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Mortgage Originations: The Good, The Bad, And the Ugly in 2014

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52 | Th e M Rep o RT o r i g i nat i o n s e r v i c i n g a na ly t i c s s e c o n da r y M a r k e t ANALYTICS The LaTesT report: recovery still in 'Middle innings' It's still going to be a while before the nation's top metros recover fully, Zillow says. t he U.S. housing market overall is recovering, de- spite its lackluster showing at the beginning of the year. It's just going to take a lot longer in several markets to get back to pre-crisis highs, according to a report issued by Zillow. According to the second-quarter Zillow Real Estate Market Report, home values in half of the nation's 100 largest metro areas will not return to their pre-recession peak levels for at least three years. In a few markets, full recovery will take more than a decade. For the most part, Zillow expects home values in the top American metros to be back to peak in 2.7 years, but that averages the fastest expected recovery (San Francisco, which should be back to peak by year's end) and the slowest. Minneapolis is expected to have the longest recovery curve at 14.5 years, followed by Kansas City (12.5 years) and Chicago (11.7 years). Zillow's assessment of the future follows the trend toward a certain guarded positivity among housing and real estate authorities. Forecasters, chastened not just by the crisis, but also by a string of expected reboots that fizzled, make sure to balance the good news—such as the fact that Zillow expects U.S. home values to rise another 4.2 percent through this time next year—with the reminders that home values remain 11.3 percent below their 2007 peak. United States home values climbed 6.3 percent year-over- year in the second quarter to $174,200, according to Zillow. This is the slowest annual pace of appreciation recorded so far this year and a sign that the market is returning to more normal levels, rather than operating in fits and spikes. In a more normal market, home values appreciate at roughly 3 percent per year. Home values nationwide were up 1 percent compared to the first quarter and 0.5 percent from May, according to the report. Zillow's chief economist, Stan Humphries, referred to the time frame between 2007, when the market was at its apex, and 2017, when it should be back to peak in most areas, as "a lost decade in which [homeowners] will have built up no home equity." Humphries said this reality is reflected in "stubbornly high negative equity and effective negative eq- uity rates." More than a third of Americans with a mortgage lack enough equity to realistically list their homes for sale and buy another, he said. The silver lining for Humphries is that as the nation navi- gates the "tricky middle innings of the recovery," lower prices for homes are allowing more people to buy into the market with bargains that should allow an earlier buildup of equity. "This will be critical to maintaining home affordability over the coming years, especially as mortgage interest rates rise," he said.

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