As a result of the 9% year-over-year growth in home sales, home prices have steadily risen, giving way to “important ramifications” for the overall economy, including positive equity that can increase homeowners’ wealth and place underwater homeowners “right-side up,” a recent CoreLogic report states.
In fact, the CoreLogic Home Price Index (HPI) for the U.S. was up 6.8% between April 2014 and April 2015, with further increases in HPI expected nationally through April 2016 at 5.3%.
And for some 4 million U.S. homeowners who owe the bank at least 20% more than their homes are worth, this is welcome news.
“We estimate that a 5% appreciation in home values across the U.S. will lift approximately 1 million additional homeowners out from being ‘underwater’ and place them right-side up once again,” CoreLogic writes.
Rising home values have also been a factor in reducing the foreclosure inventory across the U.S., according to the report.
“Homeowners with very little equity — and those who are underwater — have a greater default incidence,” CoreLogic writes. “Compared to homeowners with an 80% current loan-to-value ratio, owners who are underwater by 20% had a default rate that was about four times higher.”
In mid-2006, at the peak of the house-price bubble, less than 300,000 homes were in foreclosure proceedings. However, by mid-2011, more than 1.5 million homes were in the foreclosure pipeline, data shows.
Home value gains have, in part, worked to reduce the number of homes in these circumstances, with foreclosure inventory in April dropping 25% from a year ago, marking the fourth year of such declines.
And, as home values improve, homeowners with positive equity will “experience an increase in wealth, which can spur additional investments in their home (through home improvements) or in financial assets,” CoreLogic writes.
To read the full report, click here.
Written by Emily Study