Supply-side conditions in the housing market are strengthening, according to an FNC Foreclosure Market Report. In recent months, with foreclosure rates approaching pre-crisis levels the foreclosure market is stabilizing. Mortgage technology company FNC indicates that foreclosure sales are declining rapidly nationwide with high demand in multiple fast-rising markets.
Demand-side conditions are also improving with home equity becoming available to prospective trade-up buyers. With the steadily rising home prices and expectations high that they will continue to rise, housing turnover is beginning to take place by prospective buyers stimulated to take advantage of relatively low home prices. Trade-up demand is developing in existing homeowners who now have enough home equity to support a payment on a bigger or better house.
“We’ve seen hard data from the past 18 months that shows rising home prices and a foreclosure market with diminished impact due to decreasing foreclosure inventories and fewer new foreclosure filings,” says Yanling Mayer, FNC Director of Research. “Meanwhile, a very encouraging trend that has been developing is the rising participation of trade-up buyers who are seeing improving home equity position and positive capital appreciation on existing homes.”
Low interest rates and rising prices along with low foreclosure inventory are driving foreclosure prices up in fast-rising markets such as California, Las Vegas and Phoenix. This results in a price premium relative to estimated market value. Investor activity is on the rise. “An important sign of a healthy and sustainable recovery is increased housing turnover driven by trade-up buying, which is more or less discretionary spending,” said Mayer. “These buyers are typically more responsive to market conditions and financial incentives.”
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