Homeowners twice as house rich as five years ago
All real estate is local, and while most states show gains in home values, the variance is wide. Connecticut and Alaska are the only states seeing annual price declines. For Connecticut, it is jobs plain and simple. The loss of major employers there, like General Electric‘s decision to move its headquarters to Boston, have hit the housing market hard.
Other states, like Arkansas, New Jersey, North Dakota, Oklahoma, Wyoming, Maine and Maryland, are barely in the black. On the flip side, as tech companies flee California, nearby states like Washington and Oregon are seeing double-digit home price gains, with Colorado and Utah not far behind.
Homeowners today show more wealth on paper, but they are not extracting it at nearly the rate they did during the last housing boom. Near-record-low mortgage rates have certainly prompted thousands of borrowers to refinance and lower their monthly payments, but a very small share have extracted cash in these refinances and home equity lines of credit(HELOC).
“That weakness of active home equity withdrawal looks in large part to reflect tight credit conditions. Although lenders have reported loosening lending standards for HELOCs in each of the past 15 quarters, that easing has been modest compared to the conventional mortgage market,” wrote Matthew Pointon, property economist with Capital Economics. “Indeed, median credit scores for new HELOC originations have not declined at all over the past couple of years, despite the serious delinquency rate on those loans dropping to its lowest since records began in 2008.”
So homeowners get richer, and those trying to become homeowners have to face not just higher prices, but a severe lack of homes for sale, especially at the entry level. There is clearly demand, just not enough supply.
“After all, measures of home purchase sentiment are elevated, and there is evidence that first-time buyers are making a welcome return to the market,” added Pointon.