Housing recovering from the bottom up- good for apartment builidng investment? 2 charts via Calculated Risk Blog

Bill McBride over at Calculated Risk has a post out this morning with 2 charts of data from LPS on the housing recovery. The first shows that homes in ‘active’ status, either in foreclosure, delinquent or otherwise ‘non-current’ has fallen below 2008 levels for the first time.


Non Current Mortgages below 2008 levels

Which is the primary axis and which is the secondary is kind of a mystery and we are left to assume that both are x1,000 so that would imply the left axis is secondary (Or is it?) The most interesting factoid on the chart is in the box on the upper left; The percent of DQ homeowners active (in the foreclosure pipeline instead of being ignored) has doubled. To me this looks like a market that’s starting to clear, which is good for housing and the economy in general.

The next chart looks at the percent of mortgaged homes with negative equity and nationwide the number has fallen below 18%. LPS explains:

At 0.84 percent, the March new problem loan rate is approaching pre-crisis levels, and nearing the conditions of 2000-2004 when the rate averaged 0.55 percent. However, as LPS Applied Analytics Senior Vice President Herb Blecher explained, a borrower’s equity position is still a key indicator of his or her propensity to default.

There has always been a clear correlation between higher levels of negative equity and new problem loan rates,” Blecher said. “Looking at the March data, we see that borrowers with equity are actually outperforming the national average — at 0.6 percent, this group is quite close to pre-crisis norms.

Percent of homes underwarer or with negative equity Marck 2013

The shrinking negative equity component is also important for another reason Fewer people are stuck in their homes which means they are free to move to a market with better job prospects or to downsize in their current location; both good for the economy and apartment building investment.


2 thoughts on “Housing recovering from the bottom up- good for apartment builidng investment? 2 charts via Calculated Risk Blog”

  1. We are living in times of change. We must be clear that large past investments are not coming back. We can not trust the economy to improve in two days.

    Families are afraid to buy yet. I wonder if in a few years to get back the time where people got married and bought houses or homes where parents gave away their children.

    1. The US housing recovery is being held back by the nearly 23 million zombie homeowners who have negative equity (owe more than the house is worth) or are effectively negative because they couldn’t sell their home and end up with the 20% down required to buy another house, see our recent post: Almost 23 Million Zombie Homeowners Still Underwater.

      On top of that there are the people who don’t have the credit rating to qualify for a new mortgage even if they could come up with the downpayment. Those two groups represent a very large percentage of potential home buyers who can’t buy and there is a secondary effect too. In the US almost everyone knows someone who is upside down on their home, did a short sale to get out or lost a home to foreclosure. The psychological effects of that could last for a generation much like the term ‘Depression Baby’ referred to those whose outlook was permanently changed by events in the 1930’s.

      All of this is good for owners of rental properties in the sense of increased demand but long term rent gains will be limited until the economy recovers, and housing is a big part of the economy.

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