While the Pending Home Sales Index (PHSI) fell in January to its lowest level since October 2014 according to a release from the National Association of Realtors This Week in Real Estate, the amount of homeowner equity has reached a new peak. Below are a few highlights from the last week of February that influence our business:
* CoreLogic: Evaluating the Housing Market Since the Great Recession.This report details the remarkable 11-year economic cycle surrounding the last U.S. housing market downturn, examining the boom and bust years between 2006 and 2011 and the ensuing recovery, with data through December 2017.Residential home prices began to peak in some parts of the country as early as 2005. Home prices collapsed in 2007, when Wall Street began to back out of residential mortgage-backed securities. After falling 33 percent during the recession, prices in most markets have returned to peak levels, growing 51 percent nationally since bottoming out in March 2011. The average home price is now 1 percent higher than it was at the peak in 2006. “Homeowners in the United States experienced a run-up in prices from the early 2000s to 2006, and then saw the trend reverse with steady declines through 2011,” said Dr. Frank Nothaft, chief economist for CoreLogic. “After reaching bottom in 2011, our national price index is up more than 50 percent. West Coast states, such as California, Washington and Oregon are seeing some of largest trough-to-current growth rates in home prices. Greater demand and lower supply – as well as booming job markets – have given some of the hardest-hit housing markets a boost in home prices.
* Pending Home Sales Start 2018 Lower.The Pending Home Sales Index decreased 4.7% in January to the lowest level since October 2014. The Pending Home Sales Index (PHSI) is a forward-looking indicator based on signed contracts reported by the National Association of Realtors. The PHSI fell to 104.6 in January from a downwardly revised 109.8 in December. The PHSI decreased in all four regions, ranging from 1.2% in the West to 9.0% in the Northeast. Year-over-year, the PHSI also decreased in all four regions, ranging from 1.1% in the South to 12.1% in the Northeast. NAR reported that listings were 9.5% below the level a year ago. NAR suggested that in addition to new residential construction, relief from the extreme shortage of supply could come from institutional investors dumping single-family homes back into the market and more homeowners deciding to sell. Existing home sales fell 3.2% in January, and new home sales declined 7.8% last month. However, builder confidence remained at a strong level in February. Job growth, increasing homeownership rates and limited inventory will spur continued growth in new residential construction.
* Homeowner Equity Surpasses Previous Peak.As house prices climb, the amount of American homeowner equity continues to grow. As of third quarter 2017, the Federal Reserve estimates owners’ equity — that is, aggregate home value less outstanding mortgage debt — is $14.1 trillion. Home equity has surpassed the previous peak of $13.4 trillion from first quarter 2006 during the past year, recovering from the great price correction that more than halved home equity positions. Home equity holdings were 40 percent higher than the aggregate value of household and non-profit checking and savings accounts in the third quarter, emphasizing its importance on the household balance sheet.