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Changes in Value of Household Real Estate – Q3 2019 – News

On Thursday, the Federal Reserve released its Flow of Funds data. This showed us how rising home prices have boosted home equity and the aggregate wealth of homeowners.  The total value of owner-occupied real estate registered a new high at $39.7 trillion.

Here’s what we learned:

The value of homes hits a new high

For over a decade, we’ve seen consistently rising home prices, which have accelerated to double-digits over the most recent two years. At the same time home building picked up pace in the past two years from its gradual decade-long climb, adding to the total value of household real estate. These factors combined to push the total value of owner-occupied real estate, the value of all homes owned by those living in them, to a new high of $39.7 trillion. This was a $1.6 trillion increase over last quarter and a $5.6 trillion gain over the past year and well over double the value of real estate 10 years ago when the current streak of home price gains began ($18.0 trillion).

Mortgage debt climbs, but at a slower pace

As home prices soared, the amount of debt buyers took on to finance them also grew, but at a slower pace than the value of real estate. Mortgage debt totaled $12.0 trillion in the first quarter of 2022, which was $220 billion higher than its fourth quarter total and $930 billion more than its year ago level. 

Home equity makes big gains

With mortgage debt climbing at a slower pace than the value of real estate, homeowners saw a big increase in equity to a new high mark. The total value of equity that homeowners had in real estate was nearly $27.8 trillion in the first quarter, $1.4 trillion more than the fourth quarter and $4.6 trillion more than the previous year. In fact, equity as a share of real estate value is at 69.9%, its highest level since 1986. It’s well above the lows seen in 2012 (46.0%) and also above the 60-65% share it saw through much of the late 1990s and early 2000s. It marks a striking contrast to earlier periods–a one-data-point summary of how different this housing market is from the early 2000s. Put another way, even if the value of homes were to universally decline by 10 percent from their level at the end of the first quarter, homeowner equity would still be at 66.5%, its highest level since 1990. 

Find the full Flow of Funds data here.

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