Summit Valuations, LLC, a full service valuation company, announced its March Residential Real Estate Market Overview based on data compiled in January 2017 and an analysis of home equity, interest rates, and emerging trends from Chief Valuation Officer Mark Melikian.
“Home prices nationwide have been rising since 2009. In the past five years alone, the median sales price of an existing home has risen by 32 percent,” Melikian said. “This increase in equity combined with rising interest rates is leading more homeowners to home equity lines of credit. Indeed, as Moody's recently pointed out, HELOC volume has increased 21 percent in the past two years, reaching its highest level since 2008. This trend will likely continue into the near future as home prices and interest rates continue to increase.”
But Melikian cautioned that in the cyclical mortgage market, increasing HELOC originations will also bring increased risk.
“As the number of junior liens increase, the potential for heightened risk in the real estate market exists as more homeowners leverage their recent gains in equity,” he said. “The same home price appreciation and rising interest rates that have led to an increase in HELOC activity will likely cause a slowdown in home price appreciation as affordability lessens in those markets. Thus, a lender or investor involved with HELOCs (or any junior liens) would be wise to focus on the quality of their real estate valuation methods to mitigate exposure to risk.”
As for the January numbers, the months’ supply of housing and the unemployment rate both decreased year-over-year. The median sales price, the seasonally adjusted number of homes sold, the pending home sales index and mortgage interest rates all increased during the period, the report said.
On a regional level the South had the highest number of existing home sales and the West had the highest median price. The Midwest experienced a month-over-month decline in the number of seasonally adjusted existing home sales while all other regions saw gains. All regions experienced declines in the median sales price month-over-month, with the Northeast seeing the smallest decline.