News In Brief - July 2013
NWREporter July 2013
- Seattle home prices rose faster from February to March than in 18 of the other 19 cities tracked in a national index. Seattle prices rose 3 percent for the month (May), and 10.6 percent year-over-year, according to the Standard & Poor's/Case Shiller home price index. U.S. home prices jumped 10.9 percent in March compared to a year ago, the most since April 2006.
- Skyrocketing home prices in a few markets have some analysts concerned that prices are on the rise too fast and could ultimately hamper the housing recovery, but the Seattle area did not enter the conversation as mentioned in an article by Tom Kelly."In many markets, fundamentals are improving as unemployment rates continue declining, while low prices and low interest rates have affordability high," according to analysts for Fitch Ratings, a credit rating agency. "However, especially in cities that never fully unwound the mid-2000s bubble, rapidly increasing price levels are a potential cause for concern." Many of the areas of concern are in California, where home prices have posted gains of 13 percent in the past year alone, according to analysts. Limited housing inventories of for-sale homes mixed with rising buyer demand are mostly behind the rising home prices. "We believe this level of housing demand is likely to abate once the pent-up demand is satisfied," Fitch analysts said. "The supply is also artificially low, as recent regulations have limited the pace of foreclosure sales and the large percentage of underwater borrowers continues to hope for future price increases to be able to sell their homes at a profit."
- Single women make up the second largest segment of home purchases, with one out of every five homes purchases by a single woman, according to the National Association of REALTORS®. With more than 25 million single women over the age of 45 - whether never married, divorced, or widowed - it is making up a growing demographic. Some builders are reportedly adding two master bedrooms to help accommodate the 40 percent of single women who choose to have non-romantic roommates, according to AARP.
- Despite increasing prices, nearly one-third of all Seattle-area homeowners with mortgages owe more than the value of their homes, according to a new survey by Seattle-based Zillow. The local negative equity ("underwater") percentage of 31.2 is greater than the national negative of 25.4 percent of all homeowners with a mortgage. Another 18.2 percent of homeowners with mortgages, while not technically underwater, likely do not have enough equity to afford to move, Zillow reported.
"Reaching positive equity, even barely, is an important milestone," said Stan Humphries, Zillow's chief economist. "But things like real estate agents' fees and a down payment for the next home traditionally come out of the proceeds from the prior home's sale. Without enough equity, these costs will instead have to come out of a homeowner's pocket, leaving many still stuck." Slightly more than 13 million homeowners with a mortgage were underwater at the end of the first quarter. When including homeowners with less than 20 percent home equity, the "effective" negative equity rate at the end of the first quarter was 43.6 percent, or a total of 22.3 million homeowners. These homeowners likely cannot afford a down payment for a new home, tying them to their current homes and contributing to inventory shortages. A homeowner technically reaches positive equity as soon as the market value of their home exceeds their outstanding loan balance. But listing a home for sale and buying a new one generally requires equity of 20 percent or more to comfortably meet related costs.