Previous Underwater Borrowers Seek Job Relocation, Affordable Housing
Home prices are improving and homeowners are finally resurfacing after plunging underwater just a few years ago. Twenty-thirteen is set to see a major surge in homeowners seeking to relocate for better jobs and more affordable housing. Zillow reports that 1.9 million homeowners were freed from negative equity in 2012. This means that homeowners will be eager to sell their homes, even if it means that they will break even, in search of healthier job markets.
Job Relocation Surges Despite Unemployment Rates
John A. Challenger, CEO of Challenger, Gray & Christmas, Inc., says, “One factor that has kept unemployment rates high has been the inability of underwater homeowners to relocate for employment opportunities. With home prices bouncing back, even those who may now simply break even on a home sale might consider moving to a region where jobs are more plentiful. This could spark a more rapid decline in the unemployment rate over the next year.”
Unemployment rates are still high in densely populated metro areas. According to a recent report from the Bureau of Labor Statistics, 130 metro areas had an unemployment rate of 8% or higher and an additional 47 metros registered rates 10% or higher. Interestingly enough, states showing the biggest gains in home prices are also the same states dealing with higher unemployment.
California saw a 7.2% increase in home prices, while unemployment rates are well above the national average at 9.7% as of December of last year. Despite the unemployment rates, California cities like Los Angeles and Riverside were among the top metro areas where the most homeowners were freed from negative equity in 2012.
Home Values Rise, Rent Gains Slow
Home values posted their biggest annual increase since July 2006, according to Zillow. Homeowners that are now free from negative equity may find it difficult to find affordable housing, but it isn’t all bad news. Even if homeowners break even on their current properties, the benefits of relocating to a richer job market have great potential. This may mean downsizing for some, but areas with a strong concentration of jobs pose a bright future for many.
The biggest annual gains in home prices were seen in 2 hot Bay Area cities: San Jose and San Francisco. San Francisco saw a 17.2% increase and San Jose saw a 16.8% gain in a list that also includes Phoenix, Las Vegas and Sacramento. Although the winter months have seen 0.2% decrease for the Zillow Rent Index, Bay Area cities have actually seen an increase. San Jose and San Francisco took the number 4 and 5 spots at 5.5% and 5.4%, respectively. This might have to do with the red-hot tech industry that has seen a rapid surge in job opportunities.
Would you be willing to rent in the Bay Area if that meant more job opportunities?