The year ahead holds the promise of positive change for markets where housing inventory has been stagnant. Rising home prices are serving to lift the market – and homeowners – above the low-equity tide. That's a good thing for several reasons.
Increasing home prices = possible inventory boom
Over the next 15 or so months, 8.3 million homeowners (that's 18% of homeowners with mortgages), are expected to gain enough equity in their homes to be able to sell them without being forced into a short sale, according to a recent report by RealtyTrac.1 This assumes that home prices continue to increase at the rate they have since March 2012 – 1.33% per month.
The report shows that this segment of homeowners' equity currently ranges anywhere from 10% negative equity to 10% positive equity. As their equity improves, so does their ability to sell their homes. Another bright spot in the report: 1 in 4 homeowners in foreclosure has positive equity, meaning they stand a better chance to sell their homes before foreclosure proceedings are completed.
The "big boost"
More home inventory is good news for the housing market overall, with buyers having a greater number of choices as the spring season approaches. Rising home prices also contribute to an overall sense of security and optimism. People who feel more financially stable are more likely to spend. "Fewer underwater homeowners is a big plus for the economy," says Mark Zandi, chief economist at Moody's Analytics. "The home is still the most important asset most Americans have."2