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Real Estate Big Data

Negative equity is falling, but we’re not out of the woods yet

(REAL ESTATE BIG DATA) The number of homeowners who are living “upside down” continues to decline year-over-year and within the last year, most have seen a 5.1% increase in equity

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Equity line graph

As real estate goes, 2009 is gone and “fingers crossed” it isn’t ever coming back. As data released Wednesday shows, the number of homeowners who are upside down, in negative equity, continues to decline.

CoreLogic, a provider of consumer, financial and property data, analytics and services to business and government, released the report on Dec. 12.

Being underwater, upside down decreased by 4% to 2 million homes or 3.7% of all mortgaged properties, according to the report, which was shared on the Calculated Risk blog. And, 78,000 properties, that were once negative, left the upside down behind and regained equity in the third quarter of 2019.

According to the report, the 64% of U.S. homeowners with mortgages have seen their equity increase 5.1% year-over-year – a gain of almost $457 billion since the third quarter of 2018.

Meanwhile, the number of mortgaged properties in negative equity declined 10% or roughly 220,000 homes in the third quarter of 2019, the report said. In comparison, during the same time period in 2018, 4.1% percent of homes or roughly 2.2 million were upside down.

“Ten years ago, during the depths of the Great Recession, more than 11 million homeowners had negative equity or 25% of mortgaged homes,” said Dr. Frank Nothaft, chief economist for CoreLogic. “After more than eight years of rising home prices and employment growth, underwater owners have been slashed to just 2 million, or less than 4% of mortgaged homes.”

Negative equity can occur for a number of reasons including a decline in the home value or an increase in mortgage debt or both.

CoreLogic began its equity data analysis in the third quarter of 2009. During the fourth quarter of 2009 negative equity peaked at 26% of mortgaged properties.

Even though the numbers of properties in negative equity has declined, there are still nearly 2% of homes with a loan-to-value 125% and higher, according to the report. Yet, year-over-year, the number of homeowners in the negative has declined from 2.2 million to 2 million, according to the report.

Mary Ann Lopez earned her MA in print journalism from the University of Colorado and has worked in print and digital media. After taking a break to give back as a Teach for America corps member and teaching science for a few years, she is back with her first love: writing. When she's not writing stories, reading five books at once, or watching The Great British Bakeoff, she is walking her dog Sadie and hanging with her cats, Bella, Bubba, and Kiki. She is one cat short of full cat lady status and plans to keep it that way.

Real Estate Big Data

What happens in a sellers market when people stop selling?

(REAL ESTATE BIG DATA) People are staying in their homes longer so median tenure is up, but there are plenty of areas of the country with lots of moving, so know your area.

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median tenure is up

When it comes to buying or selling a home, much of the focus naturally falls on people in the process of moving. Where they want to relocate to, how long it takes them to find a home…etc. But there’s another part of the equation: what happens once someone buys a home? More importantly, how long do they stay put?

In 2018, the National Association of Realtors® (NAR) actually did a study on this and found that the median amount of time individuals own their homes is 13 years. That’s actually a jump since the last decade, when people were more likely to stay for only about 10 years.

Of course, median scores don’t paint an accurate picture of what’s happening in specific locations. For instance, homeowners in the north eastern section of the United States (think states like New York, Massachusetts and Pennsylvania) are more likely to keep their homes for longer periods of time. On the other hand, homeowners in the west – think Utah, Arizona and Colorado, not the Pacific Northwest – are more likely to sell their homes within 8 years.

One good indicator of whether or not someone will keep their homes for longer is average home prices. In general, NAR found that people who lived in areas where housing was expensive, like California, were less likely to sell quickly. High prices also make selling homes difficult: people often don’t want to put their home up for sale when they don’t have anything lined up. This can create a housing shortage, which can drive prices higher, furthering the cycle.

That said, other areas are seeing massive growth: locations like Austin, Texas or Boise, Idaho, tend to have homeowners selling more often.

The good news about places with “low median tenure” (people moving more often) is that there’s more likely to be growth in the housing market. After all, if someone moves out of their starter home into something bigger, it leaves that starter home open for newcomers looking to settle down in the area.

Essentially, while home tenure has risen on a national scale, the diverse landscape of the United States means experience will vary depending on your specific location.

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Real Estate Big Data

Looking into the crystal ball – 2020 housing forecast

(REAL ESTATE BIG DATA) Housing in America is about to change significantly as the millennials begin purchasing their first house and the market changes to meet them.

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Housing neighborhood

In 2020, Millennials will be taking on the majority of home mortgages and shape the housing market, that according to Realtor.com’s national housing forecast for 2020.

The report dispels the myth that Millennials want walkability and avocado toast. The report states that in 2020 the group will take on more mortgages than Boomers and Gen X – combined. And, they will be plunking down serious cash, with larger down payments than ever.

While Millennials will be buying homes in the burbs, willing to drive the kids to school, and shaping the market, in general the forecast is for a tight market, with a flat increase in sales.

