Market Studies

The California real estate market continued to experience rising home prices and strong sales in July, but negative equity still remains a significant challenge, according to a report from PropertyRadar. Out of the 6.8 million California homeowners with a mortgage, 26 percent, or 1.8 million, were underwater as of July. Another 500,000 are barely managing to stay above water, with no more than 10 percent of equity in their home. This means about one third, or 2.3 million homeowners, are still unable to sell due to lack of equity.

Median home prices dipped month-over-month in July, but still experienced a sharp rise from last year, according RE/MAX's latest housing survey covering 52 metropolitan areas. Homes in July sold for a median price of $189,950, down 2.1 percent from June, but up by 11.5 percent from July 2012. While inventory was down compared to last year and the prior month, the decreases were more conservative, which means home price gains should slow, according to RE/MAX.

RealtyTrac observed 100 large metro areas across the country for evidence of recovery based on seven indicators, including unemployment rate, the rate of underwater homeowners, the change in foreclosure activity from its peak, the change in median home price from its trough, the percentage of distressed sales, the share of sales to institutional investors, and the share of cash sales. Rochester, New York, topped the index with several positive indicators, including low unemployment, low underwater rates, low distressed sales, rising home prices, and a large drop in foreclosures.

The positive indicators seen in housing markets across the country are not a mirage but a true recovery, according to RealtyTrac VP Daren Blomquist and a panel of six real estate professionals who spoke during a roundtable discussion Friday. RealtyTrac ranked 100 markets in terms of recovery and found a smattering of markets from all regions in the top 20. Blomquist said the defining factors for where a market landed on the ranks were location and employment.

Is it possible that we have turned the corner on the real estate crisis? Some economic indicators seem to be pointing in that direction. Inasmuch as there are tangible measurements, which have evolved into positive forecast discussions, we are not out of the woods just yet. The foreclosure process remains in the spotlight. Shortly after the 2010 robo-signing issue materialized and was reported on every news channel imaginable, REO sales throughout the country began a downward spiral. Although the robo-signing issue seems to have been addressed, there are many states that still have a cumbersome foreclosure process.

The second quarter saw modest gains in home sales in Connecticut, according to the Warren Group. Second-quarter sales of single-family homes totaled 6,898, a nearly 1 percent increase over Q2 2012. In June alone, home sales were up 0.4 percent (the second straight month of increases) to a total of 2,602.

Led by multifamily activity, new housing permits and starts rose in July with new construction, continuing a shift from single-family homes. The Census Bureau and HUD reported Friday builders broke ground on new homes at a seasonally adjusted annual rate of 896,000 units, up 5.9 percent from June, and filed permits for construction of 943,000 new units, up 2.7 percent from June. Economists surveyed by Bloomberg had expected the pace of total starts to increase to 900,000 and total permits to increase to 918,000.

Over the past four years since the recession ended, GDP has grown only 9 percent, Freddie Mac revealed in a recent analysis. At the current rate, the ""U.S. has experienced the weakest economic recovery coming out of a recession in the Post-War era,"" said Frank Nothaft, Freddie Mac VP and chief economist. Despite the ""frustratingly slow"" growth rate, the GSE expects the housing sector to aid the sluggish economic recovery in three ways.

Homeowners whose homes are located in designated flood zones are required to purchase flood insurance, and others in areas where natural disasters are common may also be required to insure against those risks. However, CoreLogic economists recently asked if that is enough to guard against these risks. In particular, they asked, are homeowners more likely to default when natural disaster strikes? The answer, in short, is ""yes.""

Freddie Mac's Primary Mortgage Market Survey showed the 30-year fixed-rate mortgage (FRM) averaging 4.40 percent (0.7 point) for the week ending August 15, flat from last week. Last year at this time, the 30-year FRM averaged 3.62 percent. The 15-year FRM this week averaged 3.44 percent (0.6 point), up very slightly from 3.43 percent in the last survey. Bankrate.com also reported slight movements in average fixed rates.