Homeowners get $2 trillion richer in red-hot housing market

Homeowners are getting richer and richer as prices keep soaring – and the numbers are staggering.

Those with mortgages — about 62% of all properties — saw their equity jump by 20% in the first quarter from a year earlier, according to CoreLogic. This represents a collective cash gain of close to $2 trillion. Per borrower, the average gain was $33,400.

The massive gain is thanks to soaring home prices, which CoreLogic said were up over 11% in March, the end of the quarter, from a year earlier. That’s the sharpest gain since 2006. Prices rose an even stronger 13% in April.

High demand for homes spurred by the coronavirus pandemic amid an already low supply caused bidding wars in markets across the nation. Record-low mortgage rates for much of last year only added to the buying frenzy and helped fuel the price gains.

“Homeowner equity has more than doubled over the past decade and become a crucial buffer for many weathering the challenges of the pandemic,” said Frank Martell, president and CEO of CoreLogic. “These gains have become an important financial tool and boosted consumer confidence in the U.S. housing market, especially for older homeowners and baby boomers who’ve experienced years of price appreciation.”

As of June 1, there were still just over 2 million homeowners in Covid-related mortgage bailout programs, according to the Black Knight real estate data company. As these plans begin to expire, having home equity will help those in trouble. They can still sell and get out with a potential profit if they have to.

“This reduces the likelihood for a large numbers of distressed sales of homeowners to emerge from forbearance later in the year,” CoreLogic chief economist Frank Nothaft said, adding that the average homeowner now has about $216,000 in equity.

The share of borrowers in a negative equity position, owing more on their mortgages than their homes are worth, consequently dropped. From the fourth quarter of 2020 to the first quarter of 2021, the total number of mortgaged homes in negative equity decreased by 7% to 1.4 million homes, or 2.6% of all mortgaged properties. Annually, the number of underwater homes dropped by 24%.

Home values are expected to cool off in coming months because buyers are already hitting an affordability wall. Sales have begun to slow, and price drops usually follow.

Home prices are not, however, expected to crash, since there is still strong demand for housing, and the demographics support that going forward. As prices moderate, buyers will come back. Unlike the last time home prices crashed, today’s mortgage underwriting is far more stringent.

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[skyak]

Who cares that their home equity is up $30k. It just means my RE taxes and insurance will go up so all the savings from refi to lower rates will soon be absorbed. It could be worse. At least I don't have to deal with rising rent....

[eequalsmc]

They didn’t get richer because now money gets you less so it’s a trade off is the illusion of getting richer

[sammypenny]

Time to short the housing market.
-Dr. Michael Blurry

[paulsommerhalder]

Send Thank You cards to Private Equity and China. Between the two of them, there's a vacuum of supply.

[theexperiment]

Many sellers got fever, sold and now are paying hundreds in storage fees while renting.

[alksjda]

my home went from 600k to 750k since last sept, so happy i got in.

[sammypenny]

Time to short the housing market.
-Dr. Michael Blurry

[charlesmoore]

“America gets 2 trillion in debt “. Here you go, if you need me to fix anymore titles let me know.

[marekkolenda]

Dow Jones stays 34, 000 to 34, 500 points for many months

[aware]

I got in late 2018 in Orange County, CA. My home value 🚀 🤯

[bobe]

media using terms like RICHER POORER BLACK WHITE SYSTEMIC to divide and divide and divide it is disgusting. I still have a crush on Diana doe