Pending home sales fell in October for the fifth straight month, dropping the sales pace to its lowest point since December of 2012. The October government shutdown is partially to blame for the figures, but “structural issues” have primarily caused the drop. Lawrence Yun, chief economist for the The National Association of Realtors, listed job creation, higher mortgage rates, and limited inventory as “headwinds” working against sales figures moving into 2014.
The good news is that the housing market is working through each of these issues slowly but surely.
Negative equity has been one of the largest obstacles to the recovery. As home sales prices rose through 2007, property values ballooned. After the crash, prices plummeted between 30% and 50% (and often more) across the nation. The median sales price in San Luis Obispo County, for example, dropped 37% between 2006 and 2011, according to the SloCountyHomes.com statistics dashboard.
The drop in home values resulted in owners owing more than their home was worth. At peak, 31.4% of total mortgages were “underwater” in the first quarter of 2012, according to Zillow research.
That number has dropped to 21% by the third quarter of 2013. Since the beginning of 2012, 4.9 million fewer homeowners owe more than their home is worth, while about 10.8 million owners remain underwater.
Homeowners have come out from underwater as home prices appreciate. A recent report from Lender Processing Services showed prices up 0.2% monthly and 9.0% yearly in September of 2013.
Tight supply has been one of the obstacles for the real estate market as it returns to normalcy. Negative equity hurts the fluidity of the market, keeping potential buyers and sellers stuck in their homes. As fewer owners have negative equity, more houses will be put on the market, and more people will be looking to purchase.
As supply increases, borrowers will need to focus on qualifying for a loan. We have created a handy guide to help potential homebuyers improve their credit. See HERE for more. You can also read here to see how to qualify for a loan after a negative credit event, which can take just two or three years depending on the conditions.
Have a happy holidays!