Foreclosures: Home Equity Won't Return Until 2026!
Sensational new headlines from CNN Money and analytics firm Fiserv claim that home equity could take until 2023 or even 2026 to come back for homeowners. Could this be true and what does it mean for homeowners, those considering buying a home and real estate investors? Based on forecasts of annual home price growth of just 3.7% by Fiserv it could take this long for property owners to see their home equity return to previous highs meaning those struggling to keep up with mortgage payments and facing foreclosure certainly stand little chance of waiting out the crisis to sell their homes and may be better off cutting their losses, taking advantages of current short sale programs and tax benefits and getting on with a fresh new start. However, savvy real estate pros who really know their data also know that figures like these are fatally flawed and skewed. Indices are notoriously faulted by both lags in recording and the metrics they track and while national stats give a broad indication of trends they mean little on a local level. For example these predictions forecast a measly 2.7% rise in Arizona home prices for the next 5 years, but we know that Phoenix has already seen a 16.6% year-over-year rise as of July 2012 and we are just beginning the real estate recovery. Similarly San Diego real estate has seen home values in some zip codes rising between 30% and 130% over the last year. So yes, even at these dramatic rates it may take a few more years for home equity to bounce back in a big way but the odds are we will well surpass 2007 home prices in the next decade. Plus, what these reports fail to point out is how median home sales prices are poor indicators of real increases in home value. So much of the real estate activity of the last few years has been relegated to the lowest end of the market. That is already changing and as we see more luxury home sales these stats will jump significantly in a short period of time. So what’s the bottom line? It is prime time for homeowners facing foreclosure to cash out, those buying a home to pull the trigger and for real estate investors to lock into great profits.
Could it really take until 2026 for home prices to recover from foreclosures and return to their previous levels?