As home prices continue to rise, millions of home owners are regaining equity, according to date released yesterday.
An estimated 2.5 million homes went back into a positive equity position in the second quarter, meaning they are no longer underwater – that their owners no longer owed more on their mortgage than the home is worth.
According to date from CoreLogic, the likelihood that a home was underwater dropped to a level where only an estimate 14.5% of all mortgages had negative equity. This is compared to 19.7% in the first quarter of 2013.
What does this mean for the Real Estate Market?
First, people simply feel better about their overall position in life. Many consumers have the bulk of their wealth tied to the real estate.
Many people the past 5-years have wanted to sell their house, but have been unable due to being underwater. As equity positions improve, these people can now safely put their home on the market without fear of having to write a check to sell their home.
It also allows more people to refinance to today’s lower rates. Programs like HARP (the Home Affordable Refinance Program), FHA Streamline Refinance, and a VA IRRRL Streamline Refinance, have allowed many people to refinance today without an appraisal, and without having to worry about being underwater. Yet about 20% of all loans are NOT a Fannie Mae, Freddie Mac, FHA, or VA loan. If you are one of the 20%, you have not been able to refinance if your home was underwater. Improving equity allows these people to refinance, freeing up money to be spent elsewhere.