Negative equity improves … except for the low-end

From CNBC:

How are millions still underwater as home prices rise?

Fast-rising home prices brought 1.5 million borrowers up from underwater on their mortgages in 2015, but there are still twice as many drowning. In total, 3.2 million homeowners nationally still owe more on their mortgages than their homes are currently worth, according to a new count by Black Knight Financial Services.

That brings the average negative equity rate to 6.5 percent, a vast improvement from the worst of the housing crash, but still well above historical norms. More concerning is that negative equity is now concentrated at the bottom price tier of the market. More than 16 percent of borrowers in these homes are underwater, which means they are frozen in place, unable to sell without losing money; these are the homes the market needs most, in order for young renters to become homeowners.

“Even after four years of improvement, the recovery has not reached all corners,” said Ben Graboske, senior vice president of Black Knight Data & Analytics. “When we looked at the population by home price levels, we found that over half of the nation’s underwater properties are in the lowest 20 percent of their respective markets. That’s the highest share on record.”

Looking beyond states, at the lowest end of local markets, the bottom 20 percent in terms of price, Memphis, Tennessee, Cleveland, Detroit and St. Louis show negative equity rates at more than 40 percent. Again, these borrowers cannot move without paying into their homes and are 10 times more likely to default on their home loans than those who have even a small amount of equity.

Ironically, the negative equity on the low end of the market is fueling overheated price growth across even the midtiers of the housing market. That is because it plays heavily into the severe lack of supply of homes for sale this spring. Underwater borrowers are less likely to move. On top of that, homebuilders are not focused on the low end, because they can’t make enough money on cheaper homes to offset their rising costs for land and labor. The resulting short supply pushes prices higher for what is available on the low end.

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60 Responses to Negative equity improves … except for the low-end

  1. grim says:

    From MarketWatch:

    A tale of two housing markets is playing out in home equity

    The housing market is starting to look a bit like Dr. Jekyll and Mr. Hyde, at least when it comes to homeowners’ equity, according to data out Monday from research firm Black Knight Financial Services.

    For some homeowners, properties are again becoming ATMs — and in many cases, well-paying ones.

    Even as the amount of equity owners hold in their homes hovers near a 10-year high, owners pulled the most cash out of their homes since 2009 last year, Black Knight said.

    “Cash-out refinance transactions” netted homeowners a total of $68 billion in 2015. That’s more than $60,000 per borrower on average. California accounted for 42% of that total, with an average of $96,000 per borrower.

    There’s a big difference between the 2015 transactions and those during the mortgage mania of the early 2000s, though. The average loan-to-value ratio in 2015 was 67%, meaning homeowners still retained 33% of the equity in their homes. That’s down from a peak of 76% in 2008.

    But Black Knight also looked at people who have no equity to tap. The number of homeowners who owe more on their mortgages than their homes are worth declined 31% in 2015. Such “underwater” properties now make up 6.5% of all mortgages, still well above normal levels.

    But for homes in the lowest price tier, that share is 16.2%. Put another way, over half of underwater mortgages are for loans on homes in the bottom 20% of prices, the most ever. Improvement in the negative equity rate among this tier of owners has lagged all the others since home prices began recovering in 2012, Black Knight noted.

  2. Juice Box says:

    Is it time again to take a vacation on the house?

  3. Juice Box says:

    I predict everyone with school age kids in Hoboken will head for the burbs after this water test comes back.

    http://patch.com/new-jersey/hoboken/hoboken-schools-will-test-lead-water-superintendent-says-0

  4. Raymond Reddington formerly Phoenix says: says:

    61 Grim, yesterday,
    I’m all for socialized medicine, let’s start the deployment with the public sector employees.
    Are we talking about VA socialized medicine or Medicare?
    I would take Medicare over most employers healthcare plans in a minute.

    57 Joyce,
    Not any falsehoods in my posts. I never posted that there is a “real” free market in healthcare, there are pockets of it on an individual basis, but that is about it.
    My post about Martin Shkreli reinforces my point. Lobbyists and those who “receive” the favors are the biggest problems in medicine (and all other industries).

    Personally I am in the industry and have the ability to see things from a different perspective, both as a consumer and an insider.
    I am not defending nor supporting the field. It is a really grey area. There are some really good hardworking people in the field. Patients/procedures are not all the same, you can gather an average over time, but that does not work if “healthier” patients are siphoned out of the system aka surgi-centers. That raises the cost of the non-surgi-centers that have to take everyone. So yes, you may now pay less for a knee replacement in a surgicenter, yet pay more for a trauma or colon resection in a major institution. Look around you, are any 2 people alike? You know who is needy or not, who could have their family look after them vs those that are alone, those that will get back up on the horse after an injury vs those that will lay down and milk it for all it’s worth.
    Family support is a huge variable in such things as Stu clearly shows us, plus the support of even the people on this forum such as Grim (billing support) and CND (offer of a night out).

