Home equity rises sharply across Sacramento region
The flood of underwater mortgages that swamped the Sacramento region during the housing collapse receded at a rapid rate this spring as home prices rose, CoreLogic reported Tuesday.
The Santa Ana-based real estate information service said the number of area homeowners with mortgages who owed more than their homes were worth plunged to 18 percent in April, May and June compared to more than twice that figure during the same months last year.
There were 86,500 upside-down mortgages in the region at the end of the second quarter of this year, the firm said. The number was down dramatically from even the first few months of 2013, when almost 124,000 area mortgages were underwater.
The reason: Home prices have risen sharply because of strong buyer demand and a tight supply of homes for sale.
In June, for instance, home prices across Sacramento, Placer, El Dorado and Yolo counties rose by almost 26 percent from June 2012, CoreLogic said. July posted similar gains compared with the same month a year before, it said.
“It’s a historic bounce back we many never see again in our lifetimes,” said Pat Shea, president of Lyon Real Estate in Sacramento.
The region’s home prices rebounded from a low point in early 2012 when they were undervalued to the point that investors, and then traditional homebuyers, swept in to purchase houses. Record-low interest rates fueled demand.
The prices and rates created a perfect storm for a mass return of equity.
“Anyone who was 25 percent or less underwater no longer is,” said Jeff Michael, economist at the University of the Pacific in Stockton. For those who were severely upside down on their mortgages, “short sales and foreclosures have taken many underwater mortgages out of the system,” he said.
CoreLogic said another 15,000 Sacramento-area homeowners were close to regaining equity in their homes at the end of June.
The region’s experience mirrored a nationwide trend in the second quarter, when approximately 2.5 million residential properties returned to positive equity, the data firm said. That left about 7 million homes, or 14.5 percent of all residential properties with a mortgage, still in negative equity at the end of the quarter, it said.
“Price appreciation obviously had a positive impact on home equity over the first half of 2013, especially the second quarter,” Anand Nallathambi, president and CEO of CoreLogic, said in a news release.
The rapid rise in home prices in the Sacramento area and elsewhere is expected to slow now that the traditional spring and summer buying season has ended.
“In just the first half of 2013, almost 3 1/2 million homeowners have returned to positive equity, but the pace of improvement will likely slow as price appreciation moderates in the second half,” Mark Fleming, CoreLogic’s chief economist, said in the news release.
Shea said a greater inventory of homes for sale will help stabilize the Sacramento region’s market, and he expects sales to continue at a decent clip.
Prices remain affordable compared with the excesses of last decade’s housing boom, and interest rates are rising but remain well below historic averages.
As more homeowners emerge from underwater, Shea said, many will want to move to a bigger or smaller house or to a different location, having felt trapped for years.
Without equity in their homes, and the ability to sell, Shea said, “people have been handcuffed."