Providing custom mortgage credit reports, related services & technology solutions for over 75 years.

800-243-0120

Search Avantus.com

Foreclosures fall, property values rise this spring

April 12, 2019

The strength of the housing market at this point almost cannot be overstated; just about every measure is now moving in the right direction, from inventory growth to buyer demand, property values and even affordability. With that in mind, it's important to consider just how far the sector has come in the past decade with regard to both how much benefit homeowners get from their properties and how well they are able to keep up with their monthly mortgage payments.

"Foreclosure filings were down 15% year over year."

During the first quarter of 2019, just 161,875 properties across the country received some sort of foreclosure notice, a total that was down 23% from just three months earlier and 15% year over year, according to the latest U.S. Foreclosure Market Report from ATTOM Data Solutions. That brought the national number of foreclosure filings to the lowest level observed since the same quarter in 2008.

A closer look
In the month of March specifically, foreclosure filings rose 7% from February as part of a seasonal trend; there was still a 21% decline on an annual basis, marking the ninth straight month of year-over-year drops, the report said.

Throughout the first quarter as a whole, the number of new foreclosure filings actually rose 7% month over month as well, but also slipped 3% annually, and that was the 15th straight month with such a shift, ATTOM's data showed. Meanwhile, bank repossessions slipped 21% on a quarterly basis and 45% annually.

"While some markets saw a slight uptick in foreclosure filings, that is above pre-recession levels, the majority of the major markets are well below pre-recession levels," said Todd Teta, chief product officer at ATTOM Data Solutions. "While we did see a slight increase in U.S. foreclosure starts from last quarter, bank repossessions reached an all-time low in the first quarter of 2019, showing continuing signs of a strong housing market."

Continuing a trend
The slight growth in foreclosure starts from February to March may be reflective of the minor increase in delinquency first observed in January. According to Black Knight's most recent First Look mortgage data, fewer than 1 in every 25 homes with outstanding mortgages nationwide were at least 30 days behind on payments but not yet in foreclosure through the end of February, down 9.5% annually but also up 3.7% from January, bringing the national delinquency rate to the highest level seen in any February in 12 years.

However, the number of homes so far past due that they fell into foreclosure continues to drop sharply, with foreclosure starts sliding 19.5% from January, the report said. As a consequence, the level of such activity is at some of the lowest levels observed since the turn of the century, close to the 15-year low observed last September. Completed foreclosures also fell more than 21% on an annual basis.

In all, the number of homes in the delinquency inventory that had not yet been hit with a foreclosure filing ticked up by about 74,000 from January to February, bringing the total to more than 2 million. However, in February 2018, that inventory was close to 2.2 million. Severe delinquency also dropped sharply, falling by 2,000 month over month and 195,000 year over year, to just 502,000 through the end of February.

Nationwide, only about 264,000 homes were in the foreclosure pre-sale inventory, meaning banks had filed on those properties but not yet gone through with the repossession.

Big help for homeowners
In March, all the positives in the housing market of late continue to bring home prices higher than ever before, according to the latest data from Realtor.com. Thanks to both normal price appreciation and mounting demand from shoppers at the start of spring, median list prices surpassed $300,000 for the first time ever, an increase of 7.2% on a year-over-year basis.

"Median list prices surpassed $300,000 for the first time ever."

Part of the reason for this increase is that a growing number people who own homes that were already well above the median are now starting to list their properties, but at the same time, home value growth is still rising at well above historical norms on average as well, the report said. Moreover, if demand for existing homes starts to slip as more construction companies put up newly built homes, list prices and sales prices will likely diverge as spring wears on.

Indeed, the number of homes for sale - regardless of price - grew 4% in March, but the prevalence of lower-priced properties continues to decline, the report said. The number of homes on the market listed at less than $200,000 dropped 9%, while homes priced above $750,000 increased 11%.

