Numbers Count: Weekly mortgage data highlights

Posted By Wendy Cutrufelli In Your Home | No Comments

Numbers count. They matter to bankers and to prospective homebuyers, sellers, and real estate professionals. Here’s my take on the key numbers on the housing market this week.

The numbers: Rising values lift homeowners’ fortunes

Large, brownish houses on a street. [1]The financial position of homeowners improved in the second quarter as the market value of all owner-occupied residential real estate rose to $20.2 trillion, according to the National Association of Home Builders [2]‘ (NAHB) analysis of the Federal Reserve’s Flow of Funds report for the second quarter. Based on its tabulations of the Fed data, NAHB said that low mortgage rates and rising home prices helped owners improve the average equity position for the 12th consecutive quarter to 54%, up significantly from the low point of 37% in the first quarter of 2009.

What counts: The rising tide of home values is lifting a lot of boats. At 54%, owners’ equity in real estate is approaching the pre-housing crisis levels of around 60%. Additional equity may give homeowners some financial flexibility, including the ability to tap into that equity with a home equity line of credit (HELOC) or home equity loan for remodeling, home improvements, important purchases, school costs, or other opportunities.

Here are three quick tips about HELOCs and home equity loans:

  1. Both provide an option for consolidating debt into one manageable monthly payment. They require careful financial management to avoid the temptation to consolidate credit card debt, and then proceed to run up your card balances again.
  2. Because HELOCs and home equity loans are secured by the borrower’s home, lenders may view them as less risky than other types of credit, such as credit card debt or auto loans. This means rates tend to be lower than rates on those other types of credit, but, of course, you are putting a lien on your home.
  3. The interest paid on a HELOC or home equity loan may be tax-deductible. You should check with a tax advisor regarding your situation.
The numbers: Cash buyers dwindling

After four consecutive months of gains, existing-home sales slipped in August [3] as investors paying cash stepped away from real estate, the National Association of Realtors (NAR) said Sept. 22. Sales increases in the Northeast and Midwest were outweighed by declines in the South and West. Existing-home sales decreased 1.8% in August to an annual rate of 5.05 million. Sales are at the second-highest pace of 2014, but remain 5.3% below the sales pace a year ago.

The Realtors group attributed the August decline to a drop off in all-cash buyers. All-cash sales were 23% of transactions in August, dropping for the second consecutive month from 29% in July, and representing the lowest overall share since December 2009 when they were 22% of sales. Individual investors, who account for many cash sales, purchased 12% of homes in August, down from 16% in July, the association said.

What counts: At 23% of sales, all-cash deals last month were near a five-year low. That should be welcome news for many home shoppers who have found it difficult in the past couple of years to compete with all-cash offers. Fewer cash buyers may open the door for others. As Lawrence Yun, NAR chief economist, said, “First-time buyers have a better chance of purchasing a home now that bidding wars are receding and supply constraints have significantly eased in many parts of the country.”

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