- According to a Gallup poll, real estate has been rated the best long-term investment for eight years in a row.
- Real estate tops the list because you’re not just buying a place to call home – you’re investing in your future. Real estate is typically considered a stable and secure asset that can grow in value over time.
- Let’s connect today if you’re ready to make real estate your best investment this year.
A year before his death, he launched the Poor People’s Campaign to fight job and housing inequality, among other issues. Historians say the Poor People’s Campaign and the Chicago Open Housing Movement laid the groundwork for the 1968 Fair Housing Act
Trikosko, Marion S.,/Library of CongressBY MARIAN MCPHERSONJanuary 15, 2018
This post was last updated Jan. 14, 2022. – Inman News
Although Martin Luther King, Jr. is most remembered for his struggle to secure voting rights and stop segregation, the civil rights icon’s dream of racial equity reached far beyond integrated public life — it also included economic security and housing rights for the millions of minority and low-income Americans who’d been relegated to their cities’ under-resourced neighborhoods and housing projects.
King began planting the seeds of what would become the Poor People’s Campaign in Chicago, where thousands of Black Chicagoans struggled with job and housing insecurity — something they’d hoped they escaped during the Great Migration, the term used to describe a decades-long exodus from the fields of the South to the factories of the North.
Although some Black people found great success in Chicago, Detroit, New York City and other similar places, many more found the only thing that changed in their life was their address.
“We are here today because we are tired,” Dr. King said, according to a transcript of a speech he made at Chicago’s Soldier Field. “We are tired of paying more for less. We are tired of living in rat-infested slums … We are tired of having to pay a median rent of $97 a month in Lawndale for four rooms while whites living in South Deering pay $73 a month for five rooms.”
“Now is the time to make real the promises of democracy,” he added. “Now is the time to open the doors of opportunity to all of God’s children.”
According to articles by HuffPost and NPR, Dr. King spent much of 1966 in Chicago, even moving his family to an apartment on the city’s predominately Black west side. There, King and Southern Christian Leadership Conference (SCLC) launched the Chicago Open Housing Movement, whose goals included the rehab of public housing, increasing the supply of affordable housing, pushing for diversity and integration in businesses and unions, a $2 minimum wage and the abolition of wage garnishment.
Over the course of the year, King and SCLC activists held citywide rallies, planned demonstrations in front of real estate brokerages and marched into Chicago’s all-white neighborhoods, which were met with violent reactions from the city’s white residents. “Well, this is a terrible thing,” King said in a soundbite acquired by NPR. “I’ve been in many demonstrations all across the South, but I can say that I have never seen, even in Mississippi and Alabama, mobs as hostile and as hate-filled as I’m seeing in Chicago.”
Eager to quell the violence, Chicago’s mayor, Richard J. Daley, agreed to meet with King and other activists in August 1966 to work out an agreement, which included building future public housing with “limited height requirements,” and requiring the Mortgage Bankers Association to make mortgages available regardless of race.
King hailed the agreement ‘‘the most signiﬁcant program ever conceived to make open housing a reality,’’ but tempered his assessment by recognizing it as only “the ﬁrst step in a 1,000-mile journey.’’
The next year, King went back to the South and began planning the Poor People’s Campaign, which was built from his experiences in Chicago the year before. He and the SCLC began creating a blueprint for economic and housing equity that addressed the systems and policies that kept minority and low-income communities behind the eight ball.
“This is a highly significant event,” King told the SCLC in November 1967, according to an archive at Stanford’s King Institute. “[This] the beginning of a new co-operation, understanding, and a determination by poor people of all colors and backgrounds to assert and win their right to a decent life and respect for their culture and dignity.”
He garnered support from civil rights leaders in American Indian, Puerto Rican, Mexican American, and poor white communities and began planning another March on Washington to demand jobs, unemployment insurance, a fair minimum wage, and education for adults and children. “It’s as pure as a man needing an income to support his family,” King said.
