The RealtyTrac U.S. Home Equity and Underwater Report for the third quarter of 2014 released recently shows there were fewer Scottsdale underwater properties. 8.1 million U.S. residential properties were still seriously underwater—where the combined loan amount secured by the property is at least 25 percent higher than the property's estimated market value—representing 15 percent of all properties with a mortgage and an estimated $1.4 trillion in negative equity.
The third quarter negative equity numbers showing Scottsdale underwater properties were down to the lowest level since RealtyTrac began reporting negative equity in the first quarter of 2012.
In the previous quarter nationwide, 9.1 million residential properties representing 17 percent of all properties with a mortgage were seriously underwater, and in the third quarter of 2013, 10.7 million residential properties representing 23 percent of all properties with a mortgage were seriously underwater.
The recent peak in negative equity was in the second quarter of 2012, when 12.8 million U.S. residential properties representing 29 percent of all properties with a mortgage were seriously underwater.
The decrease in Scottsdale underwater properties is promising but the estimated $1.4 trillion in negative equity nationwide means that the flood waters are not receding as quickly across the country as they were before, even though Scottsdale underwater properties are down slightly, corresponding to slowing home price appreciation. Daren Blomquist, vice president at RealtyTrac said, "slower price appreciation means the 8 million homeowners seriously underwater could still have a long road back to positive equity."
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The confidence level towards Scottsdale real estate is on the rise according to the latest Zillow Housing Confidence Index. Homebuyers generally feel more positive about the Scottsdale real estate market now compared to the beginning of the year. The index was 63.7 in January, but increased to 64.2 during the summer.
The Housing Confidence Index is measured on a scale of 0 to 100, and readings above 50 show a positive market sentiment. Sub-sectors within the index look at buying and selling conditions, predicted changes in home values, market trends, home affordability, home buying plans and attitudes towards home ownership. Residents in the areas surveyed reported increased overall confidence in the Scottsdale real estate market.
Younger Renters See Themselves Buying Scottsdale Real Estate
Younger renters were most optimistic about their future home buying prospects, and some 82% of those aged between 18 and 34 were pretty confident they would be able to buy their own Scottsdale real estate someday. In comparison 64% of those aged 34 to 49 felt this way, and just 48% of those aged 50 to 64 thought they'd be able to buy their own Scottsdale home.
The younger generation also have a much more optimistic view about the Scottsdale real estate market in general, and a 33% expected property values to rise more than 6% annually over the next 10 years compared to just 21% of middle-aged respondents, and 15% of those falling into the older age group.
Although strong aspirations are no substitute for financial capacity or credit worthiness on a mortgage loan application, feedback from millennial renters is significant because it confirms that they bear relatively few psychological scars from the housing bust, and because the attitudes of this generation will drive housing trends in the decades to come.
Experts point out we need this generation to feel confident about home ownership, and we should want them to buy regardless of the fact that they may initially struggle to purchase a home.
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Scottsdale home prices increased in August, yet the pace of these gains continues to slow, helping to improve affordability for potential buyers.
Real estate data provider CoreLogic said recently that Scottsdale home prices rose 6.4 percent in August compared with a year ago. That marks a decline from an annual gain of 6.8 percent in July. Scottsdale home prices had been rising as much as 12 percent yearly toward the end of last year.
Scottsdale Home Prices Not Adjusted for Seasonality
Prices rose 0.3 percent in August from July. But CoreLogic's monthly figures aren't adjusted for seasonality, such as buying that occurs during warmer weather.
Sales struck a plateau in the middle of last year and have remained subdued for much of 2014. As sales have slowed, so have price gains. That should eventually make it easier for would-be buyers to afford a Scottsdale home.
As the pace of price gains has slowed, so have sales of existing homes.
Home Prices Dropping Nationwide Too
Nationwide, the National Association of Realtors reports that purchases fell 1.8 percent to a seasonally adjusted annual rate of 5.05 million in August. Sales fell from a July rate of 5.14 million, a figure that was revised slightly downward. Overall, the pace of home sales has dropped 5.3 percent year-over-year.
Economists associate annual sales of 5.5 million with a healthy market.
The NAR also said that median sales prices had risen 4.8 percent over the past 12 months to $219,800, but that average slipped slightly in August compared to prices in July and June.
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Scottsdale home equity is rising once again. Home gains over the past two years have restored a lot of money to most homeowner's available fund balance through the value in their home versus what they owe on it. As a result, more and more Scottsdale homeowners are taking out HELOC's (Home Equity Lines of Credit) again.
Through July, some 449 of 884 markets or 48.9 percent of America's housing markets, have reached or exceeded median peak price levels, according to Homes.com.
RealtyTrac recently reported that the 12 months ending in June 2014 a total of 797,865 Home Equity Lines of Credit (HELOCs) were originated nationwide, up 20.6 percent from a year ago and the highest level since the 12 months ending in June 2009.
What Exactly is a Home Equity Line?
Home Equity Lines of Credit are non-purchase loans that are secured by the equity (the appraised market value of a property minus any other loans secured by that property) and can be used by homeowners to fund home improvement projects or other purchases.
This recent rise in HELOC originations indicates an increasing number of homeowners are gaining confidence in the strength of the housing recovery and, more importantly, have regained much of their home equity lost during the housing crisis. Nearly 10 million homeowners nationwide, representing 19 percent of all homeowners with a mortgage, now have at least 50 percent equity in their homes, according to RealtyTrac data. Meanwhile the percentage of homeowners with severe negative equity has decreased from 29 percent in the second quarter of 2012 to 17 percent in the second quarter of this year.
With new loans slowing to a crawl, lenders have been looking for ways to come up with products to offer homeowners who have already refinanced or gotten their primary loan. A Scottsdale home equity loan (HELOC) enables homeowners to leverage additional equity they may have gained since refinancing while still preserving the rock-bottom interest rate on their first position loan.