Real Estate Information Archive


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Home Equity Continues to Expand Across US

by Hart Real Estate Solutions

More United States borrowers got into the black in 2015 and reported having equity in some form on their home. Now, many of these buyers also have more equity in general, as home prices have improved and the housing market has recovered.

Household holdings in real estate totaled 21.825 trillion dollars in the 3rd quarter of 2015. In 2014, real estate holdings totaled 20.461 trillion. From 2014 to 2015, holdings increased by 1.365 trillion dollars.

Home mortgage debt hit 9.46 trillion dollars in the 3rd quarter. Compared to 2014, that figure rose by 0.078 trillion dollars.

The difference in holdings growth (1.365 trillion) over the mortgage debt difference (0.078 trillion) shows that households across the US have seen a rise in their home equity.

In September 2015, 91% of US homes had equity. That number should grow as home values have risen across the United States. In 2014, 89% of borrowers had equity in their home. In March of 2015, 97% of Montana borrowers had equity in their home.

Although mortgage debt did expand in 2015, that fact is not necessarily negative. Oftentimes, mortgage debt expands, not because people are falling farther into debt, but because more home buyers are taking out mortgages. A majority of US home buyers need to take out mortgages to buy a home, so expanding mortgage debt often implies a healthier, growing housing market.

Delinquent mortgages have fallen in the past couple years, supporting the idea that more buyers are entering the market. As more homeowners see their equity grow, more potential buyers will see their financial success and want to also have a part in it.






US Housing Market’s Third Quarter Best in Nearly a Decade

by Hart Real Estate Solutions

Existing home sales rose by 3.4% in the 3rd quarter of 2015 and has been one of the best quarters for the housing market in nearly a decade. The quarter has lead to a new annual rate of 5.48 million sales in 2015. Existing home sales increased by 8.4% compared to 2014.

In the United States overall, the single family median home price hit $229,000, up 5.5% from the third quarter of 2014. While home prices and sales continue to climb, their growth rates have slowed to a much healthier pace, providing a bit more depth and consistency to the US housing market.

Median prices rose in 87% of US markets and only 24 of these areas reported prices lower than in 2014.

In the West, existing home sales increased by 3.9% and are 9.7% higher than a year ago.

Issues still remain with lack of home inventory, which have pushed prices up and eliminated some first time home buyers from feasibly buying a home. But generally, more buyers are now able to buy a home than before.




Federal Reserve Raises Short Term Interest Rate

by Hart Real Estate Solutions

By unanimous vote, the Federal Reserve agreed to raise the federal fund rate (aka short-term interest rate) showing their confidence in an improving United States Economy. The Fed will raise their rates from near zero to 0.25 to 0.5 percent, a decision that had been expected to come at several different points in 2015. The Fed will shift between 0.25 and 0.5 based on market conditions. They are also willing to adjust their strategy based on how the economy performs in response to the move.

The Fed has kept rates at near zero since 2008. During the recession, the Fed did all they could to entice borrowers back into the fold. Now that the labor market and housing market have started performing well, the Fed has decided that now is the time to get rates up again. So far, the market has performed well in response to the news, with the Dow Jones Industrial Average rising by 224.18 points.

The Fed pointed to strong dollar values and a rebounding labor market as the major factors that convinced them to raise rates. As the dollar value has risen, emerging market companies that borrowed heavily during low rate periods will now have to pay more to payoff the debt.

But how will the rates affect the housing market?

With a rise in interest rates, each subsequent lender will need to raise their rates as well to keep their business profitable. It is fully expected that mortgage rates will increase over 2016. Mortgage rates have been at historically low levels during the recession. Buyer confidence has improved over 2015, allowing the Fed to raise rates without losing all their borrowers.

Although mortgage rates will in all likelihood increase, according to the National Association of Realtors Chief Economist Lawrence Yun,  the small uptick should not have a major affect on borrowers. However, other experts believe this is the first of several upticks, in which case mortgage rates may rise at several points over 2016.

Currently the 30 year fixed rate mortgage sits at 3.93 percent. In the short term, the housing market might actually have a small surge, as fence sitting buyers take the plunge with rising mortgage rates on the horizon.






Storage Units Outperform Other Commercial Real Estate Sectors

by Hart Real Estate Solutions

Property investors might be surprised to learn that storage units have performed extremely well since the recession, offering their owners a great return on investment. Rents are high and most storage companies are reporting low vacancies. With the recession keeping new storage facility construction down, competition is also low, opening the door for investors across the United States.