King was assassinated before he could finish planning the demonstration; however, other SCLC leaders and his wife, Coretta Scott King, banned together and finished planning the march, which took place on Mothers’ Day 1968. After the initial demonstration, protestors pitched tents on the Mall in Washington and lobbied for fair employment and housing policies until their park permit expired a month later.
Even though the campaign was largely unsuccessful in making widespread change — they did secure free food surplus distribution to 200 counties — historians say the Poor People’s Campaign and the Chicago Open Housing Movement laid the groundwork for the 1968 Fair Housing Act, which ensures that all Americans have access to equal housing opportunities and outlaws discrimination based on an individual’s race, color, religion, sex, national origin, disability or familial status.
Although the Fair Housing Act has improved the living conditions of Americans, many readily point out there is still much work as evidenced by disproportionately low homeownership rates for Blacks, rampant gentrification in communities of color, a lack of affordable housing for low-income individuals and families, and concerns about new technologies, such as Facebook, being used to discreetly discriminate.
“And we have to continue in the legacy of MLK and the civil rights movement and the legacy of abolition movements of before,” said Paige May, a Chicago resident who spoke to NPR after an event to celebrate MLK.
“We have a lot of work to do, but it’s also — it feels like a day that’s celebratory in a lot of ways, right? But in the sphere of struggle and resistance.”
Many homeowners who plan to sell in 2022 may think the wise thing to do is to wait for the spring buying market since historically about 40 percent of home sales occur between April and July. However, this year’s expected to be much different than the norm. Here are five reasons to list your house now rather than waiting until the spring.
1. Buyers Are Looking Right Now, and They’re Ready To Purchase
The ShowingTime Showing Index reports data from more than six million property showings scheduled across the country each month. In other words, it’s a gauge of how many buyers are out looking at homes at the current time.
The latest index, which covers November showings, reveals that buyers are still very active in the market. Comparing this November’s numbers to previous years, this graph shows that the index is higher than last year and much higher than the three years prior to the pandemic. Clearly, there’s an influx of buyers searching for your home.
Also, at this time of year, only those purchasers who are serious about buying a home will be in the market. You and your loved ones won’t be inconvenienced by casual searchers. Freddie Mac addresses this in a recent blog:
“The buyers who are willing to house hunt in a winter market, when there are fewer options, are typically more serious. Plus, year-end bonuses and overtime payouts give people more purchasing power.”
And that theory is proving to be true right now based on the number of buyers who have put a home under contract to purchase. The National Association of Realtors (NAR) publishes a monthly Pending Home Sales Index which measures housing contract activity. It’s based on signed real estate contracts for existing single-family homes, condos, and co-ops. The latest index shows:
“…housing demand continues to be high. . . . Homes placed on the market for sale go from ‘listed status’ to ‘under contract’ in approximately 18 days.”
Comparing the index to previous Novembers, while it’s slightly below November 2020 (when sales were pushed to later in the year because of the pandemic), it’s well above the previous three years.
The takeaway for you: There are purchasers in the market, and they’re ready and willing to buy.
2. Other Sellers Plan To List Earlier This Year
The law of supply and demand tells us that if you want the best price possible and to negotiate your ideal contract terms, put your house on the market when there’s strong demand and less competition.
A recent study by realtor.com reveals that, unlike in previous years, sellers plan to list their homes this winter instead of waiting until spring or summer. The study shows that 65% of sellers who plan to sell in 2022 have either already listed their home (19%) or are planning to put it on the market this winter.
Again, if you’re looking for the best price and the ability to best negotiate the other terms of the sale of your house, listing before this competition hits the market makes sense.
3. Newly Constructed Homes Will Be Your Competition in the Spring
In 2020, there were over 979,000 new single-family housing units authorized by building permits. Many of those homes have yet to be built because of labor shortages and supply chain bottlenecks brought on by the pandemic. They will, however, be completed in 2022. That will create additional competition when you sell your house. Beating these newly constructed homes to the market is something you should consider to ensure your house gets as much attention from interested buyers as possible.
