Homeowners in some of the hardest-hit markets have seen double-digit prices increases in 2012 and they may finally have enough equity to sell.
But that doesn’t mean they will be able to qualify for a new mortgage, according to CoreLogic chief economist Mark Fleming.
“Home sellers in greater numbers are finding they have sufficient equity to consider selling, but continue to be constrained by creditworthiness,” Fleming says in a CoreLogic publication called “The MarketPulse.”
The primary hang-up is the credit score. Credit score requirements today are much higher than before the financial crisis. (The average credit score on a Fannie Mae loan is 760 and 700 on a FHA loan.)
Meanwhile, a lot of borrowers are struck in their homes because their current combined loan-to-value ratio is higher than 80%. They can’t sell and leave the closing table with enough of a downpayment to purchase another home.
“It is currently estimated that 45% of all mortgage homeowners have insufficient equity,” Fleming says, to make it worthwhile to sell.
The CoreLogic chief economist expects investors will continue to drive housing demand in 2013, particularly when it comes to REO and short sales.
“Though rising prices have cut into rental returns in the many of the fastest growing markets, other markets still yield attractive returns,” Fleming says in the April 23 edition of “The MarketPulse.”
The market could get a boost from first-time homebuyers who are poised to enter the market after renting for several years. “The expectation this spring is that renters will take advantage of low interest rates and low home prices to become homeowners,” the chief economist said.