Underwater Homeowners Actually Helping Home Values:

One of the biggest barriers to an even more robust recovery in the housing market is a lack of supply. There are simply not enough homes listed for sale to meet the demand—and part of that is because a growing number of home buyers are not selling their previous homes.  Lack of inventory and steady demand have kept home prices moving upward.

"As people are starting to move, they're also turning into landlords by choice. And that is definitely having a dent in the inventory numbers," said Nela Richardson, chief economist at Redfin, a real estate brokerage. "Our agents are seeing people come through their door with the cash in hand to buy that next place. A lot of them obviously don't need that equity in their former home, or they're able to tap some of it out and then use it to buy the next place."

It's a strange new irony in housing. Lack of supply is driving prices higher, which is pricing some demand out and driving up rental demand.

For others, however, the rise in home prices is providing useful equity to buy another home while still holding on to their old home, which is then providing lucrative rental income.

There are no hard numbers as to how many buyers are holding on to their previous properties, but there is plenty of anecdotal evidence, especially as rental demand and rent rates continue to surge.

So, instead of underwater homes hurting the housing market they are driving up rental rates and home prices.

Un-advertised Listings Distort Housing Inventory:

The number of homes listed for sale nationally is finally beginning to rise, but ask anyone looking to buy a home and the majority will complain there is nothing out there. Neighborhood to neighborhood, market to market, supply still seems tight, despite a 6.5 percent increase in listings from a year ago, according to the National Association of Realtors. 

"Statistically it appears that we are getting back to very balanced market conditions," said Lawrence Yun, chief economist for the Realtors. "However, the sentiment out there is that we still have a shortage of inventory, and I think that is due to the prevalence of pocket listings in some markets."

A so-called pocket listing is when the real estate agent signs a listing agreement with a seller but does not advertise it widely or put it in a multiple listing service, where other agents and buyers can see it. Instead, they circulate the listing only among their own buyer clients or within their own brokerage. That way they can potentially get commissions on both buyer and seller sides, and would not have to split commissions with other selling agents.

No hard numbers exist on pocket listings so their rise and fall comes anecdotally from Realtors. Pocket listings are not illegal.

The incentive for a seller to do a pocket listing could be that they need to sell the home quickly and don't want to go through a wide marketing plan with multiple showings and open houses. The agent is promising the seller that they know of enough potential buyers personally that they can get a deal done fast. This usually happens when the market is very tight, and buyers are willing to make larger offers up front to negate the risk of a bidding war. 

Millennials Key To Next Wave of Purchases:

Just 36% of Americans under the age of 35 own a home, according to the Census Bureau. That's down from 42% in 2007 and the lowest level since 1982, when the agency began tracking homeownership by age.

It's not all their fault. Millennials want to buy homes -- 90% prefer owning over renting, according to a recent survey from Fannie Mae.

But student loan debt, tight lending standards and stiff competition have made it next to impossible for many of these younger Americans to make the leap.

"When we surveyed Millennials they cited several barriers to homeownership, especially access to financing," said Steve Deggendorf, a senior director for Fannie Mae. Many Millennials simply can't come up with the hefty 20% down payments. Others don't have good enough credit to qualify for loans.

There is a ray of hope for young wanna be homeowners, said Fannie Mae's Deggendorf. "Mortgage lending is getting a little less tight, with lenders approving buyers with a little lower credit score and who have less of a downpayment," he said. 

Home Prices Continue to Rise:

We have yet another positive housing report that shows continued growth in home prices.  Data provider CoreLogic says home prices increased 8.8% in May compared to a year earlier.  So, that means that the average homeowner enjoyed an 8.8% appreciation rate over the past 12 months.

On a month-to-month basis, prices rose 1.2 percent from April to May. But CoreLogic's monthly figures aren't adjusted for seasonal patterns, such as warmer weather, which can affect sales.

Prices increased the most in Western states, including Hawaii, California and Nevada.

Last week, we reported that Pending Home Sales shot up 6.1% and the continued gains in housing are helping more and more homeowners climb back into positive equity territory.  This new release supports pricing gains from other reports such as the Case-Shiller Home Price Index (+10.8% on a yearly basis) and the FHFA Home Price Index which showed a yearly gain of +6.6%.  Regardless of which reading is the most accurate, consumers are now starting to understand that the likelihood that they will loose money after purchasing their next home has diminished greatly.