4. There Will Never Be a Better Time To Move-Up
If you’re moving into a larger, more expensive home, consider doing it now. Prices are projected to appreciate by approximately 5% over the next 12 months. That means it will cost you more (both in down payment and mortgage payment) if you wait. You can also lock in your 30-year housing expense with a mortgage rate in the low 3’s right now. If you’re thinking of selling in 2022, you may want to do it now instead of waiting, as mortgage rates are forecast to rise throughout the year.
5. It May Be Time for You To Make a Change
Consider why you’re thinking of selling in the first place and determine whether it’s worth waiting. Is waiting more important than being closer to your loved ones now? Is waiting more important than your health? Is waiting more important than having the space you truly need?
Only you know the answers to those questions. Take time to think about your goals and priorities as we move into 2022 and consider what’s most important to act on now.
If you’ve been debating whether or not to sell your house and are curious about market conditions in your area, let’s connect so you have expert advice on the best time to put your house on the market.
By Clare Trapasso
Dec 1, 2021
3 of a 3 part series
- Realtor.com anticipates mortgage rates will rise to an average 3.3%, hitting around 3.6% by the end of 2022.
- Rental prices have been soaring, and tenants aren’t expected to get any relief. Prices have surged and are expected to continue rising by 7.1% in 2022.
- The culprit behind the price hikes: There simply aren’t enough homes to go around—for rent or sale.
Mortgage rates have been the wild card to the housing market during the pandemic. Low rates at the start of COVID-19 helped fuel dizzying price jumps as buyers could afford to spend more on homes. That’s because they were paying less interest each month so they could absorb the higher home prices.
However, as the economy has improved and inflation has risen, making everything from a dozen eggs to a gallon of gas more expensive, rates are also expected to go up. That could help curb the runaway price growth that was seen in the spring. Buyers can stretch their budgets only so far.
Realtor.com anticipates mortgage rates will rise to an average 3.3%, hitting around 3.6% by the end of 2022. That’s up from a low of 2.65% in the first week of January for 30-year fixed-rate loans, according to Freddie Mac data.
While that doesn’t sound like much of a hike, it adds up.
The difference of roughly a percentage point to 3.6% would result in about $157 extra tacked on to the monthly payment of a median-priced home of $380,000. That can total more than $56,500 over the life of a 30-year loan. (This assumes the buyers put down 20% and does not include property taxes, insurance costs, or homeowners association fees.)
It’s also likely to result in homebuying becoming even more expensive. With home prices continuing to tick up a little and rates increasing, those purchasing a home with a mortgage will wind up shelling out more each month.
Rents will keep shooting up higher than home prices
It isn’t just homebuying that’s gotten more expensive. Rental prices have been soaring, and tenants aren’t expected to get any relief. Prices have surged and are expected to continue rising by 7.1% in 2022.
At the beginning of the pandemic, as home sale prices spiraled, rents in many of the big cities dropped precipitously. Many tenants moved to larger, nicer apartments with more amenities at deeply discounted rents. Then this year, they were hit with steep increases even in smaller, more traditionally affordable cities and suburbs.
The culprit behind the price hikes: There simply aren’t enough homes to go around—for rent or sale. Many aspiring homebuyers who keep losing bidding wars or can’t afford high homes prices are stuck renting. Plus, there are plenty of folks who moved in with family and roommates or split up with their partners during the pandemic who are looking for their own rentals.
“With apartment vacancies still near historic lows and landlords making up for lost rent increases during the pandemic, rents are expected to continue to grow,” says Hale.
By Clare Trapasso
Dec 1, 2021
2 of a 3 part series
- “The shortage of homes for sale, that has been more than a decade in the making, will keep home prices high,”
- Millennials are a massive generation—next year, there will be more than 45 million millennials between the ages of 26 and 35, which are prime homebuying years.
