The Mortgage Corner

CoreLogic, a Southern California real estate data firm, also released new analysis showing approximately 2.5 million more residential properties returned to a state of positive equity during the second quarter of 2013, and the total number of mortgaged residential properties with equity currently stands at 41.5 million. The analysis shows that 7.1 million homes, or 14.5 percent of all residential properties with a mortgage, were still in negative equity at the end of the second quarter of 2013. This figure is down from 9.6 million homes, or 19.7 percent of all residential properties with a mortgage, at the end of the first quarter of 2013.

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Graph: Calculated Risk

Nevada was the highest percentage of mortgaged properties in negative equity at 36.4 percent, followed by Florida (31.5 percent), Arizona (24.7 percent), Michigan (22.5 percent), and Georgia (20.7 percent), per Calculated Risk’s graph. Montana had the lowest percentage of mortgaged properties. The top five states combined account for 34.9 percent of negative equity in the U.S.

“Equity rebuilding continued in the second quarter of this year as the share of underwater mortgaged homes fell to 14.5 percent,” said Dr. Mark Fleming, chief economist for CoreLogic. “In just the first half of 2013 almost three and a half million homeowners have returned to positive equity, but the pace of improvement will likely slow as price appreciation moderates in the second half.”

Meanwhile existing-home for sale inventories climbed to 20.6 percent, according to Housing Tracker. The Calculated Risk graph show that 2013 inventories are almost back to 2010 levels, as housing prices continue to improve. The actual inventory level is still 4 percent below 2012, says Calculated Risk, but it’s still rising vs. last year.

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Graph: Calculated Risk

The reality is that with existing-home prices up some 12 percent year over year per Case Shiller, more homes are expected to come onto the market and continue the housing recovery. Western cities like San Francisco and Las Vegas prices are up some 24 percent in a year.

The one caveat that could limit further price increases is that the Federal Housing Finance Authority, ruler of Fannie Mae and Freddie Mac, just announced they would be lowering the conforming loan limits.

“FHFA has been analyzing approaches for reducing Fannie Mae and Freddie Mac loan limits across the country, and any such change would be announced with adequate advance notice for implementation on Jan. 1," the agency said in a statement Monday. It could be as soon as next month, according to the LA Times.

Most pundits are conjecturing that just the conforming limit would be lowered, and the so-called Hi-Balance conforming limits would remain unchanged at $625,500 for the higher-priced California counties. The upper limit for Fannie and Freddie loans in high-priced areas was increased in 2008 to $729,750 to support the collapsing housing market. That limit was reduced to $625,500 in October 2011, although the $729,750 cap is still in place for loans insured by the Federal Housing Administration.

Harlan Green © 2013

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