    Also, want high ratings like you mentioned Grim, don’t take patients that you can clearly read will have a bad outcome. They bring your numbers down. Like hiring a bad employee. What’s the term for that, easy pickin’s? Just tell the patient they are not a good candidate and send them packing off to the next place.

    I watched my own dad destroy the hard work of the professionals who took care of him when he refused to take his medicine. He said, and I quote “didn’t like how it makes me feel.”
    Gone 6 months after taxpayers dumped 150k into him thru Medicare.
    You can’t repair the lack of someone’s will to live.

    Stu, I wish you and your family the best and support you wholeheartedly.
    The advise from Grim and others has been very good.
    It is counterproductive that you actually have to fight a battle against the same thing that is supposed to be helping you…

  5. Bystander says:

    No Panama papers discussion? Et Tu, Messi? The best was Icelandic PM getting caught in interview with pants down. Listen to it. Marianna Oslzewski is f-ed. She got caught using a fake beneficial owner to hide her identity. Email trail is extensive. She will be giving financial advice to women OITNB style soon.

  6. D-FENS says:

    9 – It’s not really much of a surprise. Widespread corruption is sort of an ongoing theme here.

  7. Fast Eddie says:

    Panama Papers – Bushes fault. That’s what I heard.

  8. Bystander says:

    Yes but it is not often that the rock is turned over so quickly that the slugs are caught in direct sunlight.

  9. The Great Pumpkin says:

    I agree, where is the discussion?

    This proves that the wealthy skip out on their tax bill and stick everyone else with it. Then they complain that their taxes are too high, that it is hurting economic growth. Yes, sure. Tell me another one.

    Bystander says:
    April 5, 2016 at 10:55 am
    No Panama papers discussion? Et Tu, Messi? The best was Icelandic PM getting caught in interview with pants down. Listen to it. Marianna Oslzewski is f-ed. She got caught using a fake beneficial owner to hide her identity. Email trail is extensive. She will be giving financial advice to women OITNB style soon.

  10. D-FENS says:

    Wake me up when they pour salt on the slugs.

  11. The Great Pumpkin says:

    That’s great!

    Bystander says:
    April 5, 2016 at 11:08 am
    Yes but it is not often that the rock is turned over so quickly that the slugs are caught in direct sunlight.

  12. The Great Pumpkin says:

    So true. How many people fall under this scenario?

    “I watched my own dad destroy the hard work of the professionals who took care of him when he refused to take his medicine. He said, and I quote “didn’t like how it makes me feel.”
    Gone 6 months after taxpayers dumped 150k into him thru Medicare.
    You can’t repair the lack of someone’s will to live.”

  13. Anon E. Moose says:

    RR [8];

    Are we talking about VA socialized medicine or Medicare?
    I would take Medicare over most employers healthcare plans in a minute.

    The only docs who make money handling Medicare patients are the Medicare mills in Florida defrauding the system. In any mixed type family practice, the younger patients subsidize the Medicare ones.

    It’s just like Pharma drugs; Canada, et al., can get away with price controls because the US market pays enormous mark-ups, subsidizing the drug supply for ROW.

    When everybody tries to get a free ride on the wagon and no one is pulling, the system collapses to its level of competency — like the VA.

  14. Anon E. Moose says:

    Re: Panama;

    “Let’s all be like the Europeans!”

    It seems the European leadership wasn’t quite fond of paying their ‘fair share’. Soci@lism is always good, for the Soci@lists.

  15. Comrade Nom Deplume, screwing around at work says:

    Clot, you know I love you but . . .

    V FOR VILLANOVA, V FOR VICTORY . . .

  16. Anon E. Moose says:

    Gourd-o [Moyers];

    Moyers and his wife purchased the four-bedroom home on nearly 12 wooded acres on Bernardsville Mountain in 2003 for $2.2 million, and initially listed it for $1.699 million. It features an expansive bluestone patio, a kidney-shaped pool and a tennis court. Taxes are $28,505.

    Sold for $1.15 MM. -$1.05 MM (48%) over 13 years. I suppose the good news is that since they held onto it for 13 years, the average compound loss is only 4.9% per year… “Safe as houses.”

  17. Comrade Nom Deplume, screwing around at work says:

    [13] Pumps,

    There’s a lot to digest and the fallout is just getting started.

    But I predict it will resonate in the election even though (thus far) I haven’t heard of U.S. individuals being implicated.

    I was listening to NPR on the way to work and they interviewed the german reporter who got the first contact. The data dump is huge, so huge that it seemingly defies credibility. My first reaction was “how the hell did one law firm wind up with so many records?” and “this has to be a hacktivist/government job and one of epic proportions.”

