Every month, the Obama Administration releases a Housing Scorecard fully evaluating the health of the housing market. The June 2014 scorecard outlined important trends occurring in home purchases, homeowner equity, foreclosure prevention actions, and also the general attitude of Americans towards certain economic trends. The full report can be found on the HUD website.
Winter 2013-2014 certainly put a damper on the growth of the housing market. As the country is now well into summer, rebounding statistics make it evident that the winter lull in the market can in fact be attributed to the bitter cold that discouraged many Americans from stepping outside. The June scorecard makes a point to mention this first thing, “Purchases of new homes surged by 18.6 percent in May. New home sales rebounded to a seasonally adjusted annual rate (SAAR) of 504,000 in May, following sales of 425,000 in April, and were up 16.9 percent from one year ago. Purchases of new homes rose in May by the biggest monthly gain in 22 years (since January 1992) and to the highest level since May 2008, indicating that home sales are rebounding from a severe weather-induced lull during the previous two quarters”. It is clear that the nice weather in May finally encouraged Americans to step out of the woodworks and take care of the home purchasing that they left unfinished over the winter, but simply wouldn’t due to the severe weather conditions. This idea is highlighted in the report when it states, “Purchases of new homes rose in May by the biggest monthly gain in 22 years”, as this is the most improvement America has seen month over month in a long time. It is also noteworthy that purchases were at the highest level since May 2008, right before the housing market crashed.
Another main point outlined by the June scorecard involved gains in homeowner equity. It is a great sign that homeowner equity is continuously exhibiting gains nationwide. It is a much more ideal situation than having homeowner’s throughout the country defaulting on their loans due to being underwater on the mortgage and having negative equity. According to the Federal Reserve, “homeowner’s equity was up nearly $795 billion in the first quarter of 2014, reaching more than $10.8 trillion, the highest level since the second quarter of 2007. Homeowners’ equity has risen sharply since the beginning of 2012, with equity up 73 percent, or nearly $4.6 trillion through the first quarter of 2014. The change in equity since April 1, 2009 now stands at more than $4.7 trillion”. The figure below depicts the trends in homeowner equity levels over the past 8 years.
*click image to enlarge
DS News reported that the home price gains are more prominent in some regions than others. “The West topped all other census regions in expected price gains, as it has since February. Prices one year out are expected to rise a median 5.3 percent in the region compared to 3.8 percent in the south, 3.6 percent in the northeast, and 3.3 percent in the Midwest”. It sounds like it’s a great time to be a homeowner on the West Coast at the moment.
The report also detailed, “foreclosures were down 32 percent from one year ago to the lowest level since December 2005 – a 101-month low”. This statistic is monumental for the housing market as it shows that the worst is soon to be ready to be put behind us, and most homeowners are more capable of living in a stable, affordable housing situation. In a past article entitled, “The FHFA Wants More Americans to Hop on the HARP and HAMP Train”, we discussed that the government has implemented successful foreclosure prevention programs, and plans to encourage more homeowners to participate until the economy is ready to stand on it’s own feet. The HARP and HAMP programs thus far are significantly attributable to the decline observed in foreclosures this year.
DS News also commented on the fact that Americans are starting to be more optimistic about their economic future: “Employment hopes also firmed up. The mean perceived probability of job loss fell to 14.7, matching a low first seen in 2013. At the same time, consumers put their probability of finding a new job within three months (if they lost their current one) at an average 51.8 percent, a new high”. Although these perceptions are not necessarily hard statistics, a positive outlook means that Americans are observing more opportunity around them and thus feel more comfortable contributing to and stimulating the economy. This is instills a great sense of hope which is essential for the overall strength of the economy.
The increase in home sales, impressive gains in homeowner equity, and declining foreclosure levels do signal a healthy housing market. However, the government, homeowners, and lenders need to be weary until the housing market reaches full recovery. The housing crisis was so severe that until the situation has completely turned around, Americans must continue to work together to achieve the end goal: a healthy housing market, and a healthy economy.