Housing's recovery, such as it is, has two parts to it that are of special interest to home builders and developers.
One covers the trajectory and momentum of transactions. If the trend is going up--more sales, more starts and permits, more completions, and strengthening prices--the conclusion is that the housing market recovery continues.
The other, maybe less-appreciated, part of housing's recovery happens off the radar of transaction. It's the part of the market--too large a part of the market--still digging itself out from distress of the Great Recession. One of the measures of that market, an indicator of recovery in its own right, is data on the number of homes regarded as upside down or underwater--where mortgage borrowers owe more money than sale of the property would fetch them.
ATTOM Data Solutions, formerly RealtyTrac, notes that when housing was at its worst, close to 13 million borrowers were underwater on their home mortgages in the second quarter of 2012. Today, that number is 5.4 million. That's a big improvement, and in the 12 months of 2016, a tad over 1 million properties moved across the line from underwater into "equity" status. Still, almost one home "borrower" in 10--9.6% to be exact--remains upside down in their home loan. Pockets of markets, Las Vegas (22.7%); Cleveland (21.5%); Akron, Ohio (20.1%); Dayton, Ohio (20.0%); and Toledo, Ohio (19.9%) reflect how spotty and geographically lumpy recovery has been.
All told, while recovery's rescued just over half of underwater borrowers, just under half remain there, stuck, unable to move to better jobs, unable to think about selling their home, unable to do much of anything but chip away slowly at a balance-owed that's out of whack with home valuations.
Now still, the number no longer besieged by distress--the ones who, whether by continuing to pay down their mortgages, or by living in homes whose value continues to drift upward--is an important factor in the other, aforementioned, stream of housing's recovery. People don't tend to sell their homes and buy new ones when their current home loan balance eclipses the price they'd get on selling the property. When they emerge from being upside down on their loan, they may finally list their home for sale, which would add to the scarily low number of resales for sale at lower price ranges.
So, every time there's a freshly-minted million homeowners who now have equity where before they didn't, the housing market has a new crop of people who may funnel into the transactions side of the housing recovery. Who better to court for the value of "new" homeownership than a household that's been stuck for years living in an existing home they could not get out of for financial reasons?
If you look at the data as ATTOM's senior vp Daren Blomquist does, you note that tenure, the amount of time owner/borrowers stay in their home before selling it has quantum-leaped from an average of 4.3 years to 7.9 years during the years since the Great Recession hit.
Increased tenure doesn't seem on the face of it to be a negative. Buying a house to live in it rather than buying it to sell it for a gain feels like a sane reset of homeownership expectations. Still, eight years average ownership for sellers may look like stagnancy to some.
“Despite this upward trend over the past five years, the massive loss of home equity during the housing crisis forced many homeowners to stay in their homes longer before selling, effectively disrupting the historical domino effect of move-up buyers that feeds both demand for new homes and supply of inventory for first-time homebuyers,” Blomquist noted.
The important thing is that jobs and income growth don't only help people in the transaction area of housing's recovery, but in the digging-out-from-distress area as well. As events leading up to and since Nov. 9, 2016 have made so abundantly clear, big pockets of America have all but missed out on economic and housing recovery streams of the past five or six years. Blomquist notes that 5.4 million--many concentrated in Nevada, Illinois, Ohio, Missouri, and Louisiana--are still in a housing hole that's hard to claw out of, even if prices are going crazy in some markets.
This all suggests that housing's heat-map is only becoming more complex and varied as time passes. Every geography consists of sub-geographies, sub-markets, right down to an infill tract here, a master plan phase there, each propelled upwards, sitting stable, or being dragged downward by a most-local overlay of economics and desirability.
So, what do you do, trust your gut or trust the data?