Lawrence Yun, Chief Economist of the National Association of Realtors, writes in his latest article in Forbes that the real estate market made steady, modest gains during the first quarter, with homeowners seeing greater equity and home prices rising.
Yun notes that existing home sales for Q1 reached 5.3 million at an annualized pace, a 4.7 percent rise from one year ago.
“There could be more room to grow given that sales are certainly not the frenzy pace of over 7 million that occurred during the easy subprime lending days and because jobs are consistently being added to the economy provided the mortgage rates remain manageable and do not shoot up,” Yun wrote.
He added that mortgage default rates are falling, with the number of borrowers who're behind on their monthly payments falling to 2.35 percent for the quarter, a new forty-year low. In addition, the number of homes that entered into foreclosure proceedings fell to the lowest level in over a decade.
Homeowner equity is rising substantially too. Home equity has more or less doubled since 2010, from $6 trillion then to over $12 trillion now, Yun said. During that period, the median home price has grown from $166,100 to $222,400.
But the picture is less happier elsewhere, most especially for those who rent their homes. The bad news is that rental prices are growing, and indeed, have been outpacing that of income growth over the last four years. Rents rose by 3.7 percent on average in Q1, which is double the rate of wage growth. Meanwhile, the continuing tight credit standards of major lenders prevents many renters from getting into home ownership.
This has had the knock-on effect of causing home ownership rates to fall to a near fifty-year low of just 63.6 percent.
“Among those aged under-35 the ownership rate fell even more markedly and was 34.2 percent in the latest quarter,” Yun said. “The renter households in the meantime have been ballooning upwards by an additional 9 million in the past decade while home owner households have been reduced by a million. This trend of more renters and fewer home owners is occurring at a time of rising home values and housing equity gains.”