a year earlier, the biggest year-over-year increase since September 2008.

The main reasons: a sharp drop in delinquent and foreclosed mortgages and an increase in home purchase lending.

"The decline in mortgage balances from accelerated amortization and foreclosure write-offs has finally been overcome by increases in mortgage debt due to home purchase lending," said Amy Crews Cutts, chief economist at Equifax.

Mortgage debt balances are likely to continue to grow during the spring and summer homebuying seasons, when the volume of new loans usually increases, she added. Furthermore, rising home values and improving employment conditions should lower the number of mortgage defaults.

Looking ahead, the National Association of Realtors is expecting a rebound in home sales now that winter is over.

The NAR's pending home sales index fell for the eighth straight month in February to 93.9, its lowest level since October 2011 and down 10.5% compared to a year earlier. But Lawrence Yun, the NAR's chief economist, said "the market appears to be stabilizing," noting that some weather-delayed transactions should close in the spring.

Likewise, sales of existing homes fell 0.4% in February to an annual rate of 4.6 million units, the slowest pace since July 2012 and off 7.1% from a year earlier, the steepest decline in three years. However, Yun noted that some transactions are simply being delayed by the weather, predicting that "there should be some improvement in the months ahead."

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