Home Sales

“This month kicks off spring home buying season,” says Len Kiefer, deputy chief economist at Freddie Mac. “Between now and the end of June, we’ll see about 40 percent of all home sales for the year.”

It’s that optimism that has Freddie Mac forecasters expecting 2015 “to be the best year for home sales and new home construction since 2007, when total home sales were about 5.8 million for the year,” according to their U.S. Economic and Housing Market Outlook for March.

An improving job market is driving young professionals, ages 25 to 34, back to the labor force. The millennial age group now has 76.8 percent of its generation employed, as of last month, up from 75.9 percent last year.

Existing-home sales are up nearly 5 percent from last year, but sales would be much higher if it wasn’t for the negative equity overhang, economists say.

The National Association of REALTORS® recently reported that existing-home sales increased 4.7 percent in February compared to a year ago.

But with an improving labor market, home sales should be even higher, Mark Fleming, chief economist at First American Financial Corp., told The New York Times. Home prices are higher too, which often correlates with rising home sales, according to Fleming’s research.

“Rising prices only crimp affordability for the first-time buyer who doesn’t yet own the asset,” Fleming told The New York Times. “But the vast majority of home sales are to existing home owners. And for existing home owners, what changes affordability is their own income and the price of money.”

However, too many home owners still lack sufficient equity in their homes to sell, Fleming notes. Home owners who have equity below 20 percent are less likely to sell because they may not be able to cover the costs of the transaction.

The equity picture has shown much improvement recently. CoreLogic reported earlier this month that 89 percent – or about 44.5 million — of all U.S. properties with a mortgage had equity by the end of the fourth quarter of 2014.

What’s more, if home prices rise by an additional 5 percent, about 1 million more home owners in negative equity stand to inch back into the black. However, much of the equity is concentrated at the high-end of the housing market (94% of homes valued at more than $200,000 have equity compared to 84% of homes valued less than $200,000).

Also, many home owners remain “under-equitied” – having less than 20 percent of equity in their homes. Nearly 50 million properties – or 20 percent – are considered “under-equitied” in the U.S., and about 1.4 million of those properties have less than 5 percent equity, which his considered “near-negative equity.”

For more advice about buying and selling real estate in and around Denton and Wise Counties, visit GDWCAR.com or TexasRealEstate.com.

Reprinted with permission of the NATIONAL ASSOCIATION OF REALTORS®. Copyright 2015. All rights reserved.