Unfortunately, for frustrated buyers who have had trouble finding the right homes in the right locations at the right price, there isn’t expected to be a rush of homes hitting the market.
Realtor.com economists predict the number of homes for sale, which is hovering around record lows, will tick up only 0.3%. That’s partly due to builders having a tough time ramping up construction as they contend with shortages in workers and materials, compounded by the global supply chain backups. (Single-family housing starts, which is when builders start construction, is expected to rise only 5% next year.)
There are plenty of investors snapping up single-family homes and turning them into rentals. And there is no tidal wave of foreclosures expected to hit now that the government moratoriums are expiring.
There are also more homebuyers today than there are abodes for sale.
Millennials are a massive generation—next year, there will be more than 45 million millennials between the ages of 26 and 35, which are prime homebuying years. So there would need to be substantially more homes built to keep up with the needed housing—except builders stopped building during the Great Recession and there are fewer homes going up today.
“The shortage of homes for sale, that has been more than a decade in the making, will keep home prices high,” says Hale.
Sales will also continue to climb, hitting a 16-year high as they go up by 6.6%, Realtor.com economists anticipate. That’s partly because technology has sped up the homebuying process. Plus, buyers are jumping on whatever comes up for sale in record time before the property is snapped up by another eager buyer.
Attractively priced homes in good shape are expected to continue going under contract quickly.
“Homes are selling so much faster than they have in any previous [years],” says Hale.
That speed supports increased housing turnover as more abodes change hands as folks move into their first homes or relocate, trade up into larger residences, and downsize.
The popularity of the suburbs is also likely to endure. They emerged as the places to be during the pandemic as buyers could score more square footage and bigger yards for less money than in the bigger cities.
“For years, we heard about the dying suburbs because millennials didn’t want to live there, but as they age, guess where they’re heading?” asks Hale.
Some were even moving to the burbs before the pandemic.
“This budding trend was accelerated by the needs of aging millennials, often with families, trying to grapple head-on with the realities of doing more than ever before from home,” says Hale.
Remote work will also likely be a factor. With more workers telecommuting or going into the office only a few times a week, they don’t have to contend with grueling commutes five days a week. Many are more comfortable moving farther outside of the cities where they can get larger abodes with room for a home office at an attractive price.
That’s likely to keep prices high in desirable communities.
“Shoppers were looking for affordable homes with space that could be used flexibly to accommodate working, schooling, exercising, cooking, and all of the other living and relaxing we used to take for granted,” says Hale.
It won’t be easy for first-time homebuyers
First-time buyers are likely to continue struggling to compete with the offers over the asking price and win the bidding wars.
The ace in their pocket is the work-from-home phenomenon that has allowed many white-collar professionals to work from anywhere they have a strong Wi-Fi connection. So they may be able to relocate to cheaper destinations that make up for what they lack in Michelin star restaurants with more affordable home prices.
“Maybe they’re not buying a home in or near a major city where prices are high and the market is still competitive,” says Hale. “But they can move farther away from the city to the suburbs or to an entirely new city where it’s more affordable.”
The savings many who held on to their jobs were able to amass early on in the pandemic—when the stimulus checks went out and many folks cut back on dining out and traveling—may help them with the down payments. Some buyers temporarily moved back home with families or doubled up with friends to save on housing costs as well.
“I know a lot of people are expecting housing prices and sales to peak and then decline. Instead, I think there’s enough momentum from these younger buyers who want to get into the housing market to keep sales moving forward,” says Hale. “They are going to succeed because that drive to buy a home and make it happen when you’re ready is really strong.”
By Clare Trapasso
Dec 1, 2021
1 of a 3 part series
- Prices will stay high, inventory will remain tight, and mortgage rates will rise
- Prices aren’t anticipated to come down from the highs
- “The pace of price growth is going to slow notably, bringing it more in line with buyers’ incomes”
Here’s what we already know: Since the COVID-19 pandemic began, the real estate market has been on a wild ride of unprecedented highs and lows—record-high home prices on one side, record-low mortgage rates and available homes for sale on the other. It’s been a time of overwhelming stress for many, gigantic profits for some, and great disorientation for most of us.