  18. Fast Eddie says:

    Moose,

    Housing never goes down, a bunch of real estate agents told me so it must be true.

  19. Comrade Nom Deplume, screwing around at work says:

    [11] eddie,

    If the data dump is as extensive as reported, this has been being investigated for years, and they have decades worth of data.

    I know the left likes to blame Bush for global warming, the Andrea Doria and the Spanish Inquisition, but (as usual) that dog won’t hunt.

  20. Anon E. Moose says:

    Eddie [22];

    Look on the bright side; If you hold on to a sinking asset declining at a steady rate, each year you lose less money than the year before! LULZ

  21. Comrade Nom Deplume, screwing around at work says:

    [23] redux

    CNN reports the Pamana Papers go back over four decades.

    Yes, Bush’s fault.

  22. Raymond Reddington formerly Phoenix says: says:

    17 Moose

    the younger patients subsidize the Medicare ones.

    Where have I heard this before……

  23. Comrade Nom Deplume, screwing around at work says:

    [23] redux,

    However, here’s the thing: Aside from actually being able to identify the shell companies more easily, there is precious little data on the owners according to what has been reported thus far. So absent more revelations, this is a huge piece of evidence supporting that which we already know.

    Certainly, it will make enforcement actions easier, and may lead to some evasion or money laundering prosecutions (assuming laws in those countries are comparable to ours). The real upshot however will be legislation; even if this doesn’t tell us anything new, it creates a “crisis” and that is how we get most of our legislation.

    Of course, people like me (not me but people like me) will continue to insure that this world continues. Assets will be moved, companies will be shuttered, domiciles will be changed, and life goes on.

  24. Comrade Nom Deplume, screwing around at work says:

    [26] ray

    ” the younger patients subsidize the Medicare ones.

    Where have I heard this before……”

    It”s only a problem if it’s goring your ox. If it’s goring the other guy’s ox, its a benefit.

  25. walking bye says:

    Eddie, I wonder if Bill Moyers “The Power of Myth” is a guide to real estate?

  26. Raymond Reddington formerly Phoenix says: says:

    18 Moose

    “It seems the European leadership wasn’t quite fond of paying their ‘fair share’. Soci@lism is always good, for the Soci@lists.”

    It seems the Medicare patients aren’t quite fond of paying their “fair share.”
    Soci@lism is always good, for the Soci@lists.

  27. Hughesrep says:

    Who needs Panama if you have Nevada and Delaware?

  28. Comrade Nom Deplume, screwing around at work says:

    [31] Hughes

    Nevada and Delaware don’t resolve taxation issues, and cannot avoid US AML law and regs. State law is only good for hiding beneficial ownership.

  29. Raymond Reddington formerly Phoenix says: says:

    27 28 CMD
    Spot on both posts…

  30. Comrade Nom Deplume, screwing around at work says:

    That the new Treasury anti-inversion rule is an administrative overreach is pretty clear. But the question is whether any corporation has the stomach to challenge it. Aside from reputational risk, this administration hasn’t been shy about siccing the IRS or DoJ on actors it doesn’t like.

    http://www.reuters.com/article/us-usa-tax-inversions-idUSKCN0X1299

    Still, if there is enough money involved . . . .

  31. Bystander says:

    #21 Nom,

    One US person so far, she is some women’s financial health guru.

    Per BBC news:

    “An email from a Mossack executive to Ms Olszewski in January 2009 explained how she could deceive the bank: “We may use a natural person who will act as the beneficial owner… and therefore his name will be disclosed to the bank. Since this is a very sensitive matter, fees are quite high.

    She replied: “I do think we should go ahead with the natural person however I want to have your promise that you… will handle this in the most sensitive manner.”

    The “natural person” Mossack Fonseca offered turned out to be a 90-year-old British citizen.

  32. walking bye says:

    Bystander, so all these years those Nigerian emails were real?

    What I don’t understand fully is in order to save some $ on taxes Olszewski was willing to hand over ownership of $1.8 million to a total stranger. What is to stop this natural person or his family from taking the money?

  33. The Great Pumpkin says:

    That’s why I posted the article; show how much money he lost. Something must be up with the property? Price doesn’t make much sense.

    Anon E. Moose says:
    April 5, 2016 at 11:35 am
    Gourd-o [Moyers];

    Moyers and his wife purchased the four-bedroom home on nearly 12 wooded acres on Bernardsville Mountain in 2003 for $2.2 million, and initially listed it for $1.699 million. It features an expansive bluestone patio, a kidney-shaped pool and a tennis court. Taxes are $28,505.

    Sold for $1.15 MM. -$1.05 MM (48%) over 13 years. I suppose the good news is that since they held onto it for 13 years, the average compound loss is only 4.9% per year… “Safe as houses.”