The coming year is going to be a mixed bag.

Economy and Global Market Influence

During 2019, consumers were still feeling good about the economy, leading to a 4.6% annualized gain in consumer spending, yet businesses were not as confident by the second quarter and resulted in a 1% drop in investment. Trade disputes between the US and its trade partners resulted in an escalation in tariffs and increased uncertainty.

At the start of 2019, the Federal Reserve initially tightened its belt because the economy seemed to be on an expansionary track, but it switched tactics later in the year as it became clear major economies around the globe were slowing and as a result cutting rates and purchasing assets to boost output, according to the report.

In 2020, GDP growth is expected to be modest with a 1.7% advance, according to the report. As housing expenses continue to rise, consumers will spend less on non-housing related purchases. Slowing consumer spending, coupled with global uncertainty and a volatile world market is expected to cause businesses to trim employment goals and control costs. Unemployment is expected to rise slightly from 3.6% to 3.9% by the end of 2020. Meanwhile, inflation is expected to remain restrained with a 2.0% year-over-year increase.

Housing Supply

Home buyers were searching for more affordable housing choices in 2019 and as a result there was a housing buildup around the country, with the number of homes available rising 7% on a yearly basis, the fastest pace of growth since 2014. As the year wore on buyers became frustrated with the costs of housing, but then mortgage rates dropped in March and many buyers were able to get into the market thanks to the shift and the reliance on financing, according to the report.

“In 2020, we expect inventory to struggle to grow and could instead reach a historic low level. The yearly declines are likely to be moderate and range between 1%-to-5 % for most of the year. A steady flow of demand, and robust-yet-declining seller sentiment will combine to ensure there is no surplus adequately-priced inventory,” the report stated.

Demand for housing will remain strong in 2020, particularly in the entry level. Millennials will be turning 30 and will make up the largest group entering the market. And, they will take more than half of all mortgages in 2020, the Realtor.com forecast stated.

Home sales are expected to remain flat in 2020, even as demand remains strong. With consumers sensing a cooling economy in the coming year, it’s expected that home sales will dip 1.8%, as supply remains short, price growth is going to remain restrained. The decline in sales will be tied to flat price growth. Prices are expected to rise 0.8% in 2020.

Buying in 2020 is going to present a mix for consumers as there will be more opportunities to find new construction at flattened prices, yet it will depend on the market they search and finding one with fewer barriers to entry. The report describes it as “Marco Polo” while it may be easier to qualify for loans, it may be harder to find a home.

Sellers are going to need to price it right to sell it. Homebuyers are on the hunt for affordable properties, so those homes in a higher price range will need to relax prices or provide incentives to encourage sales.

The trend of searching for affordable housing will continue as Millennials leave the urban centers behind for homes for families and Boomers retire to sunnier communities, with lower taxes and lower cost of living. Texas, Arizona and Nevada could benefit from homebuyers looking for affordability. Meanwhile, Georgia, Florida and the Carolinas may see more relocations from folks leaving the expensive and cold Northeast behind.

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Real Estate Big Data

Alternative data is an intriguing, inventive new way to market

(REAL ESTATE BIG DATA) Alternative data is a wild ride with surveillance planes, satellite images, and specially equipped helicopters, and it’s not stopping anytime soon.

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Alternative data

The road less traveled has always been a little stranger and trust me, alternative data is a little strange. Buckle-up your seatbelts, it’s going to be a wild ride.

Data has always been a hot commodity. The digital world has made it easier than ever for investors to get their hands on all kinds of data. The problem is, if one person can gain access to a data set then nearly everyone else can too. So, how are investors supposed to get an edge over their competitors and make the best decisions in their power? Please welcome, alternative data to the stage.

First of all, what the heck is alternative data? According to alternativedata.org, it refers to “data used by investors to evaluate a company or investment that is not within their traditional data sources.” Alternative data is the road less traveled. It offers investors a way to add new and unique variables to the mix.

This data can be anything from private aircraft surveillance to satellite images of parking lots. Every bit of data that investors can gather to determine their next course of action has value. It gets wild, y’all.

In the oil and gas industry, one company uses helicopters decked out with infrared beams to estimate the amount of oil in storage tanks. It may sound like something out of a silly movie, but it’s actually quite clever.

So, is alternative data just an industry fad? Probably not, but what qualifies as this kind of data will evolve over time. As certain practices become more mainstream, they will lose that “alternative” edge. Kind of like when the band you’ve been following for years gets a hit song and now, they’re everyone’s favorite band.

What’s already clear is alternative data is not pixie dust. These creative data sets can provide an interesting insight, but it shouldn’t be the sole basis of any decisions. At the end of the day, alt data points are just more variables on the table. It’s best to not get caught up in the sexiness of private jets and satellites.

One thing is for sure, we will be seeing more creative uses of alternative data in the future.

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