Now the housing experts say the market is “normalizing.” But what does that mean? Will home prices and rents finally come down? Will more homes go up for sale? And what does the year ahead have in store for the real estate market?
The Realtor.com® 2022 housing forecast anticipates the market will continue slowing down from the frenzy seen in the spring when prices shot up to new heights. However, prices will stay high, inventory will remain tight, and mortgage rates will rise.
The bottom line: Even as the market calms down further, it’s still expected to be challenging for buyers, especially those purchasing their first homes.
“The 2022 housing market will continue to be a seller’s market with fast-moving homes and rising prices,” says Realtor.com Chief Economist Danielle Hale. “But the competition should be a bit less intense than we’ve seen recently.”
Home prices will stay high, but price growth will continue slowing
Home prices aren’t expected to keep zooming up into the stratosphere in 2022 the way they did this year. So buyers can breathe at least a shallow sigh of relief. Instead, Realtor.com economists anticipate they’ll increase at a much slower rate of just 2.9% over this year compared with an anticipated 12% rise in 2021.
This means the double-digit price growth that confounded buyers earlier this year is expected to taper off.
However, prices aren’t anticipated to come down from the highs they reached this year due to the continuing shortage of properties for sale and hordes of buyers continuing to enter the market. They just won’t go up so much as quickly.
“Price growth is expected to move back toward a normal range, but this is on top of recent high prices,” says Hale. “So prices will [still] hit new highs.”
While that’s not great news for buyers, homes aren’t expected to cost much more than they did just a few months ago.
“The pace of price growth is going to slow notably, bringing it more in line with buyers’ incomes,” says Hale. “With prices high and mortgage rates beginning to tick up, people won’t be able to be as aggressive in what they’re willing to pay.”
This marks the 40th anniversary of NAR’s signature Profile of Home Buyers and Sellers – real estate’s definitive guide on home buyer and seller trend.
November 11, 2021
- Homes typically sold at a record pace of one week and received full asking price from July 2020 through June 2021.
- Tenure in the home dropped from 10 years to eight years, the largest year-over-year decline in the history of the data set.
- Eighty-seven percent of buyers used an agent or broker, and 90% of sellers hired an agent to sell their home.
WASHINGTON (November 11, 2021) – Among repeat home buyers and home sellers over the last year, a key factor for moving was the desire to live closer to family and friends, while an equally important motivator was the need for more space or a bigger home. Sellers as a whole were able to benefit in these transactions, typically earning their full asking price, and selling in one week.
These driving forces to move as well as further sales figures appear in the National Association of Realtors®’ 2021 Profile of Home Buyers and Sellers,1 a yearly report – now in its 40th year – that analyses demographics, preferences and experiences of buyers and sellers across America.
“During the pandemic, buyers and sellers have been driven by the desire to be close to family and friends, as well as the need for a larger home,” said Jessica Lautz, vice president of demographics and behavioral insights at NAR.
Among sellers, as a group they traded up in price, size and newer residences, as 46% purchased a larger home and 28% purchased the same size home.
Relocating to be closer to family had been increasing in recent years, according to Lautz, however, the COVID-19 outbreak accelerated that trend.
In past years, convenience to work and affordability had ranked as top factors for reasons to move.
The 2021 NAR report comprises an entire year of research in which buyers and sellers purchased or sold a home during the COVID-19 pandemic. In addition to various other findings, the pandemic likely spurred occupants to shorten their home stay, as tenure in the home decreased to eight years from 10 years, according to the report. This is the largest single-year change in home tenure since NAR began collecting such data.
In general, buyers said they expected to live in their homes for a median of 12 years, while 18% said that they were never moving. Historically, tenure in the home has been six to seven years, but experienced an increase to nine to 10 years following the Great Recession.
