Soaring home prices will boost average equity growth for US homeowners. WGN 720 radio


Los Angeles (AP) – Soaring home prices have pushed growth in average homeowners’ net worth to its highest level in more than a decade, but recent signs of a cooling in the US real estate market are gradual over the years. second half of this year. Shows a strong increase.

Credit houses acquired an average stake of $ 51,500 in the second quarter, up 29.3% from the April-June quarter of last year, according to real estate information firm CoreLogic. According to the company, this is the highest quarterly average profit on real estate assets since the second quarter of 2010.

According to CoreLogic, this represents nearly $ 3 trillion in mortgage interests acquired by US homeowners, which represents about 63% of all homes. Average owner capital in the first quarter increased about 20% year-on-year.

Growing home equity can have a wide range of economic implications, giving homeowners more financial flexibility to make large purchases and lay eggs. .. Rising home prices are also making it more and more difficult for potential homeowners to buy.

Homeowners in California, Washington and Idaho were one of the biggest average increases in second quarter equity. It’s $ 116,000 in California, $ 103,000 in Washington, and $ 97,000 in Idaho.

The increase in equity gains for homeowners is due to ultra-low interest rates on mortgages, low inventory of properties for sale, and many buyers’ desire for more living space in the housing market. extremely hot. Among them, during the pandemic following the record rise in house prices in the United States this year.

S&P said this week that the carefully watched S&P Core Logic Case-Shiller 20 City home price index jumped 19.9% ​​year-on-year, the largest increase on record since 2000.

Still, there are signs that the surge in home prices, which is fueling homeowners’ equity, may have peaked. Median prices for previously occupied homes in the United States rose 14.9% year-on-year to $ 356,700 in August, according to the latest domestic market snapshot from the National Real Estate Agents Association. This is a modest increase from the start of this year, with an increase of 20-25% year-over-year.

“From July to August, it looks like prices started to rebound a bit in terms of falling prices,” said Ali Wolff, chief economist at Zonda Economics, a real estate tracker.

Wolff said home prices in the United States would rise about 5% next year due to slightly higher mortgage rates and a modest but noticeable increase in the number of homes on the market. I expect it to slow down.

“The era of runaway house prices is behind us,” she said.

In the latest quarterly real estate forecast, mortgage buyer Freddie Mac predicts home prices will rise 5.3% next year, up from 12.1% in 2021.

If this outlook for home prices is sustained, the pace of homeowners’ equity growth next year will be modest. Nonetheless, the significant increase in homeowners’ equity this year will have a ripple effect on the economy in general and the housing market.

The increase in homeowners’ capital creates a buffer for borrowers against potential financial hardship such as unemployment. Homeowners also have the financial flexibility to borrow against equity to pay off high-interest debt and to finance large-scale purchases such as home improvement projects. You can boost your economy.

“It’s good for broader economic growth, but there is an ugly side to today’s price levels,” Wolff said. “People who choose not to buy a home, or who couldn’t, find it very difficult to enter the market right now, and often these people are missing out on their accumulation of wealth. “

Soaring home prices this year have made buying difficult for potential homeowners. According to the National Association of Real Estate Agents, 29% of home sales in August were first-time buyers. A year ago, they represented 33% of buyers.

Homeownership in the United States was 65.4% in the second quarter, down from 66.6% last year to 66.2% a decade ago.

The increase in mortgages has helped limit the number of homeowners who find themselves “underwater” on their mortgages or borrowing more than their home’s value. Also known as negative equity. This can happen when the value of a home goes down or when a mortgage goes up, such as when a person borrows a mortgage.

At the end of the second quarter, 1.2 million homes, or 2.3% of all U.S. homes with mortgages, had negative equity, according to CoreLogic. This is a decrease of 30% from the same quarter last year.

According to the company, Chicago had the largest share of negative equity homes in the US metro area’s April-June quarter.

Soaring home prices will boost average equity growth for US homeowners. WGN 720 radio

Soaring home prices will boost average equity growth for US homeowners. WGN 720 radio

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