Overall, the housing market made steady, modest gains during the first quarter, with home prices rising and home owners seeing greater equity, Lawrence Yun, the chief economist for the National Association of REALTORS®, notes in his latest column at Forbes.com.
Existing-home sales during the first quarter were at a 5.3 million annualized pace, marking a 4.7 percent increase from a year ago.
“There could be more room to grow given that sales are certainly not the frenzy pace of over 7 million that occurred during the easy subprime lending days and because jobs are consistently being added to the economy provided the mortgage rates remain manageable and do not shoot up,” Yun notes.
Mortgage default rates are lessening. The number of borrowers late on their mortgage payments by a month dropped to 2.35 percent in the first quarter. That is the lowest in 40 years (since the data first was collected on delinquency rates). The share of homes with new foreclosure proceedings also dropped to the lowest level in more than a decade.
Home owners are seeing their equity increase. Since 2010, home equity nationwide has basically doubled from $6 trillion to more than $12 trillion, Yun notes. The median home price in that time has risen from $166,100 to $222,400.
However, there is one area of alarm: Rents, Yun notes. Rents have been outpacing income growth for the past four years. During the first quarter, rents rose 3.7 percent – double the rate of wage growth. Renters also continue to be held back from home ownership due to persistently tight credit standards among lenders.
As such, the home ownership rate plummeted to near 50-year lows of 63.6 percent in the first quarter.
“Among those aged under-35 the ownership rate fell even more markedly and was 34.2 percent in the latest quarter,” Yun notes. “The renter households in the meantime have been ballooning upwards by an additional 9 million in the past decade while home owner households have been reduced by a million. This trend of more renters and fewer home owners is occurring at a time of rising home values and housing equity gains.”
Source: “First Quarter Housing Market Trends,” Forbes.com (April 29, 2016)