After five years of financial misery President Obama is getting a real estate bounce that could solidify his chances for re-election. Recent home values are up when compared with the worst days of the real estate meltdown and foreclosure activity is down. We’re not out of the financial woods yet but there has been progress — and just in time for the presidential election.
Don’t believe it? Just ask three questions.
1. Are home values generally higher than four years ago?
According to HUD the typical residential property was valued at $198,100 in 2008. As of June of 2012 that same property was likely to be worth $189,400. Home values today – and this is not the whole story — are generally less than four years ago. You can check value changes in your area during the past four years by using a heat map developed by RealtyTrac.
2. Are home prices higher than six years ago?
HUD says house prices actually reached their highest point in 2006 when the typical home was valued at $221,900. While home prices today are roughly $10,000 less than where they were four years ago the real fall in home prices took place between 2006 and 2009. In that period average home values dropped from $221,900 to $172,500 — a loss of nearly $50,000.
Given these home price shifts one could argue that we have not returned to the home values seen in 2006 or it could be said that we have largely recaptured the value lost between 2006 and 2009. No doubt the preferred argument will depend on the politics of the debater.
3. During the past year has the real estate marketplace begun to turn around?
Major measures of real estate activity have become far more positive during the past year.
- Foreclosure activity is at a five-year low according to the September report from RealtyTrac while at the same time consumer sentiment is at a five-year high.
- Existing home prices in September were 11.3 percent higher than last year according to the National Association of Realtors. That’s seven months in a row of higher prices.
- Interest rates have been at or near historic levels, actually below 3.4 percent for fixed-rate 30-year mortgages according Freddie Mac.
- People are again investing where they live. A study from the Joint Center for Housing Studies at Harvard University suggests that “the seeds for what appears to be a very robust remodeling recovery have been planted, with annual homeowner improvement spending expected to reach double-digit growth in the first half of 2013.”
- Unemployment is now less than 8 percent. Although this is a fuzzy number because of curious definitions and odd exclusions, it has a consistent basis – it’s the same fuzzy approach used for decades.
- Fewer homes are on the market. According to REMAX, residential inventories have been shrinking for the past 26 months.
- “National home values,” says Zillow, “rose 1.3 percent from the second to the third quarter – the biggest quarterly gain since March 2006, when home values rose 1.5 percent. This also marks the fourth consecutive quarter of increases.”
Foreclosures, Short Sales & REOs
The rate of foreclosure was typically about 0.4 percent before the mortgage meltdown. Now, after the passage of Dodd-Frank and Wall Street reform and it’s common-sense underwriting requirements, the foreclosure rate has fallen to 0.1 percent according to the Lawrence Yun, NAR’s chief economist.
This historically-low foreclosure rate generally means that fewer short sales, declining foreclosure levels and shrinking REO inventories for lenders are ahead. It also means less lending risk, growing lender profits and maybe even rising share values. Wall Street Reform is working and few high-risk mortgages are entering the system, the reason — in part — why mortgage rates remain so low.
For any presidential challenger, including Gov. Romney, recent good news on the real estate front can only be seen as helping the incumbent. Imagine how much different the presidential race would be if home values were again sinking and foreclosure filings were soaring?
Election 2012 Housing Heat Maps: Is Your County’s Housing Market Better Off Than Four Years Ago?
Face to Face with the Foreclosure Crisis
Foreclosure Activity Drops to 5-Year Low in September