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Home values and equity on the upswing while foreclosures and distressed sales decrease

close up of man in suit holding his hands around paper chain cut out of four houses
March 18, 2016

By Pam Leibfried

The housing market continues to be strong, with home prices and home equity lines of credit on the rise while foreclosures, delinquencies and distressed sales decline. 

Home prices up again!

In January 2016 (the latest month for which data is available) home prices increased 6.9 percent year over year from January 2015. The monthly increase vs. December 2015 was 1.3 percent. These latest price levels, as measured by the CoreLogic Home Price Index (HPI®) Report, bring average housing prices nationally to a level within 7.0 percent of their peak in early 2006. 

Foreclosures, delinquencies and distressed sales down 

Foreclosure inventories fell by 21.7 percent between January 2015 and January 2016, while the rate of inventory for which homeowners are 90+ days delinquent on their mortgage payments fell by nearly 23 percent during the same period. 

Distressed homes include short sales (when the sale price is less than the amount owed by the homeowner) and REOs or real-estate–owned sales (when the home is owned by a lender). In December 2015, sales of distressed homes were down to 10.3 percent of total sales. This is down from a high of 32.4 percent of all sales in January 2009. December distressed sales were stable or down in 42 of 50 states. The REO number represents the lowest December REO sales in 10 years. 

Home equity rising, along with home improvements 

Home equity lines of credit (HELOCs) are on the rise, with the nearly one million HELOCs approved during January to September of 2015. That’s more than double 2012’s pace of HELOC loans and the most since the 2008 market crash. Several factors are contributing to this improvement in the HELOC market and its corresponding jump in the pace of home remodeling spending.

  • The number of homeowners who are upside down on their mortgages decreased by one million homeowners between Q4 2015 and Q1 2016. The share of these so-called “negative equity” homeowners decreased from 10.7 percent to 8.5 percent of all U.S. homeowners. 
  • Home value increases have greatly increased the “positive equity” of American homeowners who are not underwater. CoreLogic cites a 36 percent increase in home prices from the March 2011 low-point to December 2015 price points. These increases mean that currently, more than 60 million homeowners have over 25 percent equity in their homes, making them candidates for a HELOC.
  • The Bureau of Economic Analysis estimates the average interest rate on residential mortgages to be 3.8 percent as of December 2015. These low rates make HELOCs more attractive than a cash-out mortgage refinance for many homeowners. 

Pam Leibfried is a marketing content specialist whose love of words led to a writing and editing career. After a brief stint teaching English, she transitioned to corporate communications and spent 20 years at The Nielsen Company before joining Alliant’s content development team. Early in her work life, Pam’s friend Matt explained the benefits of a 401(k) and her dad encouraged her to start a Roth IRA. Their good counsel prompted her to prioritize retirement savings, which just might enable her to retire early so she can read more and live out the slogan on her fave T-shirt:  “I have a retirement plan: I plan on quilting.”