Home prices were up over 12 percent in the nation’s top 20 housing markets in July, according to a report this week from SP/Case-Shiller. While the price gains are moderating, the jumps make it increasingly difficult for first-time home buyers to get into the housing market.

(Read more: Forget easing prices, new homes are up, up, up)

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The negative home equity rate fell in the second quarter of this year, the fifth straight quarterly drop, but it is still alarmingly high and continues to hamper the housing recovery.

Currently, 23.8 percent of homeowners with a mortgage, or approximately 12.2 million, owe more than their homes are worth, down from 15.3 million one year ago, according to the report. Some, however, are still so far underwater that even with fast-rising prices, it will take years for them to see any home equity.

(Read more: Home sales suffer on higher rates: Realtors)

“Widespread rising home values during the past year have helped chip away at negative equity nationwide, helping many homeowners who were only modestly underwater to come up for air. For those homeowners who are deeply underwater, though, there is still a long row to hoe,” said Zillow Chief Economist Dr. Stan Humphries in a release.

(Read more: He’s not buying a house—why is Obama on Zillow?)

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“This implies a continuation of double-digit price increases from a year earlier, with a strong push from pent-up demand.”

(Read More: Rising Mortgage Rates Cause ‘Rush to ARMs’)

The average rate on the 30-year fixed conforming mortgage is up about 100 basis points from the beginning of May to around 4.5 percent. The rate spiked the most in the past week, before these May contracts were signed.

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Based on the change in mortgage rates from early May to today, the average buyer would have to pay 13 percent more in monthly payments, including taxes and insurance, according to Mark Hanson, a California-based analyst. They also have to earn 10 percent more in income to qualify for a loan based on a typical qualifying debt-to-income ratio of 45 percent.

“These are huge moves especially considering—when purchasing a house using a mortgage—most people buy based on ‘monthly payment and the maximum allowable debt-to-income ratio.’ This means first-timer share will fall even further. They are already at a multiyear low even with record-low rates,” said Hanson.

(Read More: As Prices Rise, Banks Repossess More Homes)

First-time homebuyer participation was at just 29 percent, according to the Realtors, a five-year low. Without these buyers, as investors pull back and prices rise, home sales will likely lose steam. June’s report on pending home sales, or signed contracts in May, will tell just how much rising rates are impacting sales. That report will be released Thursday, June 27.

—By CNBC’s Diana Olick. Follow her on Twitter @Diana_Olick or on Facebook at facebook.com/DianaOlickCNBC.

Questions? Comments? RealtyCheck@cnbc.com

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“It was a bit of a nightmare because I don’t live in Greenville…I have no desire to go back to Greenville because my life is in DC,” says Patel. “It was a lot of coordination and I am still trying to collect over $2,000 from my tenants.”

Patel finally ended up selling the home recently at a large loss. She didn’t want to do a short sale because the process is long and risky, and she didn’t want to damage her credit.

(Read More: Record High New Home Prices to Grow)

While there are no real estimates of how many “accidental landlords” now inhabit the housing market, Realtors say they are one more cause of today’s low inventory issue. Usually a buyer is also a seller, making the transaction a wash in terms of inventory, but if the buyer is not a seller, and instead becomes a landlord, inventory takes a negative hit.

Home prices have been rising steadily, up over ten percent from a year ago, according to the latest reading from CoreLogic. Prices are still well below where they were during the housing boom, when so many people bought into the market.

As millions come above water, others are far below. Forty-eight percent of borrowers in Atlanta are underwater, 37 percent in Miami, 54 percent in Las Vegas and 37 percent in Sacramento.

(Read More: Homes Selling at Fastest Pace Since Boom)

It will take many years of price gains for these homeowners to see the light of equity.

Article source: http://www.cnbc.com/id/100764601

(Read More: US Home Sales Rise to Highest Level in More Than 3 Years)

First time home buyers are already dropping out of the market, representing just twenty-nine percent of home buyers in April, according to the NAR—the lowest in two years. Rising mortgage rates, now at their highest in two months, are playing a part, but there are also fewer low-end homes to buy. The number of homes in the foreclosure process is now down nearly twenty-five percent from a year ago, according to a new report from Lender Processing Services.

Just eighteen percent of home sales in April were of distressed properties, the lowest since the Realtors began tracking this number in 2008. Compare that to thirty-five percent about a year and a half ago. Sales of homes priced below $100,000 were down ten percent in April compared to a year ago, while every other price range saw sales gains. Those who can get credit are now competing for what little there is to buy, and pushing prices well beyond expectations.

