Further to our story last week about recent changes in the US housing market, it seems that — as the US real estate market continues to recover from the epic crash of 2006 — currently foreclosed homes are appreciating faster than the typical US home.
According to MarketWatch Monday, homes that were foreclosed on during the recession are rising in value at a breakneck pace.
The median crisis-era foreclosed home increased 10.3% in value over the past year, versus just 6.5% for the median home overall in the U.S., according to a new analysis from real-estate website Zillow Z, -2.41% Indeed, the rate at which foreclosed homes are appreciating in value accelerated even as the market overall has slowed down, says MarketWatch.
In many markets, foreclosed homes are now worth more than ever before. Since the recession, these homes have increased 74.5% in value, while the typical U.S. home only gained 46% in value. Granted, foreclosed homes dropped more substantially in value during the recession — and they’re still generally worth less than the typical U.S. home. The median home value among foreclosed homes was $207,000, versus $216,700 among all homes.
The Zillow report also analyzed who has benefited from the rise in the value of foreclosed homes, and who is worse off because of it. By and large, the winners in this situation are real-estate investors who purchased foreclosed homes at a significant discount and turned them into rentals. Not only have their properties increased substantially in value, but they also reaped the rewards of rising rents as thousands of foreclosed households were forced to enter the rental market to obtain housing.
As well, according to the Business Times October 2, the US housing market, already struggling with tight inventory and rising building costs, faces a fresh headwind as 30-year mortgage rates rise close to the 5 per cent threshold for the first time in years.
Even as home prices have climbed steadily thanks largely to a lack of supply of homes for sale, housing affordability has remained relatively stable thanks to historically low borrowing costs.
But that is changing. Mortgage rates have surged to 4.97 per cent from 4.23 per cent in January, according to the Mortgage Bankers Association (MBA). Including fees, most 30-year mortgage costs have reached 5 per cent or higher.
The rise in mortgage rates so far this year means that a potential homebuyer would pay about US$35,000 more interest on a US$220,000 loan over 30 years.
The central bank has also been reducing its holdings of mortgage bonds purchased in an unconventional policy adopted during the 2007-2009 credit crisis.