The Equity Boom Might Be Making You Money

Have you ever checked out your bank account online only to discover you’re $50,000 richer than you were yesterday? That may sound like the sort of thing that happens only in fairy tales and lottery advertisements, but it’s happening right now to millions of homeowners across the nation.

How does it happen?


Homeowner equity is the largest source of wealth for many Americans, and as I speak, an equity boom is underway, raising homes values over the past three years as prices recover from the housing crash.The evidence suggests we’re still in the beginning phases of a boom that is unmatched in modern times. We may not even reach the halfway point for two years or so.

Following the housing crash in 2007, homeowners lost trillions worth of equity in their homes as prices, and then values, plummeted. Falling values pushed millions of homeowners “underwater” or into “negative equity” as their homes became worth less than the amount they owned on their mortgages.  When many homes became virtually worthless, owners defaulted on their loans—sometimes voluntarily. By the end of the Foreclosure Era, more than 5 million homes were lost—about the same number as all the existing homes typically sold in a year.

Is your home still underwater? Many still are. Luckily, the government has programs in place that can help. Learn more about HARP here.

Tracking home value increases


When the recovery began in 2012, the national median home price was at a multi-year low of $154,600 in January of that year. In November 2016, it had reached $220,300 and was still climbing.[1] That’s an increase of 42.2 percent. Sales price trends influence home values over time, so it’s a fair assumption that values are generally following suit and may be increasing much more than 42 percent in hotter Western markets.

Over the past three years, Homes.com has tracked price recovery on a market-by-market basis. By September 2015, 170 of the nation’s largest 300 markets, or 57 percent, had returned to the peak prices they achieved before the housing crash, including 53 of the top 100 markets.^[2]

The real estate data and analytics firm CoreLogic estimates that the number of mortgaged residential properties with equity at the end of the third quarter of 2015 reached approximately 46.3 million, or 92.0 percent of all homes with an outstanding mortgage, a decrease of negative-equity homes by 11.8 percent in 12 months. In Q3 2015 there were 37.5 million borrowers with at least 20 percent equity, up 7 percent from 35 million in Q3 2014.[3] Homeowners with 20 percent or more equity will find in easier to sell their homes, refinance or take out loans where their equity provides the collateral.

Price increases are expected to moderate in 2016, causing CoreLogic to move back is forecast for the date when the national median sales price will reach the peak level attained before the housing crash. Initially the firm predicted the peak would be reached in mid-2016; now it is forecasted for mid-2017.[4] The rate of increase in the CoreLogic Home Price Index is expected to slow to 4 to 5 percent during 2016 from about 6 percent in 2015.[5]

These medians, whether market-by-market in the Homes.com reports or CoreLogic’s national medians, represent only a midpoint among homeowners. Even in a market where the median price has reached the peak price half or more than half of homeowners could still below the peak. It will take several more years of price growth for the Equity Boom to fully reach a significant majority of homeowners.

What does this mean for you?


CoreLogic’s data only covers homeowners with a mortgage. If you are one of the 34.4 percent of homeowners who own their homes free and clear[6], the Equity Boom is putting money in your pocket just as quickly as your neighbor with a mortgage—and you don’t have to pay any of it back to a lender when you sell!

The Equity Boom is not occurring at the same pace by geography or by price tier. In general, the bulk of positive equity for mortgaged residential properties is concentrated at the high end of the housing market. For example, 95 percent of homes valued at $200,000 or more have positive equity compared with 87 percent of homes valued at less than $200,000.[7]

In general, those markets that are trailing in the race to regain peak prices lost the most value during the foreclosure crisis and therefore have the longest roads to travel to regain their peak prices. Those where demand is strong and prices are rising fastest are making the most progress to meet and exceed their peak price levels.

source: totalmortgage.com

Volume of $1 Million to $10 Million Mortgages Hits All-Time High

It’s no secret that mortgage lending has hit the skids in recent months. There are considerably fewer borrowers refinancing their existing mortgages and home purchases are still pretty sluggish.

Earlier this year, Black Knight Financial Services said mortgage origination volume fell to its lowest point on record for a February, with records dating back to the year 2000.

But one area of the market is on fire. I’m talking about the $1 million to $10 million loan amount niche, also known as super jumbo. Pretty much any loan officer’s dream.

Despite there not being a secondary market for such loans, banks are more than happy to hand them out to their wealthiest clients and keep them on their books.


After all, they’re low risk borrowers who also happen to have a lot of money. And wealth management seems to be all the rage these days.


15,000 Mega Mortgages Were Originated During Q2

Banks reportedly made more than 15,000 mortgages with loan amounts between $1 million and $10 million during the second quarter in the nation’s top 100 metros, the highest total ever according to CoreLogic.

Additionally, sales of homes valued at $2 million and up increased to the highest level since at least 2006 during the first half of the year.

Surprisingly, this is happening at a time when all-cash home sales are also at record levels, which at first glance seems a little strange.

Back in May, RealtyTrac said cash was used for a record 42.7% of residential home sales in the first quarter of the year, which was up from 37.8% a quarter earlier and 19.1% a year prior.

The rich generally pay all cash as opposed to taking out a mortgage, but the crisis has produced a lot of fire sales thanks to the sheer number of underwater borrowers and foreclosed properties out there, which could explain the high all-cash share.