Changes in equity
At the same time, the number of homes that entered 2019 with a renewed strength thanks to rising prices was significant, according to the latest U.S. Home Equity & Underwater Report from ATTOM. At the close of 2018, some 14.57 million properties were considered "equity-rich," meaning they were worth at least 50% more than the remaining balance on the mortgage, up more than 6% on an annual basis and another all-time high for the study, which dates back to the end of 2013.

Nationwide, equity-rich properties make up more than a quarter of all homes with outstanding mortgage debt, the report said, Meanwhile, only a little more than 5 million homes - under 9% of all properties with home loan balances - are seriously underwater, with owners facing obligations at least 25% north of what the property is actually worth. That was down very slightly, about 0.6%, on an annual basis. Trends of both declining underwater homeownership and ever-growing equity are expected to continue for some time to come.

"With homeowners staying put longer, homeownership equity will most likely continue to strengthen," Teta said in discussing these ATTOM findings. "Those that are seriously underwater may find themselves coming up for air as they continue to pay off excessive legacy mortgages or sell. This report helps to showcase a story of the West coast markets having the highest share of equity rich homeowners versus the South and Midwest markets, who continue to have stubbornly high rates of seriously underwater homeowners."

Separate data from Trulia shows that the trend of homeowners staying put longer doesn't mean they're just sitting on their equity as it grows. Currently, about 90 percent of homeowners say they want to remodel or renovate their current homes, and that number is up from 84 percent a year ago. In fact, just 17% of respondents who plan to renovate within the next two years are also planning to sell, but more than two-thirds of current owners who do think they will sell in that time frame are also planning to renovate. About 39 percent will do so within the next year.

Furthermore, 1 in 5 owners with designs on remodeling plan to invest at least $10,000 into the project, but nearly half aim to spend less than $5,000, Trulia found. The most popular room slated for at least some remodeling efforts was the kitchen, cited by 50% of respondents. The kitchen is also typically considered the room most likely to provide a high return on investment, and even those owners who aren't planning to sell will likely get the most mileage out of the expense because the kitchen also tends to be the highest-trafficked room in a home. The kitchen finished just ahead of bathrooms in terms of renovation plans, as 45 percent of respondents said they plan to spend on remodels there.

Good news for shoppers?
But with home prices continuing to rise and mortgage rates leveling out, and despite a shrinking inventory of starter homes, there may be plenty of opportunity for first-time buyers in the market this spring and summer, according to the latest Entry-Level Market Report from RealEstate.com. The national average starter property saw prices rise 9.2% on an annual basis in February.

"The number of low-priced homes ticked up 4.1%."

While that's well above the average growth for properties of all values, it's actually the slowest level of starter-home appreciation since June 2016, the report said. In February 2018, prices had risen 12.5% annually. In fact, 42 of the 50 biggest housing markets nationwide saw starter-home price growth slow down since that time, in part because the inventory is rising thanks to construction efforts nationwide. The number of low-priced homes on the market ticked up 4.1% from February 2018 to the same month this year, marking seven straight months of improvement. Before this recent run of success, starter inventory had been in decline for four straight years.

"Buying a home for the first time is an incredibly exciting yet extremely stressful time," said RealEstate.com general manager Justin LaJoie. "Potential buyers who tested the waters in recent years should have an easier time now, which should be especially good news for anyone who made an offer but lost their bid for a home. First-time buyers can give themselves an extra boost by being well-informed, prepared buyers. And the work they do - contacting more agents, doing more research and visiting open houses - should pay off this year."

In fact, with all this in mind, now is the perfect time for first-time buyers to start working with lenders and real estate professionals to potentially lock in a good deal. Though prices are now at some of the highest levels observed - and still growing - mortgage rates remain well below both historical and pre-recession averages, and locking in a mortgage deal when that's the case will typically help homeowners save thousands of dollars or more over the life of a loan. However, that likely requires them to get into the market sooner than later to make sure they can get the best possible deal available to them.

 

 

 

If you liked this article, consider signing up for our weekly Buzz recap email! Sent every Friday morning, it's a quick way to catch up on all the industry news and happenings at Avantus. Click here to sign up!