Existing Home Sales and Prices Jump:

The National Association of Realtors reported today that May sales of homes that have been previously occupied (the largest segment of homes) jumped 4.9% from April.  Existing Home Sales came in at an annualized rate of 4.89 million units which handily beat the market expectations of 4.73 million units.

The median price rose to  $213,400 which is a 5.1% increase over the past year (May 2013 to May 2014).

The reason for the spike in sales?  Is it interest rates?  Nope, its inventory. Home Sales had been suppressed even while fixed mortgage rates hit their lowest levels for 2014 due to a very tight supply of homes available for sale.  Since home prices have been increasing at a moderate pace, many homes that were "under water" are now back into positive equity and these homeowners are now finally able to put their homes on the market.

Household Net Worth Creeps to Record High:

U.S. household net worth nudged up 2 percent to a record high $81.8 trillion in the first quarter as the stock market continued its upward climb and property values rose, data from the Federal Reserve.

The S&P 500 rose 1.4 percent in the first quarter as the Fed continued with a highly accommodative monetary policy for a recovering U.S. economy. For the year to date, the S&P is up 5 percent, and hit a new intraday record high on last week.

How consumers feel about their financial net worth has a direct impact on consumer spending and demand for homeownership, so this is more good news for the housing market.

Insurance Coverage for Summer Storm Damage

“If my home is damaged by a summer storm, will my insurance cover repairs?”

By Sandra Block, Kiplinger.com

Where water-related damage is concerned, the answer depends on whether the water came from above or below. In general, if the damage was caused by wind-driven rain that came in through your roof, windows or doors, your insurance will cover the cost of repairs.

But if the damage is caused by flooding, a far more common problem during storm season, your homeowners insurance will not cover it. The only way to protect yourself from flood-related damage is to buy flood insurance from the federal National Flood Insurance Program. Premiums range from about $200 a year to more than $2,000, depending on your area’s risk of flooding.

Never assume you don’t need flood insurance just because you don’t live in a coastal area. In 2011, torrential rainfall from Hurricane Irene caused widespread flooding throughout the Northeast. Vermont was hard hit, and many of the victims didn’t have flood insurance. “A lot of Vermont residents never thought they’d be involved in major flooding,” says Richard McGrath, chief executive of McGrath Insurance Group, in Sturbridge, Mass.
You can purchase federal flood insurance through a local insurance agent. Don’t wait until storm clouds gather to buy a policy; typically, there’s a 30-day waiting period before premiums take effect. For price quotes, go to FloodSmart.gov.

Sewage backup. If heavy rains overwhelm your storm-water system, sewage could back up into your house—an expensive and unpleasant mess. Most standard homeowners policies don’t include sewage-backup coverage, but you can purchase a rider that will pay for $10,000 to $20,000 of damages for about $50 to $75 a year, McGrath says.

Damage from trees. Old-growth trees lose their charm in a hurry when lightning, wind or heavy rain knocks them down. If the tree hits your house, garage or other insured structure, the damage is usually covered by your homeowners insurance, says Jeanne Salvatore, spokeswoman for the Insurance Information Institute.

Damage from a neighbor’s tree—or even from one a block away that was uprooted in a windstorm—is also usually covered. If your insurer believes your neighbor contributed to the problem by failing to take care of the tree, it may try to collect against your neighbor’s policy, Salvatore says. In that case, you could get a break on all or part of your deductible. But it works both ways: If your tree damages your neighbor’s property, you could be held responsible. Your insurer could refuse to cover damage to your property if it believes you were negligent.
Most policies won’t pay to remove a tree that falls in your yard but doesn’t hit anything—although you may be eligible for some coverage if the fallen tree blocks your driveway or prevents you from getting into your house.

Get a tax break? You may be able to recover some of the costs your insurance doesn’t reimburse when you file your taxes.

Losses from hurricanes, floods and other disasters that aren’t covered by your policy are deductible, if you itemize your deductions. You won’t be able to deduct the entire amount of your losses, however. First, you’ll have to reduce the amount of your loss by $100. Then, you can deduct only the amount that exceeds 10% of your adjusted gross income. For example, if you suffered $20,000 in unreimbursed losses and your AGI is $100,000, you would subtract $100, then subtract $10,000 (10% of your AGI) from the $19,900 balance, bringing your deduction to $9,900.

Reprinted with permission. All Contents ©2014 The Kiplinger Washington Editors. Kiplinger.com.