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Increasing Equity Sparks Move-up Sales

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By Maria Patterson

Recent breaking news regarding the significant jump in April home prices—posting record monthly growth and the fastest year-over-year growth in seven years—is just the latest in a series of statistics confirming that the real estate market is primed for the return of home sellers, who are now financially able and emotionally confident to list their current home in order to move up to their next.

The April home-price increase data from S&P/Case-Shiller came on the tail of a report from CoreLogic heralding the return of positive equity for 850,000 more residential properties in the first quarter of 2013, another sign that move-up buyers will become an increasingly prevalent market segment in the months ahead. According to CoreLogic, the national aggregate value of negative equity decreased more than $50 billion to $580 billion at the end of the first quarter from $631 billion at the end of the fourth quarter of 2012.

“It is hard to know market by market exactly how extensive the return to positive equity is, but from published data, it looks like the movement is spread across the country,” says RE/MAX, LLC Chairman of the Board and Co-founder Dave Liniger. “In 2012, 1.7 million homeowners who were previously underwater achieved positive equity and about half that number achieved positive equity in the first quarter of 2013. For every home-price increase of 5 percent, another 1.2 million will reach positive equity. It appears to be a widespread phenomenon and one that will benefit this inventory-starved market.”

According to Lennox Scott, home prices in the Northwestern U.S. reached bottom around November 2011. “At that time, a surge of local homebuyers regained buyer confidence to move forward with home purchases,” explains Scott, chairman and CEO of Washington state-based John L. Scott Real Estate. “Prices have seen double-digit gains for homeowners in 2012/2013, thus bringing underwater homeowners into positive equity. However, there is still a ways to go before the majority of underwater owners see some relief.”

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