The Rich Have No Mortgage Limits

Still, the rich always have plenty of options, and with mortgage rates as cheap as they are, and banks desperate to get their hands on their assets, we’re seeing a lot more of these mega loans these days.

Per Bloomberg, the rich are happy to take out low-rate adjustable-rate mortgages instead of being forced to sell their stocks, which also happen to be at all-time highs.

And because they get mortgage discounts for having so much money, the deals are pretty hard to pass up. This explains why guys like Mark Zuckerberg and Buffett opt to take out loans instead of simply paying with cash.

Some of the banks issuing the largest number of mega mortgages say they don’t even have maximum loan limits for such clients. For example, Union Bank and Bank of the West will apparently consider any loan request.

Union Bank said it has originated more than 350 mortgages with loan amounts of $2 million or more this year. And loan requests at BNY Mellon for similar loan amounts have increased 30% this year compared to 2013.

Sadly, this comes at a time when first-time home buyers are struggling to take out relatively miniscule mortgages. Of course, the wealthy have no problem putting down 30% or more, which greatly increases their options and chances of approval.

source: thetruthaboutmortgage.com

Improving Market Pushes Home Prices Higher in June

NEW YORK -- U.S. home prices jumped in June and are forecast to ramp up further in the latest signs of a housing market that is on the mend, data from CoreLogic showed Tuesday.

CoreLogic's home price index rose 1.9 percent from May and accelerated by 11.9 percent from June last year.

Excluding distressed sales, prices were slightly less strong, up 1.8 percent on the month and 11 percent from a year earlier.

Distressed sales include properties that have been seized by lenders and short sales, where the struggling homeowner is allowed to sell the property for less than the outstanding mortgage.

The acceleration in prices compared to a year earlier was in line with the closely watched S&P/Case-Shiller report that showed prices rose 12.2 percent on an annual basis in May.

The CoreLogic report predicted more gains for the housing market, forecasting prices will rise 1.8 percent in July. That would make for a year-over-year gain of 12.5 percent.

"The U.S. housing market experienced robust price appreciation during the first half of 2013 and our forecast calls for double-digit growth through July," CoreLogic chief executive Anand Nallathambi said in a statement. "Despite their rebound of late, home prices remain reasonable in a historical context, with most states near peak affordability levels."

The recovery in the housing sector has gained momentum this year, with tight inventory pushing prices higher. But higher interest rates on mortgages pose a potential hurdle if they cause potential homebuyers to shy away from the market.

source: dailyfinance.com

Home Foreclosures Fall to Lowest Level in Nearly 8 Years

LOS ANGELES -- Fewer U.S. homes entered the foreclosure process or were repossessed by banks in June, the latest sign that the nation is shaking off its housing bust hangover.

Lenders initiated the foreclosure process on 57,286 homes last month, the lowest level for any month in 7½ years, foreclosure listing firm RealtyTrac Inc. said Thursday.

Foreclosure starts are on pace to reach roughly 800,000 this year, down from 1.1 million last year, the firm said.

Completed foreclosures, when the lender repossesses a home, are on track to hit a half-million, or about a quarter below last year's total.

The trend comes as the U.S. housing recovery continues to gain strength, propelled by steady job gains, low interest rates, improving consumer confidence and growing demand for homes at a time when there's a thin supply of available homes for sale in many markets.

That's helped boost home prices, which jumped 12.2 percent in May from a year earlier -- the biggest gain in seven years, according to data provider CoreLogic.

Even so, foreclosures remain a potential drag on housing in many states, including Florida, Nevada, Illinois and Ohio.

"Halfway through 2013, it is becoming increasingly evident that while foreclosures are no longer a national problem, they continue to be a state and local market problem," said Daren Blomquist, a vice president at RealtyTrac.

Homes scheduled for auction in states like Florida, where the courts play a role in the foreclosure process, were up 34 percent in June from a year earlier, the firm said.

Scheduled home auctions doubled last month in New Jersey and Florida, which also posted the highest foreclosure rate of any state -- nearly three times the national average -- in the first six months of the year, the firm said.

Most homes lined up for public auction typically end up going back to lenders, which opens the door for the properties to be placed on the market as sharply discounted foreclosed homes later this year or in 2013.

Nationally, the inventory of previously occupied homes on the market was 10 percent below prior-year levels in May, according to the National Association of Realtors. So the potential for more foreclosures going on sale will likely be welcome news to would-be homebuyers in markets where there is a tight supply of available homes.

The number of homes that entered the foreclosure process in June was down 21 percent from May and about 45 percent below June 2012's total.

Lenders repossessed 35,507 homes last month, down nearly 9 percent from May and a drop of 35 percent from a year earlier. That's still short of the 25,000 or so a month that Blomquist considers the benchmark for foreclosures in a "normal" housing market.

At the height of the housing boom in 2006, completed foreclosures averaged 22,000 a month. They peaked in September 2010 at 102,000. Tighter lending standards for home loans since the housing bubble burst have helped slow the pace of foreclosures.

About 75 percent of the 824,292 U.S. homes in the foreclosure process as of June are tied to loans that were originated between 2004 and 2008.

"That's a good sign that the lending has much improved and we're not seeing high foreclosure rates on mortgages that have been taken out since 2008," Blomquist said.

source: dailyfinance.com