Washington Report

Home values rise, more owners get above water

 

kenharney@earthlink.net

The biggest story in American real estate in 2013 hasn’t gotten the attention it deserves, so let’s shout this out: Homeowners’ net equity holdings soared by $2.2 trillion between the third quarter of 2012 and the third quarter of this year, according to new data collected by the Federal Reserve.

This is a record rebound for a 12-month period. And it’s crucially important in personal financial terms for hundreds of thousands of owners who’ve been underwater on their mortgages for years. They now have options they didn’t have before: They can sell their homes and not have to bring money to the closing. They may be able to borrow against their equity to help pay for college tuitions, home improvements and other purposes. They may be able to refinance their mortgages without having to use a government-aided program.

Home equity is the difference between the mortgage debt outstanding on a residence and the current market value of the home. If your house is worth $300,000 and you owe the bank $150,000 — whether from a single mortgage or multiple loans — you have $150,000 in equity. If your mortgage debt totals $350,000 on a $300,000 house, you have $50,000 in negative equity. Equity generally grows in several ways: You lower your debt by making payments to your lender, the value of your house increases because market conditions improve or you raise the home’s sales value by remodeling or upgrading it.

Growing home equity not only signifies widespread recovery in household personal wealth, but it also provides an important boost for the ongoing economic recovery. Consumers who have a cushion of equity in their homes are more likely to spend money on goods and services than those who don’t. The latest Fed “flow of funds” calculations show that owners have now seen their equity stakes grow by more than $3.2 trillion from the post-bust low point in the first quarter of 2011.

During the financial crisis of 2008-11, millions of American owners fell into negative equity positions as the sale value of their homes plummeted. With the recovery that took hold in 2012, values began to turn upward again — dramatically so in some of the hardest-hit areas where prices had fallen fastest.

A new research study released this week by CoreLogic, a real estate and mortgage data firm, estimated that 791,000 homes moved from negative to positive equity status during the third quarter of this year alone, and more than 3 million have done so since the beginning of 2013. Though 6.4 million homes continue to be underwater on their mortgage debt — 13 percent of all homes with a mortgage — that is down from 7.2 million (nearly 15 percent) as recently as the end of the second quarter of this year.

CoreLogic researchers found that among the states that experienced the most severe property devaluations during the bust and have recovered impressively, some continue to have persistent hangovers of negative equity. In Nevada, nearly a third of all homes are underwater, despite price gains. In Florida, nearly 29 percent are still in negative equity, and in Arizona it’s nearly 23 percent.

In California, which suffered deep equity losses in non-coastal areas between 2007 and 2010, home values have roared back in the past two years. Now the state has just a 13 percent negative equity rate — significantly lower than Ohio (18 percent), Michigan and Illinois (both 17.7 percent,) Rhode Island (16.6 percent) and Maryland (15.6 percent).

The states with the highest rates of homeowner equity: Texas and Alaska, where 96.1 percent of all owners with mortgages are in positive territory, Montana (95.8 percent), North Dakota (95.7 percent) and Wyoming (95.4 percent).

Other findings from the CoreLogic study:

• People with higher-priced homes are somewhat more likely to have positive equity than owners of lower-cost houses. While 92 percent of all mortgaged homes in the country valued at more than $200,000 have positive equity, 82 percent of homes valued at or below $200,000 do.

• Though homeowner equity wealth has increased rapidly in the past year, 10 million homeowners still have only modest equity stakes — less than 20 percent — and that puts them at risk should property values tumble again.

But another bust is nowhere in sight, thanks to tougher underwriting and regulatory oversight. So whether you’re one of the recent arrivals to positive equity status, or you’ve enjoyed it all along, the new year looks encouraging.

Kenneth Harney is executive director of the National Real Estate Development Center.

Read more Home & Garden stories from the Miami Herald

  •  
 <span class="cutline_leadin">RETURNING TO HER ROOTS:</span> Noris Ledesma, curator of tropical fruit at Fairchild Tropical Botanic Garden in Coral Gables, prunes a ruby mango tree. The Colombian native will showcase Colombian mangoes at the festival, July 12-13.

    Coral Gables

    Colombian mangoes will be the star at this weekend’s Mango Festival at Fairchild Tropical Botanic Garden

    Three types of mangoes from the Andean country — only one of them sold here — will be featured at this weekend’s mango festival at Fairchild.

  •  
This majolica piece has a great deal of charm.

    Treasures

    Some majolica pieces can be highly prized

    Q: Enclosed is a photo of a majolica jardiniere (I have two), which I [purchased approximately 25 years ago from a house auction in Michigan]. Someone working in my house broke off one of the lady’s tops. Luckily, I was able to have it restored. There are no markings and the piece is 16 wide by 18 inches tall. I need an appraisal for insurance purposes. I would like to know the value of both the pair and one alone.

  •  
The water-saving Awaken handshower from Kohler allows users to get an extra boost of water for rinsing, with the push of a button, but have a constant flow of warm water for regular washing.

    Ask a plumber

    Looking for ‘constant’ shower water savings

    Q: I’m planning to remove my old outdated shower head for a new water-efficient shower set-up. I have seen some models that allow you to turn the water “on and off” during use, but I want to keep the water running “constantly” and still be efficient. Can you please give me more information and suggestions on water efficient showering?

Miami Herald

Join the
Discussion

The Miami Herald is pleased to provide this opportunity to share information, experiences and observations about what's in the news. Some of the comments may be reprinted elsewhere on the site or in the newspaper. We encourage lively, open debate on the issues of the day, and ask that you refrain from profanity, hate speech, personal comments and remarks that are off point. Thank you for taking the time to offer your thoughts.

The Miami Herald uses Facebook's commenting system. You need to log in with a Facebook account in order to comment. If you have questions about commenting with your Facebook account, click here.

Have a news tip? You can send it anonymously. Click here to send us your tip - or - consider joining the Public Insight Network and become a source for The Miami Herald and el Nuevo Herald.

Hide Comments

This affects comments on all stories.

Cancel OK

  • Marketplace

Today's Circulars

  • Quick Job Search

Enter Keyword(s) Enter City Select a State Select a Category