I wrote the other day that there’s an important regional dimension to the recovery of the housing market, and that localities that are doing well “look to me to be the ones with more income and job growth.”
Well, along comes the always interesting David Dayen with a post showing the growth in home sales broken out by the top 1% most expensive homes vs. the other 99%. The results, from Redfin Research, corroborate my impression.
Last year, home sales grew 36% for the most expensive 1% and 10% for the rest. This year–through April–home sales of the bottom 99% are down 8%, while the top 1% of home are moving to the tune of 21%.
Luxury sales are crushing it in pricey neighborhoods in LA and NY, but lagging where jobs, incomes, and wage growth remain weak and credit for most households remains tight (rising mortgage rates are a factor here as well). And remember, there’s still a non-trivial share and number of underwater mortgages out there, specifically 17% (about 8 million). That’s down from 25% in 2011, but it ain’t nothin.’ Home price appreciation will help get some of these mortgages back to the surface, but there’s a good rationale for not giving up on principal reduction policies. Particularly important in this space is for the GSE’s to allow principal reduction on the home loans they back.
Source: Redfin Research