By Gino Blefari, President & CEO, Intero Real Estate Services, Inc.
Three highly watched housing indicators were released at the close of summer last week, giving us a high-level view of how housing is performing. While sales of existing homes appear to be slowing, negative equity and the foreclosure market are improving substantially, thanks in part to increasing home values.
Let’s take a look at all three data releases.
Pending sales slow
In the National Association of Realtor’s latest index of pending sales, we saw a 1.3% decline in July from June. However, the forward-looking indicator was 6.7% above the same month a year ago.
The pending sales index tracks contracts, not closings, but is closely watched as it is helpful in understanding immediate future sales. The monthly slip is no surprise, given the decline in available homes for sale.
Negative equity falls
Meanwhile, Zillow reports that the national negative equity rate continued to fall in the second quarter, dropping to 23.8% of all homeowners with a mortgage, or 12.2 million homeowners. That’s down from 13 million homeowners in the first quarter and 15.3 million at the same time last year.
Negative equity means a homeowner is underwater and owes more on their mortgage than the home’s current market value. It’s been a closely watched number in the recovery because so many markets and borrowers were and continue to be deeply affected by it.
Just how deep is negative equity right now? Nationwide, 57% of all homeowners in negative equity are underwater by 20% or more, and roughly 13.4% owes more than twice what their home is worth.
While Zillow says it could still take years for many homeowners to regain equity, the declining trend is good news for the market overall. Also, home values are expected to continue upward.
Foreclosure crisis over?
In another good sign for housing, foreclosure inventories fell 32% in July compared with the same month a year ago, according to the latest numbers released by CoreLogic.
In July, 949,000 homes were in some stage of foreclosure, down from 1.4 million last year.
In closing, we all expected the summer of 2013 to be a great one for housing – with the one challenge being low inventory. The numbers now support that theory.
The question now is how the markets will perform through the end of the year. Inventory, interest rates and home values will be the hot numbers to watch this fall.