Zillow:10.5% National Negative Equity Share Declining (But Chicago And Las Vegas Have 2X National Rate)

According to Zillow (and their methodogy for calculating “underwater mortgage loans”), US negative equity hit 10.5% in Q4 2016. That is a considerable improvement of the peak of 31.4% in Q1 2012.

But more than 55 percent of all homeowners in negative equity nationwide were underwater by more than 20 percent as of the end of Q4.

Where are the negative equity “zones”? Not on the West Coast. The West Coast is home to all five major metros with the lowest rates of negative equity. As of the end of 2016, Las Vegas and Chicago had the highest rates of negative equity among the largest U.S. metros, with 16.6 and 16.5 percent of homeowners underwater, respectively.

How about EFFECTIVE negative equity rates? Even though a borrower may barely be in positive territory, brokerage fees (say 6%) on sales can push the homeowner into negative territory. The national average for EFFECTIVE negative equity still exceeds 25%.

Let’s compare Washington DC with Prince Georges County in Maryland. The share of homes with a mortgage in negative equity is almost double in PG County compared with DC. The same holds true for the shares in EFFECT negative equity (that is exactly double the rate of Washington DC).

To show how much Phoenix AZ has improved in terms of negative equity, Phoenix now has the same negative equity share as Washington DC: 10.5% and the US. But Maricopa County has a larger EFFECTIVE negative equity share of 27.3%.

But how about Chicago, home of the World Series Champion Chicago Cubs? Negative equity in Chicago is even worse than it is in Prince Georges County in Maryland!

How about Lackawanna County, PA, the home of Scranton and the Dunder-Miflin regional sales office? Even worse negative equity problems than Chicago!!

The WORST negative equity county in the US? Pulaski County in Missouri, home of the US Army’s Fort Leonard Wood with a 47.4% share of negative equity mortgages and  76.1% share of EFFECTIVE negative equity mortgages.

Despite the improvement of negative equity in the US, a number of counties (many rural) are still struggling which is an impediment to both mortgage refinancing and mortgage purchase lending despite near-record low mortgage rates.

Freddie Mac Serious Delinquencies Fall To Lowest Since June 2008 As Home Prices Grow At 5.87% YoY Clip

Freddie Mac reported that the Single-Family serious delinquency rate in February was at 0.98%, down from 0.99% in January.  Freddie’s rate is down from 1.26% in February 2016.  That is the lowest reading since June 2008.

Notice how tame serious delinquencies were during the housing/credit bubble. The US seems to be repeating the housing bubble in terms of house price growth and low serious delinquencies, but without the higher levels of mortgage originations to borrowers with credit scores less than 620.

Bear in mind, the Case-Shiller reading is for January and it is almost April. Be that as it may, home price growth is at 5.73% YoY versus wage growth at 2.3% YoY, over 2x. And yes, Seattle, Portland and Denver lead the nation in YoY growth in home prices. The slowest growing cities? New York City and Cleveland (the Shooting Guards JR Smith/Iman Shumpert effect having been traded from the Knicks to the Cavaliers).

It says here that when home prices are growing at two times wage growth it would mean we have a housing bubble … again.

 

 

 

Clinton Country Credit Scores: California and New York Lead US In Credit Scores (Also Have The Worst Income Inequality)

Remember the furor over the 2016 Presidential Election where Donald Trump won the Electoral College vote, but not the Popular Vote? A substantial number of Hillary Clinton’s electoral votes (and popular votes) came from California (55 electoral votes) and New York (29 electoral votes). 

The 2016 electoral map is correlated with CoreLogic HCI Credit Score averages by state. The highest two average credit score states are California and New York. Actually, the District of Columbia has the highest average credit score in the country. The top five states (and DC) are all in Clinton Electoral Country (that is, they all voted for Hillary).

The bottom five states? All these states were in Trump Electoral Country.

Washington DC, New York and Connecticut lead the US in income inequality.  With California and Massachusetts in 5th and 6th place. 5 of the top 6 states for income inequality voted for Clinton. One 1 state (Louisiana) for Trump.

The correlation is not perfect, of course. Arizona has a higher than average credit score, yet voted for Trump. The same goes for Montana (all three electoral votes), Tennessee and North Carolina.

Wealthier, coast states have higher than average credit scores and votes for Clinton. Flyover country have lower than average credit scores and for the most part voted for Trump.

Of course, the wealthiest counties in the nation surround Washington DC, New York City and West Coast cities like Seattle, Portland, San Francisco, Los Angeles and San Diego.

Just like those who believed that all you needed was a credit score to be underwritten for a mortgage loan, one could conceivably predict Presidential voting using credit scores (at the state level).  But I do NOT recommend it!!! Just like with mortgages, we need more information than just credit scores (for both borrowers and voters).

An ALT-A mortgage borrower during 2006.

 

 

Housing Bubble? Homebuyers Face Bidding Wars on Scarcer-Than-Ever U.S. Listings

Is this the new, creditless home price bubble?

(Bloomberg) – Prashant Gopal – The winning bidder of a Grand Rapids, Michigan, house has been offered almost $20,000 to hand his purchase contract to another buyer. An agent in Nashville, Tennessee, got a property for his client by cold-calling local homeowners. Near Columbus, Ohio, it took a teacher five tries to secure a deal.

It’s the 2017 U.S. spring home-selling season, and listings are scarcer than they’ve ever been. Bidding wars common in perennially hot markets like the San Francisco Bay area, Denver and Boston are now also prevalent in the once slow-and-steady heartland, sending prices higher and sparking desperation among buyers across the country.

Buyers are clamoring as an improved job market and growing confidence in the economy collide with rising mortgage rates — yet there’s little new inventory for them to purchase. Housing starts remain well below levels before the last recession, and builders have focused on higher-end properties out of reach for many people. Homeowners have become even more reluctant to sell because, after all, where are they going to move?

The three months through January had the fewest homes on the market on record, according to an analysis by Trulia. Prices jumped 6.9 percent in January from a year earlier, the biggest increase for any month since May 2014, data from CoreLogic Inc. show. And homes sold faster in the first two months of 2017 — spending an average 58 days on the market — than at the start of any year since at least 2010, according to brokerage Redfin.

Low inventory of homes for sale and  bidding wars for homes? Existing home sales cratered in 2012 and have remained  at levels since before the financial (and housing) crisis. Yet the median price for existing home sales has skyrocketed to levels higher than the peak of the home price bubble.

But why is there so little inventory for sale? One reason is that the supply of mortgage credit to households with credit scores of less that 660 had drop precipitously by 2012.

Another reason is dreadful wage growth for the majority of the working US population.

There is a possibility of a home price bubble, but this time due to LACK OF AVAILABLE CREDIT. So, prices are being bid up but households are still not willing to put their properties up for sale.

For some buyers, patience and persistence can pay off. Jessica Streit, a 42-year-old teacher and mother of two, has been searching for months for a home in Sunbury, Ohio, north of Columbus. She lost three bidding wars and even went into contract on a home, only to back out after an inspection revealed some expensive problems. Last week, her fortunes changed — she signed a $136,000 deal for a two-bedroom condominium with a finished basement.

“We were absolutely shocked to get this one,” she said. “We had an appointment to see a rental house Saturday because we thought that would be our next direction.”

A $136,00o condo in Sunbury Ohio?????

This reminds me of Tom Haverford in Parks and Recreation expressing surprise over Jerry Gergich owning a time share condo in Muncie Indiana. “In Muncie??”