The national negative equity rate has been high since the recession. However, more recently, that number is finally falling back to healthy levels, helping encourage sellers to put their homes on the market.
While homebuying conditions continued to ripen in 2013, low inventory levels dogged the market. Buyers had the money for a down payment and were well-positioned to make monthly payments on mortgage, but there were no homes available. As the negative equity rate continues to fall, more homeowners will be more likely to sell, helping give buyers more options.
According to a recent report from Zillow, the national negative equity rate ended the year at 19.4 percent, down from 21 percent in the third quarter and 27.5 percent on a year-over-year comparison.
"We'#039;ve reached an important milestone as negative equity has fallen below 20 percent nationwide, which has helped free up marginally more inventory and contribute to further stabilization of the market," said Zillow Chief Economist Dr. Stan Humphries. "But a number of headwinds will prevent negative equity from falling at the kind of sustained, rapid pace we need before the market can completely return to normal, and it remains roughly four times what it is in a healthier market. High negative equity is just another sign of how distorted the market continues to be, and how far we still have to go on the road back to normal."
Zillow noted that home values were up 6.6 percent in 2013 compared to the year before, helping more Americans improve their equity. They expect home values will increases 3.4 percent in the next 12 months and the negative equity rate will fall to 17.2 percent by the end of 2014.
Another sign of a housing market finding a healthy balance is the fact that foreclosures fell in January. According to a report from RealtyTrac, foreclosure filings fell to to 124,419, down 18 percent from a year ago and marking the 40th consecutive month of annual declines.
"The monthly increase in January foreclosure activity was somewhat expected after a holiday lull, but the sharp annual increases in some states shows that many states are not completely out of the woods when it comes to cleaning up the wreckage of the housing bust," said Daren Blomquist, vice president at RealtyTrac. "The foreclosure rebound pattern is not only showing up in judicial states like New Jersey, where foreclosure activity reached a 40-month high in January, but also some non-judicial states like California, where foreclosure starts jumped 57 percent from a year ago, following 17 consecutive months of annual decreases."
Mortgage rates affordable
Aside from a decreasing negative equity rate and the number of home foreclosures, mortgage rates - although rising - continue to remain affordable.
The latest report from Freddie Mac showed that a 30-year fixed-rate mortgage averaged 4.37 percent, up from 4.33 percent a week before.
"Mortgage rates edged up with new home sales exceeding expectations and rising to a seasonally adjusted pace of 468,000 units in January, the strongest annual rate since July 2008," said Frank Nothaft, vice president and chief economist at Freddie Mac. "The 9.6 percent increase in new home sales for January followed an upward revision of 13,000 units in December. The S&P/Case-Shiller 20-city composite house price index rose 13.4 percent over the 12-months ending in December 2013."
As more homebuyers will find themselves in a good position to make a purchase in 2014 - with increasing inventory levels and affordable mortgage rates - they will want to get a home inspection.
While an open house can help a buyer get a feel for the home, an inspection is a thorough analysis of the property, helping any buyer make an informed decision.