According to the latest roundup of real estate statistics, almost 9 million American homeowners are still underwater. Despite traction gained in the recovery, many are finding in difficult to pay their mortgage. That said, are U.S. homeowners actually gaining any equity? Perhaps even more importantly, what does it all mean for home buyers, sellers, and real estate investors?
Data published by the Union Tribune in December 2014 acknowledged 8.7 million homeowners that still owed more on their mortgages than their homes are worth. That’s almost 17% of the total. In San Diego County, around 45,000 homeowners were underwater at the end of 2014. Quite interestingly, however, home prices, rents, and demand for housing has been strong.
In addition, there are millions of vacant homes across the country. Thousands of them are being torn down by local authorities. Abandoned and neglected bank owned REOs make up a large portion of this pool. So what’s ahead? What do these real estate stats mean for potential home buyers and sellers?
Stabilization
Although the foreclosure crisis officially ended years ago, and a clear pivot has been seen as home prices keep rising, there is obviously some inventory that has yet to go through the cycle. Should trends continue in the direction they have been, experts anticipate foreclosures, short sales, and underwater homes ought to continue to decline as a share of the market. However, the vast majority have chosen to turn a blind eye to the hundreds of billions of dollars in non-performing mortgage loans in the shadows. This is likely a mixture of both believing this debt is no longer a threat, as well as most being completely unaware of the size of this pool of loans. Still, the general consensus is that 2015 will be the year the nation’s housing market really stabilizes.
So what does it all mean for those actively participating in the housing market?
Homeowners
For many homeowners that have been in negative equity situations, 2015 will likely be the year they breakthrough to the surface. There still may be significant treading of water to be done, but situations will have gotten better from previous years. Those that have been considering selling, or that really need to sell, should keep a close eye on local home prices and property values. Obviously, asking prices are not the same thing as value, but they can be a good indicator.
Homebuyers
Some homebuyers have reluctantly remained on the fence. This may be due to misconceptions about how hard it is to get financing today, or due to fierce competition in local markets. The good and bad news is that the real estate market, and home prices, are only likely to keep heading up for the foreseeable future. The real estate data above shows that there are still clearly deals to be found. However, the time to lock in is now. It is the choice of either buying now and enjoying the rise in equity themselves, or letting sellers enjoy it, and paying far more for the same properties later on. Remember that rising interest rates can make seemingly insignificant rises in home prices actually cost tens, if not hundreds of thousands more.
Real Estate Agents
For real estate professionals, it is definitely a quirky market. Consumers are going to be more demanding than ever, and agents need to be able to skillfully manage distressed deals. Surprisingly, the National Association of Realtors (NAR) reports that few actually have much experience with these types of transactions. Still, be ready to switch gears as we move into a new phase.
Real Estate Investors
2015 is shaping up to be another fantastic year for real estate investing. There is still great opportunity to invest for value, and flip houses, or lock into great yields on rental properties. What is likely to really stand out about this year for investors is how others will underestimate and overlook the opportunities. There will be great wealth and income opportunities for those that are ready to hustle and know where to find the deals.
