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

Los Angeles (AP) — Soaring home prices have pushed homeowner average equity growth to its highest level in more than a decade, but recent signs of a chill in the U.S. home market are gradual in the second half of this year. Shows a sharp rise.

Mortgage homes acquired an average of $ 51,500 in stake 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 housing assets since the second quarter of 2010.

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

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

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

The surge in equity gains for homeowners is driven by the ultra-low interest rates on mortgages, low inventory of properties for sale, and the desire for more living space by many buyers in the fiercely hot housing market. Among them, during the pandemic following the record rise in US home prices this year.

S & P said this week that the carefully monitored S & P Core Logic Case-Shiller 20 City Home Price Index surged 19.9% ​​year-on-year, the largest rise in the record dating back to 2000.

Still, there are signs that soaring home prices, which fuel homeowner equity, may have peaked. Median home prices for previously occupied US homes rose 14.9% year-on-year to $ 356,700 in August, according to the latest National Real Estate Agents Association Home Market Snapshot. This is a modest increase from earlier this year, with a 20% to 25% year-on-year increase.

“From July to August, it seems that prices have begun to rebound a bit in terms of where prices have fallen,” said Ali Wolff, chief economist at Zonda Economics, a tracker in the real estate industry.

Wolff said home prices in the U.S. will grow by about 5% next year due to slightly higher mortgage rates and a modest but notable increase in the number of homes on the market. I expect it to slow down.

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

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

If these home price outlooks are maintained, the pace of equity growth for homeowners next year will be modest. Still, the significant increase in homeowner equity this year will have a spillover effect on the wider economy and housing market.

Increasing homeowner capital creates a buffer for borrowers against potential financial difficulties such as unemployment. Homeowners also have the financial flexibility to borrow on equity to repay high-interest debt and to fund large-scale purchases such as home renovation projects. You can boost your economy.

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

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

Home ownership in the United States was 65.4% in the second quarter, down from 66.6% last year to 66.2% ten years ago.

Increasing mortgages have helped limit the number of homeowners who get “underwater” on their mortgages or borrow more than the value of their home. Also known as negative equity. This can happen when the value of a home goes down, or when a mortgage grows in size, for example when someone borrows a mortgage.

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

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

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

Source link Soaring home prices will boost average equity growth for US homeowners. WGN Radio 720

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