While most other real estate commercial sectors have fallen flat in 2015, some storage companies have reported seven percent increases in rental income. Many investment firms have moved to constructing new storage spaces themselves to get their piece of the pie.

Publicly traded storage companies have also performed very well on the stock market. Extra Space Storage reported a 33% increase in their stock over 2015. They also reported that 94.5% of all their spaces in the United States were occupied, up from 92.1 percent.

Storage units may provide great rental income to investors while also helping buffer them from market volatility. Storage units generally stay in demand, based on deaths, moves, divorces etc.—all reasons that tend to not follow housing market trends. Storage unit values have held true since the recession and have since recovered better than other commercial sectors.





Property Taxes Rising Suggests an Improved Economy

by Tim Hart

Property tax collections increased by 3 percent over the past year. Collections increased by 13 billion dollars to a total of 503 billion collected. The figures include both commercial and residential property taxes.

Property taxes might be rising thanks to improving home values. State and local governments might be re-appraising homes to raise their listed value. Whether it has happened enough in different towns and states to affect the national average is unclear.

Interestingly, property taxes have taken up a smaller percentage of total tax collections than in recession years. In 2010, property taxes held 44.9% of the total share whereas now they hold 38.9% of the total. According to the National Association of Home Builders, that proportion is very close to the pre-housing boom levels seen in 2001 to 2003.

This trend would suggest that non property taxes have grown significantly faster over this time than property-based taxes, meaning that Americans are taking in more income and are generally having better economic success than in years previous. As everyone’s financial situation improves, it would make sense for the housing market to see similar results as it tries to creep back to a normal, healthy market.





Foreign Investments on Record Pace in US Real Estate Market

by Tim Hart


Foreign investors have taken on the United States Real Estate Market in full force in 2015 thanks to an improving US economy and low interest rates.

According to the real estate services firm JLL, foreign investments totaled 24.1 billion dollars at mid-year compared to 23.6 billion for all of 2014. JLL only keeps track of transactions greater than 5 million dollars so some hotels and multi-family developments were excluded. The CoStar group, another commercial firm, has the total spent at nearly 39 billion.

Chinese investors have taken a large portion of the investor market. They accounted for 1.9 billion dollars in the second quarter of 2015. Many investors are looking for a safe place to keep their money while the Chinese economy has struggled and the US continues to have very low interest rates. Interestingly, instead of putting away money in large lavish personal residences as seen in other years, these investors have shifted towards more humble, income producing commercial and residential properties.

In 2014, 28% of foreign investment came from Chinese investors. They spent 104 billion in total in 2014. To put that in perspective, Canada came in second place at 11.2 billion spent.

So long as the US economy continues to strengthen and so long as interest rates remain low, it would be logical to expect foreign investment to hold true, if not increase. Foreign investment will help deepen the housing market overall. Domestic investors might not enjoy the increased competition, but having that competition can really help individual buyers and sellers sell and buy at a great price.




91% of US Homes Have Equity

by Tim Hart

After 759,000 properties regained equity in the second quarter, almost 45.9 million homes now have a higher property value than the remaining balance on their mortgage. In essence, 91% of US homes with mortgages now have equity—great news for the recovering US Housing Market.

At the end of 2014, 89% of US homes had equity, totaling 44.5 million homes.

Ninety five percent of mortgaged homes valued at 200k or more currently have equity. At the end of 2014, that number was at 94 percent of mortgaged homes.

Homeowners with lower home values struggled to get over the equity hump in comparison to those buying more expensive homes. But these homeowners also saw the biggest improvement over 2015. In 2014, 84% of buyers under 200k had equity in their home but in 2015, 87% now have equity.

Much of the country has recovered from negative equity issues seen during the recession. Five states alone contributed to nearly 32% of the negative equity seen in the entire US. Although terrible news for these specific states, the general outlook for the nation overall might be even more positive than these numbers suggest. The US states with the highest negative equity rate (% of mortgaged homes in state without equity) are Nevada (20.6%), Florida (18.5%), Arizona (15.4%), Rhode Island (13.8%) and Illinois (13.1%).

Montana was in the top 5 states for lowest percentage of negative equity homes. In March of this year, Montana had 97% of homes with mortgages in positive equity. Although certainly not major, that number has climbed to 97.2 percent.

If property values rise by an additional 4.7 percent, experts believe another 800,000 homeowners will have positive equity in their home by July 2016.




