The Average Homeowner Gained Approximately $64,000 in Equity Between Q1 of 2021 And 2022

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CoreLogic released its quarterly Homeowner Equity Insights report This Week in Real Estate which showed that homeowners with a mortgage saw their equity increase by more than $3.8 trillion year-over-year, a gain of 32.2%. The average homeowner gained approximately $64,000 in equity between the first quarters of 2021 and 2022. All eyes will be on the Federal Reserve this week as the central bank is largely expected to raise its key benchmark rate during their June meeting, which is scheduled for Tuesday and Wednesday. Below are a few newsworthy events from the second week of June that influence our business: 

Homeowner Equity Insights. CoreLogic analysis shows U.S. homeowners with mortgages (roughly 62% of all properties) have seen their equity increase by a total of over $3.8 trillion since the first quarter of 2021, a gain of 32.2% year-over-year. U.S. home prices continued their upward trajectory in the first quarter of 2022, with year-over-year growth averaging around 20%, allowing 62,000 owners to regain equity compared with the previous quarter. In the first quarter of 2022, the average homeowner gained approximately $64,000 in equity during the past year. California, Hawaii and Washington experienced the largest average equity gains at $141,00, $139,00 and $114,00 respectively. Only 2% of homeowners with a mortgage remain underwater, a slight decline from the fourth quarter of 2021.

Unpacking The Persisting Inventory Crisis Plaguing Housing Market. Despite the recent progress in increasing the supply of homes for sale, a recent Black Knight, Inc. report suggested that those developments aren’t good enough to correct the dearth of homes for sale. The gradual decline in the remaining monthly inventory serves as the primary driver for the state of the market. The supply of homes for sale has steadily declined since the late 2000s. That drop was exacerbated by the pandemic and buzzing market activity that followed. “Inventory has been falling for multiple years due to homebuilding below the normal amount required for over a decade,” Lawrence Yun, chief economist for the National Association of REALTORS, tells RISMedia. “But finally, later this year, inventory may no longer decline (on a year-over-year basis) as demand is cut back from higher mortgage rates and homes sit on the market a tad longer. The most acute housing shortage is likely to be this year, and we expect to see inventory levels rise next year.” “With few exceptions, the housing market has experienced a broad, generally nationwide decline in the number of homes for sale since 2011,” says Danielle Hale, chief economist for realtor.com. “Our May Housing Trends Report showed that for the first time in three years, the number of homes available for sale grew on a year over year basis, as rising mortgage rates caused some home shoppers to pause their searches and rising home prices enticed more homeowners to try to sell than we saw at this time last year. Although the housing market remains far from balanced in most areas across the country, this new trend is a step in the right direction and should eventually help bring about more balance. Put another way, it’s not going to spell an immediate end to the symptoms of low inventory, such as fast-rising prices and homes selling as soon as they come up for sale, but as inventory rises, it will alleviate the sense of scarcity that has driven those outcomes, eventually calming the frenzy.” 

Mortgage Rates Turn Upward Again. Following three weeks of declines, mortgage rates reversed course and headed back up this week. The 30-year fixed-rate mortgage averaged 5.23% for the week ending June 9; a year ago, it averaged below 3%. Increased economic activity and incoming inflation data were behind the most recent rate increases this week, says Sam Khater, Freddie Mac’s chief economist. “The housing market is incredibly rate sensitive, so as mortgage rates increase suddenly, demand again is pulling back,” he says. “The material decline in purchase activity combined with the rising supply of homes for sale will cause a deceleration in price growth to more normal levels, providing some relief for buyers still interested in purchasing a home.” Economists will watch the Federal Reserve’s actions closely this coming week. The central bank is largely expected to raise its key benchmark rate at its next meeting, June 14-15. “The upcoming rate hike will likely have a smaller impact on mortgage rates this time,” said Nadia Evangelou, senior economist and director of forecasting for the National Association of REALTORS. In March, when the Federal Reserve raised its short-term interest rates, mortgage rates surged 80 basis points in the following three weeks, Evangelou notes. The 30-year fixed-rate mortgage jumped from 3.85% to 4.67% by the end of March. In May, when the Federal Reserve raised its interest rates even more aggressively, mortgage rates rose by less than 20 basis points. By the end of May, the 30-year fixed-rate mortgage averaged 5.10%. “It seems that mortgage rates have already priced in some of the effects of the upcoming Fed’s rate hikes,” Evangelou explains.

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