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Nancy Starczyk: Equity rebounds in 2013

Posted: January 1, 2014 2:00 a.m.
Updated: January 1, 2014 2:00 a.m.

Tens of thousands of owners who once again have equity in their homes have much to be grateful for as 2014 dawns.

Indeed, the record rebound in home equity that occurred during 2013 has gone largely unheralded, even though each increase in resale prices meant thousands of Californians may be able to stay in their homes and, when they decide to sell, may leave with dollars in their pocket.

Returning underwater owners to positive equity is another decisive step on the housing market’s path to full recovery, along with recent drops in distressed sales, the pull back of investors, and the strong return of traditional buyers.

The Federal Reserve recently reported that homeowner equity shot up more than $2 trillion from the third quarter of 2012 to the third quarter of 2013. Latest calculations from the Fed show that equity in homes has grown in excess of $3.2 trillion since the bottom of the bust in early 2011.

The $2 trillion rise is a record increase, which means many current owners may have an easier time refinancing loans with high interest rates.

And, a return to positive equity means many more owners may be likely to take on home improvement projects, further improving a home’s resale value, while creating jobs and speeding the return to health of the local economy.

After hovering in the mid-20 percent range and higher for years, the percentage of owners who owe more than the current resale value of their home has fallen to 13 percent.

That translates to 6.4 million homeowners who are still underwater, a number that is still way too high, but down from 7.2 million earlier in 2013.

A return to positive equity particularly benefits owners of lower-priced homes and condominiums, since higher-priced properties generally had more equity when the Great Recession hit.

“The challenge in the coming months will be to find a healthy balance so that prices can continue to recapture lost ground, which will help owners who are still underwater, while not rising so high that too many families are priced out of the market,” said Jim Link, the chief executive officer of the Southland Regional Association of Realtors.

What happens with the remaining underwater owners in the San Fernando Valley will influence the pace of the local home resale market this Spring.

As owners recapture equity, the number of foreclosures, which already are down dramatically, and short sales — where a lender allows a sale at a price less than the outstanding home loan balance — will surely diminish further.

Of the total 267 closed escrows in the Santa Clarita Valley during November, only 13.1 percent were short sales, while 5.2 percent were foreclosure related.

Fully 80.5 percent of November transactions were standard sales, involving a traditional sellers and a traditional buyers. It was the highest percentage on record since the Association started keeping the statistic.

That’s great news, a fantastic way to end 2013, and a solid foundation for an even better 2014.

Nancy Starczyk is President of the Santa Clarita Valley Division of the Southland Regional Association of Realtors.



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