Delinquent Mortgages Falling Across United States

by Tim Hart

Delinquent mortgages continue to fall across the United States, providing great news to a recovering housing market. Delinquent mortgages are mortgages with an outstanding bill for payments due. Delinquent mortgages are a great way to gauge the housing market’s health as well as the financial health of current homeowners.  Having less delinquent mortgages implies that a stronger economy has formed or is forming—helping those with mortgages pay of current debts and giving buyers the sense (whether true or not), that they are taking less financial risk by taking out a mortgage.

According to a report by the Mortgage Banker’s Association, delinquency rates for mortgage loans on one to 4 unit properties fell by 5.3 percent. That level is 24 basis points below the 1st quarter of 2015 and 75 points below levels seen last year.

And its not just the overall average rate that has been dropping. No, every stage of delinquency fell over the past year-providing heartening news to the US Housing Market. All loans that were past due fell by 70 points. All loans 30 – 59 days past due fell by 17 points. All loans from 60 to 89 days past due fell by 8 points and all loans 90 days or more overdue fell by 45 points.

In 2009, delinquency rates hit a high of 5.1 percent. Currently, delinquency rates sit at 1.9 percent. There is still work to be done however, as prerecession levels sate comfortably at 0.84 percent.

Less delinquent mortgages means happier homeowners and less anxious home buyers. Its already a financial burden to purchase a home. Having the emotional burden of neighbors leaving and friends drowning in finances did little to convince homebuyers that the time was right to buy during the recession. Hopefully, as more potential buyers see the financial advantages to owning a home, more and more will take the plunge, helping to deepen the mortgage and therefore housing market even more.




Real Estate Market Creeping Closer to Normal

by Tim Hart

Real estate markets across the country continued their slow climb back to normal market conditions. In early August, the National Association of Home Builders and First American Leading Markets Index (LMI) reported that most markets across the United States have been trending to normal. The LMI increased to a score of 0.92, suggesting the US is closing in on its goal for a normalized market.

The LMI measures the proximity of a certain market to its previous, normal economic and housing market outlook. When a housing market has hit “normal,” meaning it has fallen within numbers seen consistently in its past, the market will have a value of 1. At 0.92, the United States market overall has gotten closer to normalcy but still has some improvement remaining.

The LMI uses three components to measure their index.

First, they look at home prices for a certain market.  On a national average, home prices have improved the most, with a score of 1.29. Essentially, home prices are 29% more than they were when last normal. For big national averages, its important to remember that markets like San Francisco and New York City can do a lot to drive the overall average, but in this case the number really reflects the overall improvement of the nation. In this case, 95% of markets had an index over 1 for housing price normalization.

Second, they look at employment figures to determine the employment market health of an area. The US overall averaged an employment score of 0.96, showing that the job market has nearly made a complete recovery. 65 markets across the US have met or passed their last “normal” score and are now scoring above 1.0 in employment numbers.

Finally, the index looks at single housing starts across the nation to gauge the construction industry’s return to normalcy. Currently, single-family starts are still behind, with an average score of 0.49—suggesting builders are still waiting for more buyers to jump into the market. However, single-family starts saw a 13% increase in June and in that month topped the January 2008 annualized rate for single family starts. Although the nation would like to see more building, the marked improvement over this summer has been very encouraging. Multi-family starts have also been very healthy, increasing 28.6% in June—numbers that this index do not take into account.

Fifty four percent of metro areas saw their scores increase from the first to the second quarter of 2015. Meanwhile 66% of all markets have seen improvement from 2014 to 2015.

The three figures mentioned obviously do not account for all the subtleties and distinctions of individual markets, but they do give a good sense that the United States Housing Market has been and should continue to improve moving forward.




Seattle’s Famous ‘Up’ House Set to Move

by Tim Hart

The home that many believed inspired the Disney movie Up will officially be on the move—though not by balloons. The ‘Up’ home became a symbol for anti-development groups, naturalists and crusaders alike as the 600 square foot home and its owner stayed put despite mass commercial development around it. For those who don’t know, the home’s past owner Edith Macefield turned down $1,000,000 to be moved from her small lot she had owned for a near half century. Once developers were spurned, they went ahead and built their project around her.

Her home became iconic for standing firm in the face of progress and was used as a symbol by many groups. Now, after a complicated series of bids to purchase the home, it will now be taken in by OPAL (Of People and Land), a Seattle land trust. The home, due to its complexities and age, will be moved from its current location to Orcas Island and added to an affordable housing project OPAL has headed.

There were efforts to have the home turned into some form of historical landmark, but the home had been fully renovated and therefore did not have historical significance in that sense. Now Seattle developers will be able to incorporate the gap and the small lot will more than likely be filled by a small retail store or coffee shop.




Displaying blog entries 1-10 of 40