Los Angeles metropolitan home owners are finding their way out of the mire. A recent report from Irvine-based data firm CoreLogic has revealed that the rise in prices of Southland homes is pulling many properties back above water on their mortgages.
According to the report, only 8 percent of mortgage holders in the Los Angeles metropolitan area owed more on their homes than what they were worth in the first quarter of this year. This is a vast improvement on the fourth quarter of 2013, and these levels are the lowest that CoreLogic has recorded since it began tabulating underwater borrowers during the height of the housing crash back in 2009.
Los Angeles is slightly ahead of the national curve, which averaged 12.7 percent of home mortgages that are underwater.
A few factors have been working to help bring down rates of underwater home mortgages. An uptick in home prices, stricter lending standards and higher down-payment requirements have all been working together to create a stronger economic environment for home owners. These factors have also helped to dramatically reduce foreclosure rates throughout the country.
These conditions are also helping home owners to build equity in their homes, and will allow them greater opportunities to sell in the future. Economists for CoreLogic have remarked that the one thing the housing recovery is missing and that is greatly needed is home buyers that are looking to “move up” with the purchase of a larger home than what they own. These homes sit in the middle tiers of the market, and are areas where more action is greatly desired.
“Many borrowers still lack sufficient equity to move and purchase a home,” Sam Khater, deputy chief economist for CoreLogic, said to the LA Times. “One in five borrowers have less than 10 percent equity in their property, which is not enough to cover the down payment and additional costs associated with a conventional mortgage.”
A Closer Look At the Los Angeles Market
The rise in prices noted by the CoreLogic study has brought the median price of a single family home in Los Angeles to $614,215, according to another California-based real estate research firm, Altos Research. These prices have been on a steep uptick since March 1, when they dropped down to around $482,000.
That sharp increase in just two months can be explained by the extreme demand that Los Angeles home owners are seeing for their homes. Altos’ unique value called the Market Action Index, analyzes supply and demand levels from a neutral value of 30. With an MAI of 42.87, Los Angeles is seeing demand strongly outpace supply, which is giving home sellers more leeway to ask top dollar for their much sought after homes.
Inventory is still looking a little quiet for the region. As of May 30, there were about 1,684 properties on the market, which is a leveling off at a low point that Los Angeles has seen since March 1 as well.
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(all data current as of 6/22/2017)
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