  34. [35] That’s a great edit. I sometimes say that I’m only enough of a basketball fan that I’ll watch the last two minutes of a basketball game…if I have a half hour to kill.

  35. joyce says:

    Raymond,
    You’re correct that the ‘falsehoods’ I claimed were your implications that health care was anything close to a real marketplace. If that wasn’t your intention, then I misspoke.

    I still say the key is to remove the incentives thayt create the examples you speak of (surgi center only taking certain patients, other having to take them all, people being able to milk minor injuries, etc).

  36. Comrade Nom Deplume, screwing around at work says:

    [36] bystander

    the more important issue is the proof that this is done. But aside from ringfencing blacklisted jurisdictions and imposing even stricter currency controls in the OECD nations, there is little that can be done.

  37. Comrade Nom Deplume, screwing around at work says:

    [39] expat

    And to add insult to Clot’s injury, the pundits are already heralding next year’s likely champion: Duke.

  38. The Great Pumpkin says:

    Nom, thanks for the write-ups on Panama.

    I can’t get Van Halen out of my head with all this Panama talk.

  39. yome says:

    Bernie Sanders opposing 2011 Panama Free Trade Agreement

    https://www.youtube.com/watch?v=a25fZFKtJ7s

  40. chicagofinance says:

    Are they older than the Federalist Papers?

    Comrade Nom Deplume, screwing around at work says:
    April 5, 2016 at 11:57 am
    [23] redux

    CNN reports the Pamana Papers go back over four decades.

  41. D-FENS says:

    Starlight Village — a brand new, midcentury modern styled neighborhood in metro Austin, Texas

    http://retrorenovation.com/2016/04/04/starlight-village-midcentury-modern-austin/

  42. 1987 Condo says:

    #46..I am so old that I am somewhat interested…

  43. Comrade Nom Deplume, screwing around at work says:

    [44] yome

    So, as Fast Eddie points out, Panama was Bush’s fault.

    Including a trade deal inked three years after he left office.

    Uh huh.

  44. 1987 Condo says:

    Same with these gasoline prices……oh, …nevermind…..

  45. The Great Pumpkin says:

    Classic!!

    I worry about the economy and corruption when I should be focused on the sad state of music. Wtf happened to music? It’s total crap today.

    Essex says:
    April 5, 2016 at 4:12 pm
    For Pumpy:

    https://www.youtube.com/watch?v=w-NshzYK9y0

  46. Bystander says:

    #51,

    Your brilliant mind must have figured out that when you don’t pay people for their music then they don’t produce lots of quality music. The flipside is that touring becomes the big moneymaker but, of course, expect to pay $200 ticket. It is wonderful to not care about music produced after 1995. There are so many forgotten albums/forgotten artists. A foray into blues or jazz would lead to more music than you could ever listen to in a lifetime. Not for everyone I know but it is light years ahead of Kayne or Arcade Fire..at least to my ears.

  47. Ben says:

    Speaking of Music, today is the day Kurt Cobain and Layne Staley both died.

  48. The Great Pumpkin says:

    Go Jersey!!

    “”It still has an impact on me,” Vasquez said. “I had to take summer classes and double up on science classes my junior year to catch up. But I have no resentment or anything,” she said.

    The New York City public schools’ curriculum is behind New Jersey, she said.”

    http://www.nj.com/mercer/index.ssf/2016/04/hamilton_senior_accepted_into_15_colleges_-_5_ivy.html

  49. The Great Pumpkin says:

    For some reason, I remember this day clearly. It was a beautiful sunny day here in Jersey. Heard the news from the radio while driving in the car with my mother. Brother was devastated. “Suicide is painless”.

    Ben says:
    April 5, 2016 at 7:36 pm
    Speaking of Music, today is the day Kurt Cobain and Layne Staley both died.

  50. Essex says:

    53. the music business deserved to die and die it has.

  51. Essex says:

    The 52-year-old has spent nearly 40 years making music, and developed a unique perspective on the business that surrounds that process.

    With a long history in the DIY music scene as one third of Shellac, and a recording engineer for bands including Nirvana, Pixies, Mogwai, PJ Harvey, Manic Street Preachers, The Cribs and many, many more, Albini has made a living without tying himself to a major corporation.

    He famously spurned the chance to take a royalty percentage of multi-platinum albums such as Nirvana’s In Utero, sacrificing riches by instead working for a flat fee – simply on a point of principle.

    In 1993, Albini’s essay, The Problem With Music, explained his issues with major labels, attacking them for being helmed by “faceless industry lackeys” and holding bands “hostage” with opaque contracts and unfair royalty splits.

    Then, during a keynote speech at Face the Music Conference in Melbourne last year, Albini updated his thesis, opining that the internet age has created “audience-driven music distribution” that’s “made it much easier to conduct the day-to-day business of being in a band”.

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