“Home sellers have historically moved when something in their lives changed – a new baby, a marriage, a divorce or a new job,” said Lautz. “The pandemic has impacted everyone, and for many this became an impetus to sell and make a housing trade.”
The market over the last year saw homes reach record-high prices, paving the way for sellers to secure maximum profits on transactions and leaving buyers to grapple with historically high housing costs. As a result, home buyers typically bought their homes for 100% of the seller’s asking price, with another 35% purchasing their home for beyond the asking price, according to the report. This 100% median is the highest recorded since 2002. Home sellers reported selling their homes for a median of $85,000 more than their purchase prices, which is a jump from $66,000 last year.
“Buyers moving quickly during the pandemic, coupled with all-time-low inventory, led to a decline in time on market to the shortest ever recorded, which was just one week,” said Lautz. “Only a quarter of home sellers offered incentives to entice potential buyers, down from nearly half of all sellers the year prior.”
On average, buyers said finding a home to purchase took eight weeks, unchanged from last year. Forty-three percent of buyers found virtual tour options to see properties and view listings online to be useful. For a second straight year, buyers reported that just finding the right home to buy continued to be “the most difficult task” for them in the home buying process.
The report found that 41% of recent buyers said they initially looked online for properties as their first step in the process, and another 19% said their first step involved contacting an agent. The majority of buyers and sellers alike eventually turned to a real estate agent or broker to assist in their home transaction. Eighty-seven percent of buyers purchased their residence through an agent or broker, with 7% buying directly from a builder or builder’s agent. Among home sellers, 90% worked with an agent to sell their home, while 7% were for-sale-by-owner sellers, and less than 1% sold via an iBuyer.
Forty-seven percent of buyers said the agent they used was referred by a friend, neighbor, or relative, and 13% used an agent that they had already worked with on a past transaction. Seventy-three percent of buyers reported that they needed to interview only one real estate agent during their home search, and a whopping 90% said they would use their agent in the future or recommend the agent to others.
For home sellers, 68% said they became acquainted with their agent via a referral or had used the agent before to buy or sell a home. Eighty-two percent of sellers said they contacted only one agent before finding what they considered to be “the right agent” to sell their property.
Fifty-three percent of sellers used the same agent to both purchase and sell their home, while 89% reported that they would recommend their agent for future residential dealings.
“Realtors® stepped up in a tremendous way during this pandemic – both in helping sellers list and sell properties, as well as in aiding buyers in finding their dream home during a time of such scarce inventory,” said NAR President Charlie Oppler, a Realtor® from Franklin Lakes, N.J., and the CEO of Prominent Properties Sotheby’s International Realty. “We saw so many buyers recommend and refer their Realtors® to family and friends, and witnessed sellers lean on Realtors® and firms that have helped them in the past.”
Typically, sellers recommended their agent twice since selling their property. Sellers to the tune of 27% referred their agent four or more times since selling their home.
Realtors® also assisted a number of first-time buyers over the last year, as the report notes the share of first-time home buyers increased from 31% to 34%, which is the largest jump since 2017. This year, the typical first-time buyer was 33 years old – equal to the previous year. Conversely, the typical repeat buyer age continued to climb, reaching an all-time high of 56 years old.
“As home prices increase, generally first-time buyers are hit hardest because they have no previous home on which to draw equity,” explained Lautz. “Furthermore, in the current environment, these buyers also face soaring rent prices and high student debt balances, which makes it extremely difficult to save for a down payment.”
Twenty-eight percent of first-time buyers reported that they used a gift or a loan from friends or family in order to make a down payment on a home and 29% said saving for a down payment proved to be the most difficult step in the entire buying process. For repeat buyers, 56% cited using equity generated from the sale of a primary residence toward their down payment. For first-time buyers, the typical down payment was 7%, while it was 17% among repeat buyers.