(Read More: Mortgage Applications Sink as Interest Rates Jump)

“I don’t see it lasting,” added Fairweather. “I think the minute they increase interest rates, you’ll see people pull back.”

—By CNBC’s Diana Olick; Follow her on Twitter @Diana_Olick or on Facebook at facebook.com/DianaOlickCNBC

Questions? Comments? RealtyCheck@cnbc.com

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(Read More: Despite Rising Demand, Some Builders Slow Production)

Listings were down 17 percent in March from a year earlier, according to the association, with several factors affecting inventories. Millions of Americans still owe more on their mortgages than their homes are worth, and that makes it impossible for them to move without incurring major expense.

Others are watching home prices rise and may be waiting to see just how high they go before listing their homes.

Meanwhile, home builders, while trying to ramp up production, are faced with a lack of land, labor and materials. Single-family starts were at a seasonally adjusted annual rate of just 619,000 units, an improvement from the worst of the crash but far below historical norms.

(Read More: Map: Tracking the US Real Estate Recovery)

Regionally, the pending home sales index was unchanged in the Northeast from February, up 0.3 percent in the Midwest, up 2.7 percent in the South and up 1.5 percent in the West.

Existing home sales in March, based on closings, fell just under one percent in March. While higher than a year ago, home sales appear to have leveled off, despite this being the normally busy spring season.

(Read More: Government Mortgage Fix Is Failing)

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Inventories are tightest on the low end of the market, where investors came in and bought most of the distressed properties and are now holding them as single-family rentals. There is about a four-month supply of homes priced under $100,000, while there is around a twelve-month supply of homes priced over $500,000. That’s why sales of those low-end homes are down 16 percent from a year ago, and sales of higher-end homes are up 25 percent, according to the Realtors.

(Read More: Housing’s Big Challenge: Student Debt)

“The housing shortage is going to continue,” claimed Yun, who says the builders need to ramp up housing starts by 50 percent. He admits that is unlikely to happen due to land, labor and supply constraints.

Weak supplies are pushing home prices up far faster than wage growth, which is keeping first-time buyers especially on the sidelines. These buyers made up just 30 percent of the market in March, compared to the historical norm of 40-45 percent. They just can’t compete with all cash investors.

(Read More: Why Housing Affordability Is at Risk)

But if prices get too high, investors could leave the market. Their share was already down in March to 19 percent compared to 22 percent just one month ago. The danger is that they will start to unload the homes they own, which would bring much-needed supply back but which could also turn home prices in the other direction.

Article source: http://www.cnbc.com/id/100660999

“Rapid price appreciation is not good news for home buyers,” said Lawrence Yun, chief economist for the NAR. “Wages are up just 2-3 percent, while prices are rising 4-5 times that.”

(Read More: Home Resales Hit 3-Year High but Miss Forecasts)

With the increase in supplies came a return of all-cash investors, who had been moving out of the market, causing sales of homes on the low end to plummet. Investors made up 22 percent of home buyers in February, according to the Realtors, up from 19 percent in January. All-cash sales hit 32 percent, up from 28 percent, and distressed home sales also increased to 25 percent of all sales, from 23 percent.

Low inventory has kept first-time home buyers, who largely seek lower-priced homes, out of the market. Newlyweds Brian and Ali Earle have been looking for a home in Northern Virginia for almost a year.

“There’s not a lot out there,” Brian said. “It’s actually amazing. We see houses go under contract in a day or two, and so we really have to be on top of the game and be willing to drop everything and run and go check out a house, or it’ll be gone.”

Article source: http://www.cnbc.com/id/100577800

Mortgage applications to purchase a home fell 5 percent last week from the previous week and is now at its lowest level since the end of last year, according to a Mortgage Bankers Association weekly survey. Applications historically start to pick up around now, as President’s Day weekend marks the unofficial start of the usually busy spring housing season.

(Read More: Homeowners Rise Above Water on Mortgages)

Regionally, the Realtors’ Pending Home Sales Index in the Northeast rose 8.2 percent in January and is 10.5 percent higher than January 2012. In the Midwest the index increased 4.5 percent and is 17.7 percent above a year ago. Pending home sales in the South rose 5.9 percent and are 11.3 percent higher January 2012. In the West the index edged up 0.1 percent in January but is 1.5 percent below a year ago. Supplies of homes for sale are most limited in the West, where investors have been buying distressed properties in bulk.

(Read More: Jumbo Mortgages Are Back: Should You Be Worried?)

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