Dominoes Fall and Home Buyer Momentum Surges

By Ryan Dosen

 

The wise guys crunching the numbers for the real estate industry have noticed some important developments in the lower tier real estate market that are expected to support across-the-board home buyer momentum in 2015.

Clear Capital, a solutions provider for real estate asset valuation and collateral risk assessment for large financial services companies in the mortgage and lending industries, just released a market report this week entitled, “Traditional Homebuyers, Make Your Move.” The report, backed with hard numbers from today’s improving market, forecasts a bright near-term future for real estate.

A Transitional Year for Real Estate

 

Clear Capital’s report states that “2015 has the promise of a transitional year where full buyer momentum in the low and mid tiers reinforce a strong housing recovery.” The report cites “sustained national price growth in the low tier segment, once driven by investor activity,” as being good news for first-time homebuyers.

Clear Capital notes that fewer and fewer people are underwater on their mortgages, and that “with more equity to play with, the mid tier homeowners could move-up, creating more opportunity and driving healthy demand in the low and mid tiers of the market.”

In addition to there being fewer homeowners underwater on their mortgages, the National Association of Realtors (NAR) and RealtyTrac report that the number of “equity rich” homeowners has taken a big step forward in the past year.

RealtyTrac’s U.S. Equity & Underwater Report for the fourth quarter of 2014 reported that about 20 percent of all mortgaged properties (around 11.3 million) are now considered “equity rich,” with homeowners having at least 50 percent positive equity in their homes.

The number of “equity rich” homeowners has climbed 24 percent in the last year.

With more homeowners having more equity in their homes, Clear Capital also notes that overall price growth has been the slowest in the top tier of the housing market. The number crunchers expect mid tier sellers to perceive good deals in the top tier, with the prices in the top tier not advancing as quickly as those in the mid and low tiers.

Those mid tier buyers, more of them now “equity rich,” are expected to make moves to take advantage of the perceived top tier deals. To take advantage, they will be selling to lower-mid or higher-low tier buyers that have also seen improved equity and/or opportunities to purchase with today’s many attractive government-backed lending programs.

To put it succinctly, Clear Capital sees an ensuing “domino effect [that] could be the catalyst for balanced demand across all sectors of the market.”

“Pent-up” Sellers

 

Also nudging the falling dominoes will be the back log of “pent-up sellers” in today’s real estate market. NAR researchers note that homeowners typically stay in their homes 6 or 7 years before moving.

However, in 2014, NAR reports that this number grew to an average of 10 years. NAR predicts that “’pent-up sellers’ will likely be unleashed in 2015, after regaining equity and feeling more confident from the economic recovery.”

NAR notes that people have remained in their homes for longer than usual due to the effects of the housing crisis. In the wake of the crisis, many were left underwater on their mortgages.

Many of those owners simply had to wait for the market to recover and for them to regain their lost equity. They were forced to wait an extra few years to make their expected moves, but many of these homeowners have finally emerged from the storm with the ability to sell their homes without leaving their shirts behind at the closing table.

Giant Jump in Written Real Estate Contracts

 

Francis McCarthy, Team Leader for Keller Williams Brandywine Valley in West Chester, reports that the volume of real estate contracts written by the Market Center in January 2015 more than quadrupled that of January 2014. With positive underlying fundamentals, and real world numbers to back it up, all signs are pointed to a very strong year for real estate.

 

— Ryan Dosen manages The Wayne Megill Real Estate Team of Keller Williams Brandywine Valley in West Chester. Contact Ryan Dosen for buyer or seller representation or for more perspective on the local and national real estate market by emailing rdosen@megillhomes.com or calling 610-399-0338. Please also visit The Wayne Megill Team blog at www.PAHomesAndRealEstate.com.

 

This article was published by 21st Century Media and the Daily Local News (West Chester, PA). To read this article on the the newspaper’s site, please visit the Daily Local News.

 

 

To view all of Ryan Dosen’s 21st Century Media real estate columns, visit http://www.dailylocal.com/search?text=dosen.