A notable revelation in the report was the slight decline in married home buyers. This year’s data showed that 60% of recent buyers were married, a share that has fallen from a high of 81% in 1985. However, the share of single women buyers increased to 19% from a recent low of 15% in 2014. The shares of single men and unmarried buyers remained at 9%, respectively.
About NAR’s Survey
NAR mailed a 129-question survey in July 2021 using a random sample weighted to be representative of sales on a geographic basis to 129,800 recent home buyers. Respondents had the option to fill out the survey via hard copy or online; the online survey was available in English and Spanish. A total of 5,795 responses were received from primary residence buyers. After accounting for undeliverable questionnaires, the survey had an adjusted response rate of 4.5%. The sample at the 95% confidence level has a confidence interval of plus-or-minus 1.29%.
Recent home buyers had to have purchased a primary residence home between July of 2020 and June of 2021.
The National Association of Realtors® is America’s largest trade association, representing more than 1.5 million members involved in all aspects of the residential and commercial real estate industries.
Media Contact: Quintin Simmons 202-383-1178Working With Buyers, Working With Sellers, Working With FSBOs
1 The 2021 edition of NAR’s Profile of Home Buyers and Sellers continues the longest-running series of national housing data evaluating the demographics, preferences and experiences of recent buyers and sellers. Results are representative of owner-occupants and do not include investors or vacation homes.
Tremendous opportunity for an investor and/or owner to remodel this singe family Cape Cod. As is, 3 bedrooms, 1 bath, needs work. Conveniently located, close to downtown Kensington (1/2mi), local parks, weekly farmers market, shops, restaurants, commuter MARC station and 1.3 miles from Wheaton Metro.
Link to Listing
Source: Rising Prices Push Home Equity to Its Highest Level in 10 Years
Homeowners with a mortgage gained a 29.3% year-to-year increase. It’s the biggest jump since 2Q 2010.
Wolf projects that U.S. home price growth will slow to about 5% next year
Wolf said. “Those who have chosen not to purchase a home or have been unable to are finding it very hard to enter the market now, and in a lot of cases these individuals are missing out on wealth accumulation.”
LOS ANGELES (AP) – Soaring home prices have pushed up average homeowner equity growth to the highest level in more than a decade, though recent signs of a cooling U.S. housing market point to more moderate gains in the second half of the year.
Homes with a mortgage gained an average of $51,500 in equity in the second quarter, an increase of 29.3% from the April-June quarter last year, according to real estate information company CoreLogic. That’s the highest quarterly average gain in home equity since the second quarter of 2010, the firm said.
That works out to nearly $3 trillion in equity gained by U.S. homeowners with a mortgage, which is about 63% of all homes, CoreLogic said. Average homeowner equity jumped nearly 20% in the first quarter from a year earlier.
Home equity growth can have broad impacts on the economy, giving homeowners more financial flexibility to spend on big purchases or build a nest egg. Rising home values also make it increasingly tougher for would-be homeowners to buy.
Homeowners in California, Washington state and Idaho saw among the biggest average equity increases in the second quarter: $116,000 in California, $103,000 in Washington state and $97,000 in Idaho.
The surge in homeowner equity gains follows a record run up in U.S. home prices this year amid a searing hot housing market fueled by ultra-low mortgage rates, a thin inventory of properties for sale and many would-be buyers’ desire for more living space during the pandemic.
S&P said this week that its closely watched S&P CoreLogic Case-Shiller 20-city home price index surged 19.9% in July from a year earlier, the largest gain on records dating back to 2000.
Still, there are signs the soaring home price gains fueling homeowner equity may have peaked. The National Association of Realtors’ most recent housing market snapshot showed the median home price of previously occupied U.S. homes rose 14.9% in August from a year earlier to $356,700. That’s a more modest gain than earlier this year, when year-over-year increases were running at 20%-25%.
“It seems that there was that shift from July to August where there starts to be a little bit of pushback in terms of where prices have gone,” said Ali Wolf, chief economist at Zonda Economics, a real estate industry tracker.
