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Borrowers added over $6T in home equity since 2010: Corelogic

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CoreLogic Principal Economist Molly Boesel joins Yahoo Finance’s Akiko Fujita to discuss how the coronavirus is impacting the housing market.

Video Transcript

AKIKO FUJITA: Well, despite the economic downturn, we are continuing to see home prices rise, at least for now. A new study shows US homeowners with mortgages have seen their equity increase by 6 and 1/2% from the same period last year. Let's bring in Molly Boesel. She is CoreLogic's principal economist out with this report today.

And, Molly, you know, what's interesting is that-- I know you're measuring year on year here, but that narrative seems to run counter to what we have seen in the broader economy, which is significant downturn right now.

MOLLY BOESEL: Yeah, it really does seem to run counter, but the housing market, at least home prices, have really been staying increasing pretty steadily. And one of the reasons it's doing that is because, prior to now, and even especially going into March and April with the pandemic, inventory for sale is incredibly tight. So that's what's keeping those home prices up.

AKIKO FUJITA: Where are you seeing the biggest increases right now?

MOLLY BOESEL: The biggest increases are still in the Pacific Northwest-- large increases in home prices there.

AKIKO FUJITA: We've talked a lot about the moves that are likely to come out of this pandemic, as more and more people work from home and are able to work remotely. How do you think that factors into some of these markets that you've seen really take off? You look at the Pacific Northwest, for example. They've got a lot of tech companies there. You know, we've heard these stories about maybe people are going to look to move out to sort of lower tax areas. Is that something that we're likely to see in the medium term?

MOLLY BOESEL: Well, I think it's-- definitely people are going to want some more space. As people are working at home-- maybe their spaces are tight, or they want a little more open space to walk around-- they're going to be looking for places with more space and more space in their homes. Like apartment living may not be as popular in a year from now as it was previously. Somebody might want a home office to go to.

AKIKO FUJITA: There is the flip side of all of this, which is some of the underwater homes, those who are not able to make their mortgage payments. And your study points to a big decrease that you saw on that front-- 16% decline year on year. I'm wondering if you expect to see an increase on the back of what's happened over the last several months, especially given that a lot of the stimulus-- once it goes away, you know, these payments are going to be due. And some may not be able to make that.

MOLLY BOESEL: Well, that's a good point. Now, if we want to compare this to the Great Recession, I think it's kind of a completely different story. Right now, home equity is its highest point it's ever been. So going into the last recession, borrowers weren't in as great a position as they are now.

Now, you did, before the break, ask when are these home prices going to decline. We do expect a year from now home prices will decline by up about 1%. Now, compare that with what we saw during the Great Recession. That's a very small decline.

Again, we have very tight inventories, a lot of borrowers out there looking for homes. In fact, we have some high frequency data on listings and signings, new contract signings, for homes. You know, they fell quite a bit in April. The middle of April is about the worst point for that, for new sales and signings. Now, about the end of May, those new signings are actually higher than they were a year before.

So you look at all the millennials who are in the market. They've been in the market a long time. They've been waiting for something they can find. They've been waiting for that inventory. They've been waiting for something they can afford. They're not as worried about getting out there and going to look at homes as the older generations are. So they're taking advantage of the less competition. They're also taking advantage of these really low, record low, long-term mortgage rates. So they're helping push up home sales.

AKIKO FUJITA: The other thing we've seen, Molly, is home flipping. We saw that's climbed to a 14-year high. Returns are a little lower. But what are you seeing on that front?

MOLLY BOESEL: Yeah, I'm not surprised home flipping is up. In fact, you know, you look at things-- housing market through the first quarter, it was incredibly strong. You know, before the pandemic, we were really on target to have a great, great year in the housing market this year. So I'm really not surprised that home flipping was up in the early part of the year.

AKIKO FUJITA: OK. Molly Boesel, CoreLogic principal economist. Good to talk to you today.

MOLLY BOESEL: Yeah, you too. Thank you.