Home-Equity-and-the-housing-market

 

Home Equity

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.Get-a-Retirement-Analysis
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.

 

Click here for a detailed explanation of the other market drivers which indicate a housing crash is unlikely: https://blog.theretirementgroup.com/blog/retiring-worried-housing-crash

 

Sources

This is Not the 2007 Housing Bubble” The Retirement Group, 25 April. 2021, https://theretirementgroup.com/
Ackerman, Andrew. “Consumer Agency Seeks to Restrict Foreclosures Through 2021 - WSJ.” WSJ, The Wall Street Journal, 5 Apr. 2021, https://www.wsj.com/articles/consumer-agency-seeks-to-restrict-foreclosures-through-2021-11617651357?mod=article_inline.(Ackerman)

New Home LSI: New Home Replacement Lots Are Getting Harder to Find | Zonda.” Zonda, https://www.facebook.com/meyersresearchllc/, 17 Feb. 2021, https://zondahome.com/new-home-lsi-new-home-replacement-lots-are-getting-harder-to-find/

“February 2021 Report.” Black Knight, Mortgage Monitor, Feb. 2021, https://www.blackknightinc.com/wp-content/uploads/2021/04/BKI_MM_Feb2021_Report.pdf.

Calculated Risk: NAR: Existing-Home Sales Increased to 6.69 Million in January.” Calculated Risk, 19 Feb. 2021, https://www.calculatedriskblog.com/2021/02/nar-existing-home-sales-increased-to.html.

Balint, Nadia. “Single-Family Rentals Increased Faster than Apartments in 22 of 30 Big Cities, Led by Phoenix - RENTCafé Rental Blog.” RENTCafé Rental Blog, 12 Apr. 2018, https://www.rentcafe.com/blog/rental-market/real-estate-news/single-family-homes-rent-increased-faster-than-apartments/.

Dezember, Ryan. “If You Sell a House These Days, the Buyer Might Be a Pension Fund - WSJ.” WSJ, The Wall Street Journal, 4 Apr. 2021, https://www.wsj.com/articles/if-you-sell-a-house-these-days-the-buyer-might-be-a-pension-fund-11617544801?mod=article_inline.

Mitchell, Olivia S., et al. Financial Decision Making and Retirement Security in an Aging World. Oxford University Press, 2017.

San Diego Real Estate Statistics | SDAR.” San Diego Association of REALTORS® | SDAR, https://www.sdar.com/fast-stats.html. Accessed 26 Apr. 2021.

Son, Hugh. “Jamie Dimon Says U.S. Consumers Are ‘coiled, Ready to Go’ with $2 Trillion More in Checking Accounts.” CNBC, CNBC, 14 Apr. 2021,https://www.cnbc.com/2021/04/14/jamie-dimon-says-us-consumers-are-coiled-ready-to-go-with-2-trillion-more-in-checking-accounts.html.

March Data: Rents Grow Faster for the First Time in Eight Months.” Realtor.Com Economic Research, 13 Apr. 2021, https://www.realtor.com/research/march-2021-rent/

ATTOM Data Solutions Releases Best Counties for Buying Single Family Rentals in 2020 | ATTOM.” ATTOM, https://www.facebook.com/attomdata, 12 Mar. 2020, https://www.attomdata.com/news/market-trends/single-family-rental/attom-data-solutions-q1-2020-single-family-rental-market-report/.

Friedman, Nicole, and Ben Eisen. “Buying a Home in the Pandemic? Family Members Team Up on Bids - WSJ.” WSJ, The Wall Street Journal, 20 Mar. 2021, https://www.wsj.com/articles/buying-a-home-in-the-pandemic-family-members-team-up-on-bids-11616232600.

McLaughlin, Katy. “Covid-19 Is Giving the Multigenerational Home Business a Big Boost - WSJ.” WSJ, The Wall Street Journal, 12 Nov. 2020, https://www.wsj.com/articles/multigenerational-living-covid-11605196694?mod=article_inline.

Coldwell Banker Global Luxury Report : 2021 Global Luxury Marketing Insights by The Report Group - Issuu.” Accessed 26 Apr. 2021.

 

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John Jastremski

Written by John Jastremski