Many home owners who have been drowning in negative equity are finally facing relief as the markets report rising home prices. According to data from CoreLogic, a provider of consumer, financial and property analytics, negative equity mortgages declined in the second quarter of 2012, falling from 11.4 million properties to 10.8 million. Additionally, 1.8 million home owners who have less than 5%, negative equity in their homes, could move into positive equity if the recent trend in increasing home prices continues. Furthermore, since the start of the year, over 1.3 million home owners who had underwater mortgages have moved from negative equity to positive equity.
The recent increase in home prices has been attributed several reasons including: record low interest rates, which the Federal Reserve has continued to hold down in the hope of encouraging lending that had considerably slowed down after the housing crisis; pent up demand for housing, after many would be buyers were sidelined due to the bust of the housing bubble; and attractive low real estate home prices, caused by the 2008 recession and ensuing housing crisis that sent home prices spiraling downward.
While there has been a decline in negative equity and a positive movement of many economic indicators in the housing industry, consumer confidencehas been lagging behind the rest. How confident people feel about stability of their incomes is important as it determines their spending activity and therefore serves as one of the key indicators for the overall shape of the economy.As reported by CNBC, home equity is a key to household buying power, and its improvement could nudge consumer confidence and spending.
Michael Hobbs, SRA, LEED GA, PahRoo Appraisal & Consultancy