Construction activity up, inventory levels down
According to the CoreLogic MarketPulse report1, the April Home Price Index (HPI) including distressed sales posted their second consecutive month of year over year increases, the first such increase since the summer of 2012, “when the housing market was benefitting from tax credits,” CoreLogic points out.
During the month, single family construction activity rose 2.3 percent, up 25 percent over the last six month, and inventory levels fell to just over six months, hitting the lowest level seen in over five years. As the flow of REOs has slowed over the past 18 months, the report notes that negative equity has become a positive force in real estate markets by restricting supply in the face of increasing demand.
[ba-quote]CoreLogic President and CEO, Anand Nallathambi said, “Nationally, inventory levels have trended down to a 6.5 month supply – a reasonably healthy level. Unfortunately, there are also significantly fewer buyers. Historically, current homeowners trading up represent the biggest segment of the purchase market. But with more than 20 percent of homeowners underwater, another 25 percent of all homeowners possessing less than 20 percent equity in their homes, and tightened underwriting requirement, this potential pool of buyers has effectively been eliminated.”[/ba-quote]
Nallathambi adds, “On the bright side, in some markets, like Phoenix, San Diego, and even Las Vegas, there is more demand than inventory, which of course is pushing prices up.”
A transitioning market
CoreLogic reports that the housing market has transitioned from pricing dynamics driven by economic weakness and high shares of distressed sales to one of restricted supply, which will likely exist for some time to come – a reason for optimism in many hard hit markets. The company notes that collateral credit standards are now more liberal than at any time in the past two decades when measured by the average combined loan to value ratio (CLTV) over time for purchase mortgage loans including first and junior liens.
Negative equity is likely contributing to the decline in inventory, the public’s perception about pricing is likely a largely contributing factor, as those who are in the market that can actually qualify see prices as a bargain these days.