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Th e M Rep o RT | 53 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 Department the latest local eDition report: Housing recovery Favors High-income neighborhoods Study illuStrateS how income and acceSS to credit are driving home valueS and a return to 'normalcy'. WASHINGTON // While at a national level the housing market continues to mend, a look at local markets reveals a recovery that is most prominent in high-income areas, while lower-income neigh- borhoods continue to struggle. ProTeck Valuation Services delved into this phenomenon in its Home Value Forecast pub- lished in late October, shining a spotlight on the Seattle metro area as a prime example. "Seattle shows us how income and access to credit drives home values and why across the country we are seeing strong appreciation in wealthy areas but slower recovery in areas of lower income," said Tom O'Grady, CEO of ProTeck Valuation Services. Seattle—and Washington in general—made a strong showing on the Home Value Forecast's list of top 10 core-based statistical areas (CBSAs) in October. Five of the top 10 CBSAs for the month were located in Washington with Seattle ranked No. 4. Factors considered in the rankings include sales and list- ing activity, prices, inventory, number of days on market, the ratio of sold-to-list prices, and foreclosure and REO activity. ProTeck noted a Census report that revealed a $5,000 increase in median household income in 2013 in Seattle, as well as a Forbes magazine article that listed Seattle as one of the best places for busi- ness. Amazon, Costco, Boeing, Microsoft, and Nordstrom all have a presence in Seattle, making for a strong job market. However, the Seattle metro is not homogenous, and the good fortune revealed in these studies is not evenly distributed. In fact, the Seattle Times found the $5,000 increase in household income is highly concentrated in the highest-income households. The top 20 percent of house- holds gained about $15,000 in 2013. Meanwhile, the bottom 20 percent experienced no gain at all, while bringing in an average $12,974 annually. The housing market follows a similar trend, according to ProTeck's research. In Bellevue, one of Seattle's high-income neighborhoods, homes have already regained most of the value lost during the housing crash. Homes there are valued at just 1.29 percent below their pre- crash high, according to ProTeck. However, in Auburn, a less wealthy neighborhood, home values continue to wallow about 20.6 percent below their pre- crash highs, ProTeck says. ProTeck attributes part of this discrepancy in recovery to the Consumer Financial Protection Bureau's qualified mortgage (QM) rule, saying the rule "has greatly restricted access to credit for those with limited money to put down and [who] need to take on a greater ratio of debt relative to their income." "Auburn is feeling the credit crunch, limiting demand to those few who can qualify and therefore, limiting home price ap- preciation," according to ProTeck. However, there is hope on the horizon for neighborhoods like Auburn, according to O'Grady. "The good news is that federal housing regulators have signaled that change is on the way to loosen some lending standards making mortgages more acces- sible for individuals with less than stellar credit," he said. Fannie Mae and Freddie Mac will begin accepting loans with 3 percent down payments instead of the current requirement of 5 percent. ProTeck also pointed out that while markets in its top-10 list for the month have fewer than four months of inventory, markets at the bottom of the rankings have much higher in- ventory. Madison, Wisconsin, for example, has 24 months of in- ventory. Lower ranked markets also tend to have a much higher percentage of foreclosure sales. Pending Home sales rebound in california leading SaleS indicator ShowS the Share of diStreSSed property SaleS haS fallen nearly 40% over the paSt year. CALIFORNIA // California pend- ing home sales turned around a downward trend in September, posting their first increase in six months. The California Association of Realtors (CAR) reported a 2.6-per- cent increase in its Pending Home Sales Index, putting it at a reading of 102.4, up from 99.8 in August. The increase compares to a 0.3-percent uptick in the National Association of Realtors' national index, which came in at 105 in the trade group's latest reading. CAR's data from the past six years show contract signings av- erage a monthly change of -3 per- cent from August to September, usually signaling the start of a slower season for housing. Compared to a year ago, pending sales in September were down 0.5 percent in California, the smallest annual decline recorded since January 2013. Meanwhile, equity sales—trans- actions involving non-distressed properties—made up 90.9 percent of all sales in September in the Golden State. That's just slightly down from the 91 percent share recorded in August. Equity sales in the state have accounted for more than 80 percent of total sales since July 2013 and for at least 90 percent of total sales since June of this year. The combined share of all distressed property sales—9.1 per- cent—was down nearly 40 percent from last year, CAR reported. Out of the 41 reporting counties, 14 showed a monthly decrease in their distressed sales share, with an additional 19 recording increases only in the single digits. ANALYTICS