There are so many housing reports flying around that even those of us in the business, like me for 40 years, need to dig in deeper to get “the rest of the story”. Housing prices are beginning to notch up a bit in the Carolina’s. I remind you, not everywhere, as it is community and neighborhood specific.
Why is this happening sooner than we anticipated?
- Those with negative equity have withdrawn from the marketplace and will need to wait it out until their homes appreciate again to avoid having to come to the table with cash.
- Rents are at an all-time high, tipping the rent vs. buy equation.
- Builders are still only able to build and fund so much inventory; which means product opportunities are way off the demand.
- Interest rates are at an all-time low.
Put that all together, and you can see why the depreciation dips are flattening earlier than anticipated.
It was reported by Zillow that 16 million homeowners in America are under water. They owe more than their homes are worth right now. That DOES NOT mean that they are not making their payments. Only about 10 percent of those that have negative equity cannot pay their payments and will have to seek remediation. Foreclosures are a LAST resort for lenders, because they only recapture 79 percent of their loan value versus 86 percent if they allow a short sale. Keep in mind; you cannot short sale if you are financially capable of making the payments.
Based on what I outlined above, appreciation is and will again occur. It will be gradual, but like the stock market, those that are negative will have to be patient. As I stated, in total numbers that is a very small percent of the greater marketplace. As with all these stats and reports coming out, we must put them in context. Because a homeowner is underwater does not mean that he is in dire straits or that his home will be blight to the neighborhood.
Today, we at Allen Tate are selling 60 homes a day in the Carolina’s, and there are new comps being placed on the books that negate some of the distressed property appraisals out there. What it all spells out is that the recovery bandwagon is marching on and opportunities abound once again, depending on your personal situation. Be careful to take what you hear and read and put it into the total context. Drama and creating angst is what media feeds upon. Why? It gets your and my attention!
By Pat Riley (President and Chief Operating Officer)