The equity in the average home is historically high. According to the Federal Reserve U.S. home equity totaled more than $22 trillion at the end of 2020, almost double the amount of outstanding mortgage debt at $12 trillion. If we compare this to the 2007 Bubble, home equity was just $13 trillion and debt was $12 trillion.
The increase in home prices boosted the amount of home equity for the average homeowner with a mortgage to more than $200,000. This equity growth also has enabled many families to finance home remodeling, such as adding an office or study, further adding value to their home. This contributed to a record level of home improvement spending in the last 12 months and a significant increase in annual home price growth.
We can see in the U.S. foreclosure market report that home equity increases have also reduced the amount of single-family foreclosures & overall foreclosures. The estimated 4.25% distressed rate and the moratorium on foreclosures are contributors in keeping supply low by keeping inventory off the market. The 600,000 homes that are off the market may continue to see appreciation and increased equity. When these foreclosures eventually hit the low supply market in late summer, equity could be higher and many of these distressed homeowners may have enough equity to renegotiate a new loan. Any remaining foreclosures hitting the market could be absorbed by eager home buyers, or investors and institutions looking for homes to buy as rentals.
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