From bloomberg.com:
The number of Americans who owe more on their mortgages than their homes are worth fell at the fastest pace on record in the third quarter as prices rose, a sign supply shortages may ease as more owners are able to sell.
The percentage of homes with mortgages that had negative equity dropped to 21 percent from 23.8 percent in the second quarter, according to a report today from Seattle-based Zillow Inc. The share of owners with at least 20 percent equity climbed to 60.8 percent from 58.1 percent, making it easier for them to list properties and buy a new place.
“Home sales will pick up very nicely when people gain the equity they need to sell their house and have a down payment for the next one,” said Neal Soss, chief economist at Credit Suisse Group AG in New York. “There’s a magnifying effect on sales — people are able to list their home and sell it, and odds are they’re going to go on and buy another one.”
A shortage of inventory has forced homebuyers to compete, driving up prices and leaving some shoppers out of the market, said Thomas Lawler, a former Fannie Mae economist who now is a housing consultant. The number of homes for sale reached a low of 1.8 million in early 2013, the fewest in more than a decade, according to data from the National Association of Realtors.
“The pent-up demand from people who now have enough equity to sell their homes will help next year,” said Lawler, president of Lawler Economic & Housing Consulting LLC in Leesburg, Virginia. “We’ll see the effect during the spring selling season. Not a lot of people put their homes on the market during the holidays.”
Read full article here:
http://www.bloomberg.com/news/2013-11-21/americans-recover-home-equity-at-record-pace-mortgages.html
I guess we have to wait and see, I personally don’t know of anyone looking to sell.
So prices go up because of lack of supply. The increased prices ‘unlocks’ sellers that have been handcuffed underwater, thereby increasing supply. Wouldn’t prices then go down because there is more supply? They’d be underwater again. I am so confused. Perhaps the moral of the story for prior underwater owners looking to get out is when you see daylight, get out and get out quick before the market floods and prices soften putting you in the woulda coulda shoulda mode, again.
I am assuming underwater, is measured on net reciepts after paying all the closing expenses. If one assumed a market with flat pricing, it seems to me that you would have to put at least 8 to 10% down to not be underwater when you leave the closing meeting. Clearly the folks on the minimal FHA plan 3.5% down are underwater when they leave the closing.
I don’t know that I buy into the assumption that we will see much of an inventory increase from former underwaters who are now in an equity situation.
The moveups will subtract an inventory for everyone they add.
Will someone who has hung on for 5 or more years making payments sell just because they now can just so they can go rent? I don’t think so, especially if they got a mod which lowered their payment to 2-3% interest, or they have an adjustable from way back which is very low because of Fed Reserve policy.
I suspect the inventory this coming spring will be smaller than many anticipate.
I’d agree with those thoughts, Kingside.
The only possible boost in inventory will come from those organic sellers that have been planning to sell, and were just waiting for the market to hit a peak before listing.
Will there be a flood that could overwhelm the demand? Maybe in isolated neighborhoods, but not overall.
The curiosity is what buyers will do, once they realize that prices got off the runaway train.