The real estate value of homes continues
Towards the end of 2022, Funds Flow Data The Federal Reserve data showed that even though house prices were declining from their seasonal highs, home values and home equity in the third quarter hit a new high. The total value of owner-occupied real estate registered $41.9 trillion.
This is what we learned:
Home values hit another new high
For more than a decade, house prices They have climbed consistently. while the the most recent pace of house price growth is slower, house prices continue registering higher levels than in the previous year. Additionally, though housing construction has declined dramatically from his early 2022 highs, also continues to add to the total value of home real estate. These factors combined to drive the total value of owner-occupied real estate, the value of all homes owned by those who live in them, to a new high of $41.9 trillion. This was a very modest increase of $0.7 trillion over the last quarter: half the $1.5 trillion gain from the prior quarter, but still nearly double the $0.4 trillion quarterly increase that was typical. from 2017 to 2019. Over the past year, home values have advanced by $5.1 trillion, less than previous quarters but still well above the $1.7 trillion that was typical from 2017 to 2019. The real estate value of homes is more than double the real estate value 10 years ago when the current streak of home price gains began ($18.0 billion).
Mortgage debt also continues to rise
As home prices soared, the amount of debt buyers took on to finance them also grew. Mortgage debt totaled $12.4 trillion in the third quarter of 2022, which was $210 billion more than the second quarter total and $850 billion more than the prior-year level. Of note, the third quarter saw the third largest quarterly growth in household mortgage liabilities since 2006, but annual growth was slightly lower than the previous quarter.
Home value hits a new high
With mortgage debt rising at a slower rate than real estate value, homeowners continued to see equity rise to a new high. The total value of homeowners’ equity in real estate was just under $29.6 billion in the third quarter, $0.5 billion more than the second quarter and $4.2 billion more than a year earlier. In fact, equity as a percentage of real estate value held steady at 70.5%, matching its highest percentage since 1984. It is well above the lows seen in 2012 (46.0%) and also above 60 -65% which it saw through much of the late 1990s and early 2000s. It continues to mark a stark contrast to earlier periods. Although there are good reasons to be concerned about the lack of affordability in the real estate market, this is a one data point summary of how different this real estate market is from the early 2000s.
But how would homeowners fare if home prices fell?
while our housing outlook in 2023 expects further growth in home prices for the calendar year, other forecasters have much less optimistic projections, with some calling for declines of as much as 20% from peak to trough. While falling home prices would be welcomed by prospective first-time homebuyers who may currently feel left out of the real estate market, they can create problems for current homeowners and potentially destabilize the financial system as we saw in 2008. If home will experience a drop in price, homeowners are much better positioned to weather such a change. We examined what would happen to accumulated equity in the event of price declines in line with other forecasts and found that even if home values universally declined by 10 percent from their level at the end of the third quarter, owner would still be at 67.2%, on par with fall 2020, which was then the highest level since 1989.
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The real estate value of homes continues to increase in the third quarter
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Towards the end of 2022, Funds Flow Data The Federal Reserve data showed that even though house prices were declining from their seasonal highs, home values and home equity in the third quarter hit a new high. The total value of owner-occupied real estate registered $41.9 trillion.
This is what we learned:
Home values hit another new high
For more than a decade, house prices They have climbed consistently. while the the most recent pace of house price growth is slower, house prices continue registering higher levels than in the previous year. Additionally, though housing construction has declined dramatically from his early 2022 highs, also continues to add to the total value of home real estate. These factors combined to drive the total value of owner-occupied real estate, the value of all homes owned by those who live in them, to a new high of $41.9 trillion. This was a very modest increase of $0.7 trillion over the last quarter: half the $1.5 trillion gain from the prior quarter, but still nearly double the $0.4 trillion quarterly increase that was typical. from 2017 to 2019. Over the past year, home values have advanced by $5.1 trillion, less than previous quarters but still well above the $1.7 trillion that was typical from 2017 to 2019. The real estate value of homes is more than double the real estate value 10 years ago when the current streak of home price gains began ($18.0 billion).
Mortgage debt also continues to rise
As home prices soared, the amount of debt buyers took on to finance them also grew. Mortgage debt totaled $12.4 trillion in the third quarter of 2022, which was $210 billion more than the second quarter total and $850 billion more than the prior-year level. Of note, the third quarter saw the third largest quarterly growth in household mortgage liabilities since 2006, but annual growth was slightly lower than the previous quarter.
Home value hits a new high
With mortgage debt rising at a slower rate than real estate value, homeowners continued to see equity rise to a new high. The total value of homeowners’ equity in real estate was just under $29.6 billion in the third quarter, $0.5 billion more than the second quarter and $4.2 billion more than a year earlier. In fact, equity as a percentage of real estate value held steady at 70.5%, matching its highest percentage since 1984. It is well above the lows seen in 2012 (46.0%) and also above 60 -65% which it saw through much of the late 1990s and early 2000s. It continues to mark a stark contrast to earlier periods. Although there are good reasons to be concerned about the lack of affordability in the real estate market, this is a one data point summary of how different this real estate market is from the early 2000s.
But how would homeowners fare if home prices fell?
while our housing outlook in 2023 expects further growth in home prices for the calendar year, other forecasters have much less optimistic projections, with some calling for declines of as much as 20% from peak to trough. While falling home prices would be welcomed by prospective first-time homebuyers who may currently feel left out of the real estate market, they can create problems for current homeowners and potentially destabilize the financial system as we saw in 2008. If home will experience a drop in price, homeowners are much better positioned to weather such a change. We examined what would happen to accumulated equity in the event of price declines in line with other forecasts and found that even if home values universally declined by 10 percent from their level at the end of the third quarter, owner would still be at 67.2%, on par with fall 2020, which was then the highest level since 1989
Financial losses and net worth see smaller declines as debt continues to rise
Although housing was a net contributor, the decline in the value of financial assets and the increase in debt affected the overall net worth of households and nonprofit organizations. Fueled largely by declines in mutual funds and equity holdings, the value of financial assets held by households and nonprofit organizations fell just over $1.0 trillion in the third quarter and it was $6.9 billion lower than the previous year. Debt and other liabilities increased slightly less than in the second quarter, adding $320 billion, but are $1.3 trillion more than a year earlier. After mortgage debt, the biggest contributor to the increase in household debt was consumer credit, which rose more than $100 billion in the quarter and nearly $350 billion from a year earlier. As a result, total net worth for households and nonprofits fell just $0.4 trillion in the quarter, a vast improvement from the second quarter’s $6.3 trillion decline. However, the impact of the second quarter lingers, with net worth in the third quarter posting a decrease of more than $2.0 trillion from the prior year.
