Homeowner Equity Keeps Growing Across The U.S. in Q3

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ATTOM released its Q3 2022 Home Equity Report This Week in Real Estate that shows 48.5 percent of mortgage residential properties were considered equity-rich; up from 48.1 percent in Q2 and 39.5 percent in Q3 2021. On Wednesday, the Federal Reserve raised the benchmark interest rate three-quarters of a percentage point; its fourth consecutive rate hike. NAR chief economist, Lawrence Yun, expects mortgage rates to move only slightly as the mortgage market has already priced in the latest Fed move. Below are a few newsworthy events from the first week of November that influence our business: 

Homeowner Equity Keeps Growing Across U.S. in Third Quarter Despite Housing Market Slowdown. ATTOM released its third-quarter 2022 U.S. Home Equity & Underwater Report on Thursday, which shows that 48.5 percent of mortgaged residential properties in the United States were considered equity-rich in the third quarter, meaning that the combined estimated amount of loan balances secured by those properties was no more than 50 percent of their estimated market values. The portion of mortgaged homes that were equity-rich in the third quarter of 2022 increased from 48.1 percent in the second quarter of 2022 and from 39.5 percent in the third quarter of 2021. It marked the 10th straight quarterly rise and resulted in virtually half of all mortgage payers landing in equity-rich territory. “Even though home price appreciation has slowed down dramatically in recent months, homeowners have continued to build equity,” said Rick Sharga, executive vice president of market intelligence at ATTOM. “And it appears that many of those homeowners have decided to stay where they are rather than purchase a new home, and are beginning to tap into that equity, as the number of home equity lines of credit (HELOCs) issued in the second quarter of 2022 rose by 43 percent from the prior year.” Only about 227,100 homeowners were facing possible foreclosure in the third quarter of 2022, or just four-tenths of one percent of the 58.1 million outstanding mortgages in the U.S. Of those facing foreclosure, about 208,700, or 92 percent, had at least some equity built up in their homes. “One of the reasons we don’t believe there will be another huge wave of foreclosures is that the overwhelming majority of financially-distressed homeowners do have positive equity,” Sharga noted. “If these borrowers can’t leverage the equity to refinance their current mortgage, they at least have the option of selling the property rather than losing their equity to a foreclosure auction.

Mortgage Rates Slip After Fed Hike, But What’s Next? “On Wednesday, the Fed approved its fourth consecutive rate hike of three-quarters of a percentage point to help bring down 40-year high inflation. Mortgage rates this week dipped slightly below 7%, even after the Federal Reserve aggressively raised its benchmark interest rate again to tame inflation. The 30-year fixed-rate mortgage averaged 6.95% this week after hitting a 20-year high of 7.08% last week, Freddie Mac reports. “Even with the Federal Reserve raising its short-term fed funds rate by another large amount, longer-term interest rates look to move only slightly,” says Lawrence Yun, chief economist for the National Association of REALTORS. “The mortgage market has already priced in the latest Fed move.” Mortgage rates will start to “drift lower” once inflation has been contained – but that could be another year or two, Yun notes. But if October’s inflation data – which will be released next week – shows signs of easing and offers some indication that the Fed’s tactics are working, the Fed could pull back on its rate increases.

Housing Market Predictions: The Forecast for The Next 5 Years. There are plenty of predictions about where the housing market is going in 2023. But what about farther out? Here’s looking at you, 2027. Mortgage interest rates could continue to increase for a few weeks or months, says Lawrence Yun, chief economist for the National Association of REALTORS, adding that seven percent looks to be the level for the rest of this year and most of next year. Within two years, the rate should return to five-and-a-half or six percent, he adds. Yun foresees zero or minor changes in purchase price tags on a nationwide basis next year, with increases or decreases of about five percent. Overall, in five years, he expects prices to have appreciated a total of 15-25 percent. While it’s been showing bubble-like properties, Yun does not expect the residential real estate market to violently pop. Although he predicts that sales will be at a low point next year, with only 5.3 million units sold, he foresees a gradual increase afterwards, up to an annual six million units by 2027. 

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