Home Equity and Foreclosures are Up

Midway through the autumn real estate season the national market is very mixed. There has been a slight annual decrease in new mortgage applications (less than a 2 percent dip) as interest rates begin climbing higher just as market watchers have predicted. A little more surprising is that foreclosure activity is beginning to rise at the same time owner equity is also going up.

Foreclosures Rise

While sales asking prices and appreciating equity values are up and continue to rise in active markets, foreclosure activity is up across the board at the same time. Default notices, scheduled auctions, and banks taking possession of homes is up a whooping 27 percent in October compared with September according to a recent report made available by Attom Data Solutions (parent company of ReatyTrac). The volume of foreclosure activity did decline 8 percent compared to a year ago but this is significantly less than the double digit declines that we have seen all year, until now.

It’s worth pointing out that foreclosure activity generally takes 4 months before the data becomes public record. It’s in the fourth month, after missing 3 house payments, that lenders typically record foreclosure proceedings. According to Daren Blomquist, senior vice president at Attom Data Solutions:

“The increase in October isn’t enough evidence to indicate a new foreclosure crisis emerging in these states, but it certainly demonstrates that this housing recovery is not completely devoid of risk.”

States with the highest foreclosure rates in October are Delaware (one in every 355 housing units with a foreclosure filing), New Jersey (one in every 564 housing units), Maryland (one in every 679 housing units), Illinois (one in every 704 housing units), and South Carolina (one in every 801 housing units).

Other states rounding out the top 10 highest foreclosure rates in October are Nevada (one in every 826 housing units with a foreclosure filing during the month), Florida (one in every 895 housing units), Ohio (one in every 930 housing units), Pennsylvania (one in every 1,018 housing units), and Georgia (one in every 1,028 housing units).

Home Equity Values Show How Mixed the Market Currently Is

Contrary to the foreclosure trend, the amount of equity homeowners now have — the value less their mortgage debt — has doubled in the last five years, according to CoreLogic. September saw a 6.3 percent annual gain, an increase over August, and a clear sign that prices are heating up.

“Home-equity wealth has doubled during the last five years to $13 trillion, largely because of the recovery in home prices,” said Frank Nothaft, chief economist for CoreLogic. “Nationwide during the past year, the average gain in housing wealth was about $11,000 per homeowner, but with wide geographic variation.”

A rising sea does not raise all ships equally. Some states are barely in the black when it comes to home equity increases and others saw equity declines. Arkansas, New Jersey, North Dakota, Oklahoma, Wyoming, Maine, and Maryland barely increased, while Alaska and Connecticut saw equity declines.

On the other side of the coin, as tech companies flee California, nearby states like Washington and Oregon are seeing double-digit home price gains, with Colorado and Utah not far behind.

Real estate professionals should always keep a close eye on local and national trends. Unfortunately, at the moment the teas leaves are a bit difficult to read.

Please leave a comment if this article was helpful or if you have a question.

Author bio: Brian Kline has been investing in real estate for more than 35 years and writing about real estate investing for 10 years. He also draws upon 30 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest. With the Pacific Ocean a couple of miles in the opposite direction.