Not so long ago, when prices were plummeting and foreclosures pumped up the inventory counts with discounted values, homeowners and real estate professionals would have welcomed one of the chronic problems plaguing markets today; inventories so low that they inflate prices and keep move up buyers in homes they want to leave.
The question everyone is asking: “What’s happened to supply and demand dynamics? Demand is stronger, so where’s the supply/”
Recently the California Association of Realtors released a study that answered that question what another one. About 35 percent of homeowners surveyed by the CAR said they have considered selling their home in the past year. But among that group, 64 percent said they decided against it because they couldn’t afford the home they’d like to buy as a replacement. So move up sellers are caught in the same circular trap as first-time buyers. Where are the affordable listings that will halt this merry-go-round?
In 2013, when tight inventories switched from being a national blessing to a curse, Zillow’s Stan Humphries provided an explanation at the National Association of Real Editors’ annual meeting and the scales fell from my eyes. He outlined how deficient equitied owners were frozen in place—not just those under water but also those lacking the 20 percent positive equity necessary to sell. When you added up the under watered and the under equitied, it was a huge chunk of all homeowners with a mortgage at that time.
Less than 20 percent of homes today are under-equitied or under water
Price appreciation has whittled down that number over the past two years. RealtyTrac recently reported that only about 13.3 percent of all properties with a mortgage have less than 25 percent positive equity. CoreLogic puts the percentage of underwater and homes with less than 20 percent equity at 19.4 percent of all homes with a mortgage. Zillow puts the negative equity rate at less than 15 percent through the second quarter.
Still a big factor, the equity barrier hurts some markets more than others. It is worse in those markets that suffered most in the housing crash—the ‘sand’ states of California, Arizona, Nevada and Florida. It is also higher among entry level and mid-level price tiers than the top levels.