Wolf projects that U.S. home price growth will slow to about 5% next year, citing expectations of modestly higher mortgage rates and a small but notable increase in the number of homes on the market.
“The days of runaway home price growth are behind us,” she said.
In its most recent quarterly housing forecast, mortgage buyer Freddie Mac envisions home prices growing 5.3% next year, down from a projected 12.1% increase in 2021.
If those home price outlooks hold, it would translate into a less torrid pace for homeowner equity growth next year. Still, the outsized growth in homeowner equity this year will have ripple effects for the broader economy, and the housing market. Rising homeowner equity creates a buffer for borrowers against potential financial hardship, such as job loss. And it can give homeowners financial flexibility to borrow against their equity to pay off high-interest debt or finance large purchases, such as home improvement projects, which can give a boost to the economy.
“It is good for wider economic growth, but there’s an ugly side to today’s level of pricing,” Wolf said. “Those who have chosen not to purchase a home or have been unable to are finding it very hard to enter the market now, and in a lot of cases these individuals are missing out on wealth accumulation.”
The surge in home prices this year has made it tougher for would-be homeowners to buy. First-time buyers accounted for 29% of home sales in August, according to the National Association of Realtors. A year ago they made up 33% of buyers.
The U.S. homeownership rate was 65.4% in the second quarter, down from 66.6% last year and 66.2% a decade ago.
The increase in home equity has helped limit the number of homeowners who end up “underwater” on their mortgage, or owing more on their loan than their home is worth. Also known as being in negative equity, that can happen when a home’s value declines, or when the size of the mortgage increases, say when someone takes out a home equity loan.
At the end of the second quarter, 1.2 million homes, or 2.3% of all U.S. homes with a mortgage, were in negative equity, CoreLogic said. That’s down 30% from the same quarter last year.
Among U.S. metropolitan areas, Chicago had the biggest share of homes with negative equity in the April-June quarter at 5.2%, the firm said.
An important metric in today’s residential real estate market is the number of homes available for sale. The shortage of available housing inventory is the major reason for the double-digit price appreciation we’ve seen in each of the last two years. It’s the reason many would-be purchasers are frustrated with the bidding wars over the homes that are available. However, signs of relief are finally appearing.
According to data from realtor.com, active listings have increased over the last four months. They define active listings as:
“The active listing count tracks the number of for sale properties on the market, excluding pending listings where a pending status is available. This is a snapshot measure of how many active listings can be expected on any given day of the specified month.”
What normally happens throughout the year?
Historically, housing inventory increases throughout the summer months, starts to tail off in the fall, and then drops significantly over the winter. The graph below shows this trend along with the month active listings peaked in 2017, 2018, and 2019.
What happened last year?
Last year, the trend was different. Historical seasonality wasn’t repeated in 2020 since many homeowners held off on putting their houses up for sale because of the pandemic (see graph below). In 2020, active listings peaked in April, and then fell off dramatically for the remainder of the year.
What’s happening this year?
Due to the decline of active listings in 2020, 2021 began with record-low housing inventory counts. However, we’ve been building inventory over the last several months as more listings come to the market (see graph below):There are three main reasons we may see listings continue to increase throughout this fall and into the winter.
- Pent-up selling demand – Homeowners may be more comfortable putting their homes on the market as more and more Americans get vaccinated.
- New construction is starting to take off – Though new construction is not included in the realtor.com numbers, as more new homes are built, there will be more options for current homeowners to consider when they sell. The lack of options has slowed many potential sellers in the past.
- The end of forbearance will create some new listings – Most experts believe the end of the forbearance program will not lead to a wave of foreclosures for several reasons. The main reason is the level of equity homeowners currently have in their homes. Many homeowners will be able to sell their homes instead of going to foreclosure, which will lead to some additional listings on the market.
If you’re in the market to buy a home, stick with it. There are new listings becoming available every day. If you’re thinking of selling your house, you may want to list your home before this additional competition comes to market.