Signs that Home Equity Will Revive
by admin ~ November 3rd, 2009.For over two years home values plummeted to 2002 levels as most Americans lost their home equity. The Federal Reserve took significant measures in 2009 to restore the housing sector with historic low mortgage rates that spurred mortgage refinance activity once again. Now, housing markets within the country are showing the first signs of stabilizing. The Home Affordable Refinance Program is helping stabilize the housing sector because this government loan is extending refinance loans up to 125% loan to value. So borrowers with no equity still may qualify for a fixed rate refinance if they have a Fannie Mae or Freddie Mac mortgage.
According to the latest results from the Standard & Poor’s Case-Shiller Home Price Indexes, which were released last week, 19 of the 20 metropolitan areas show an improvement in their annual rate of return, and 17 of the 20 metropolitan areas saw price increases in August over July. In September, existing-home sales increased to 5.57 million units, up 9.4% from August, according to the National Association of Realtors. “We’ve already seen immediate signs of a housing recovery,” says Ross DeVol, the director of regional economics at the Milken Institute, an independent economic think tank that tracks the housing market. “But things were so depressed that coming off a low bottom could take a long time.”
Helping to speed up the housing recovery are national policies including the first-time home buyer’s tax credit and relatively low mortgage rates. Should the tax credit get extended Senate Democrats reached a compromise last week and it will continue boosting home sales, says Mark Zandi, the chief economist at Moody’s Economy.com. Meanwhile, the Federal Reserve, which has been keeping mortgage rates artificially low, is scheduled to end that effort by March, which could temporarily increase demand for homes between now and then. Of course, each housing market is regional and varies greatly from the other. Still, there are indicators home owners can rely on to see whether their home values are about to rise. Here are six.
The Unemployment Rate
It’s quite simple: Without a job, you can’t buy a home. And as the unemployment rate rises, fewer individuals are capable of buying a home and qualifying for a home loan with the tightened credit standards. That decreases the demand for homes, which drives prices down. To find a city’s unemployment rate, and whether it’s rising or falling, visit the Bureau of Labor Statistics’ web site. The most recent report, from Oct. 28, breaks down the unemployment rates in each state’s major metropolitan areas and compares those numbers to the previous year. Also, see if local businesses are hiring and if large corporations are moving into the area. More jobs leads to more employees who end up increasing demand for real estate in the area.
Rising incomes
House hunters who want to dig a little deeper can look at the average or median change in income among households in a particular neighborhood. At a minimum, confirm that incomes are being adjusted for inflation. Homeowners who have stagnant or decreasing salaries may not have much cash left over after they pay their mortgage; as a result, they might not maintain their homes or stay on top of repairs, which could lower a home’s value and even its neighboring homes’ values, says Zandi.
The Bureau of Economic Analysis offers some insight on personal income. Click here and choose “Per capita personal income” and “All Metropolitan Areas” to see how an area’s personal income compares to others and to previous years. A big drawback is that the data released this year ends with 2007 figures. For state data, click here; the numbers are more current and show changes in personal income on a quarterly basis.
March 10th, 2010 at 2:43 pm
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