New Record High Home Prices: Your Potential Cash

According to Black Knight’s new report, home prices have surged across the U.S., with 60% of markets hitting record highs in June. This renewed growth in home prices is mainly due to a supply shortage to meet the high demand. Despite higher mortgage rates acting as a deterrent for current homeowners to sell, this growth has restored homeowners’ wealth, bringing home equity levels close to last year’s peaks.

With total equity surpassing $16 trillion and tappable equity (the amount lenders allow while maintaining 20% equity) rising to $10.5 trillion, homeowners have approximately $200,000 of potential cash in their homes. This trend has led to a minimal presence of underwater borrowers, with only 344,000 homeowners owing more than their properties are worth. However, the surge in home prices and mortgage rates has significantly impacted affordability for potential buyers, with current homeowners paying around 21% of their income on mortgage payments. In comparison, prospective buyers might need to allocate over 36% of their income for the same payments due to higher prices and rates.

Despite the challenges for potential buyers, the strong credit quality of mortgage holders and the industry focus on loss mitigation have contributed to a 16-year low in seriously delinquent mortgages.

NAR Economist Declares End of Housing Recession

Pending home sales saw a slight uptick in June, signaling a recovering housing market. According to the National Association of REALTORS® (NAR), the Pending Home Sales Index, which indicates home sales based on contract signings, increased by 0.3% in June. This comes alongside rising median existing-home sales prices, reaching their second-highest levels in two decades. Multiple offers on properties suggest high demand amid low supply, with homebuilders increasing production and hiring to meet the demand.

Lawrence Yun, NAR’s chief economist, stated that while the housing recession is over, inventory shortages persist, leading to limited choices and higher prices for buyers. However, Yun suggests that mortgage rate increases might be stabilizing, and with inflation moderating and job additions continuing, a decline in mortgage rates could stimulate increased buyer activity later in the year and into the next.

NAR’s forecast predicts a 12.9% decline in existing-home sales for 2023 compared to 2022, followed by a 15.5% increase in 2024. National median existing-home prices are expected to remain relatively steady, dipping by 0.4% in 2023 before rebounding by 2.6% in 2024. Additionally, the new-home sales market is anticipated to rise by 12.3% in 2023 and 13.9% in 2024, with housing construction expected to increase by 5.4% in 2024 after a 5.2% dip in 2023.

Study: Americans Hold Misconceptions About Home Prices and Mortgage Rates

A recent survey by Clever Real Estate and Real Estate Witch highlights Americans’ misconceptions about home prices and mortgage rates. The study found that more than half of respondents (53%) regularly check Zillow listings during their home search, with 29% looking at Zillow daily. Despite concerns about affordability, many Americans underestimate the actual cost of homes. Sixty percent of respondents underestimated the median home price, with only 14% accurately identifying the U.S. median price range of $400,000 to $499,999.

Interestingly, non-homeowners, who are more likely to be impacted by rising interest rates, are less knowledgeable about them than current homeowners. Only 8% of non-homeowners correctly identified the current range of mortgage rates, while 15% of homeowners had accurate knowledge. Furthermore, the survey revealed that 34% of participants ended up paying more for their homes than initially planned. Overall, the study highlights the gap between perception and reality in the housing market, with Americans often unaware of actual home prices and mortgage rates.

 

Source:

Vaimberg, Ron. “Weekly Newsletter – January 6, 2023.” Ron Vaimberg International, Ron Vaimberg, 6 Jan. 2023, https://rvionline.thinkific.com/courses/take/rvi-weekly-newsletter/texts/41523497-weekly-newsletter-january-6-2023.