Since many on this site may be buying or selling a home at any given time, own investment properties, or commercial real estate I'm posting this weekly update to stay current.
The data is well researched from my employer New American Funding's Research/Analytics Department.
Thus, it is fact based and only analyzing the data/trends without regard to government policy.
As I stated previously let's keep the thread informational for those that might be in the market and leave policy discussions in "The Corral".
I'll be posting the highlights here - for you data and chart geeks at the end is a link to the full report.
The Highlights -
Quick Hit
If you’re looking to enter the housing market this spring there’s one feeling that every homebuyer will be experiencing if they haven’t been tracking home price movements, and that’s sticker shock. According to most home price indicators, annual growth rates have returned to pre-pandemic levels of 5% or more. This rise in home prices has equated to owners’ equity levels surpassing the $30 trillion mark, the share of mortgages underwater falling to just 0.2% of active mortgages, and an uptick in home equity usage that could lead to a reacceleration of inflation if this capital transitions from just being on paper to circulating in the monetary system.
Key Points and Stats
If you’re looking to enter the housing market this spring there’s one feeling that every homebuyer will be experiencing if they haven’t been tracking home price movements, and that’s sticker shock. According to most home price indicators, annual growth rates have returned to pre-pandemic levels of 5% or more. For the month of January 2024, CoreLogic S&P Case-Shiller pegged the rate at 6.07%, the Federal Housing Finance Agency came in at 6.35%, Freddie Mac models had things at 6.19%, and Zillow lagged its peers at the lowest reading of just a 3.13% rate.
Either way you slice it, home prices are growing faster than overall inflation and household incomes. For historical context, the latest S&P HPI reading reveals that home prices are now 71% above the housing bubble peak, 131% above the trough, and 46% higher than at the onset of the pandemic based in nominal terms.
Strength in home prices is nothing new. U.S. housing has typically always been a “safe” asset class to invest in, but things are truly starting to test that narrative.
Prior to the pandemic, after adjusting for inflation, home prices were on par with the prior housing bubble and a principal and interest payment put things into context that home prices still had room to run before hitting the prior housing bubble peak thanks to low mortgage rates. Fast forward to today’s rising rate environment and even the inflation adjusted principal and interest payment indexed to 2000 is flashing warning signs that this market’s home prices are 46% higher than the prior top.
Looking across the country, there has been significant outperformance since the start of the millennium in markets such as Miami, Los Angeles, San Diego, and Tampa. Meanwhile markets such as Atlanta, Chicago, and Detroit have underperformed. However, there are indications that these overperformers might just be the ones to experience the biggest shock if and when home prices start to pull back as noted by the movement in the most recent months for each respective series when home prices attempted to correct.
If you are currently a homeowner, things still appear rosy for the majority of the country as most markets continue to hit new all-time highs; especially in the Midwest where housing is more affordable, Northeast where demand is strong, and markets where new construction activity adding to supply is weak.
Owners’ Equity in Real Estate
The acceleration in home price growth since the pandemic and quick rebound more recently has pushed homeowners’ equity back above the $30 trillion mark to $31.79 trillion as of December 2023. This marks the highest levels as a share of the total real estate market value since December 1960 at 70.9%.
Restated another way, homeowners’ equity is sitting at a plush $368,715 per owned household. However, owners’ equity is not evenly dispersed among households based on various demographic characteristics. Of the $30 trillion, households in the top 80-99% of income earners enjoy access to 43% of the pie, baby boomers claim 50%, college educated households account for 68%, and white households take the lions share at 80%.
When it comes to mortgage holders and lenders, the rise in home prices has equated to decreased risk for borrowers being upside-down on their mortgage with only 0.2% of active mortgage loans having a mark-to-market loan-to-value of greater than 100% or an estimated 101,596 borrowers.
As of December 2023, the top three states with the best mortgage equity position are California, Hawaii, and Montana. The top three states in the least desirable position are Louisiana, Alaska, and North Dakota.
Home Equity Lending
Surprisingly, current homeowners remain reluctant to tap into these elevated equity levels. Data from Inside Mortgage Finance estimates that there is $512.34 billion in outstanding home equity lending debt funded by depositories and nonbanks as of December 2023, less than half of what was outstanding in March 2009. Furthermore, there remains 56.2% of HELOC commitments being unused on existing lines of credit held by banks and credit unions, although we have seen an uptick in utilization since March 2022. If this capital transitions from just being on paper to circulating in the monetary system, it could make the job of getting inflation under control that much harder for the Fed and we could see that reacceleration that everyone fears is coming.
Have an Amazing Week & Hook 'Em!
MH
Full Report Hyperlink -
Click Here For Full Report With Charts and Diagrams
PS I just checked and this report is not yet on LinkedIn - I get an advanced copy.
Full report should be up later today for public viewing.
The data is well researched from my employer New American Funding's Research/Analytics Department.
Thus, it is fact based and only analyzing the data/trends without regard to government policy.
As I stated previously let's keep the thread informational for those that might be in the market and leave policy discussions in "The Corral".
I'll be posting the highlights here - for you data and chart geeks at the end is a link to the full report.
The Highlights -
Quick Hit
If you’re looking to enter the housing market this spring there’s one feeling that every homebuyer will be experiencing if they haven’t been tracking home price movements, and that’s sticker shock. According to most home price indicators, annual growth rates have returned to pre-pandemic levels of 5% or more. This rise in home prices has equated to owners’ equity levels surpassing the $30 trillion mark, the share of mortgages underwater falling to just 0.2% of active mortgages, and an uptick in home equity usage that could lead to a reacceleration of inflation if this capital transitions from just being on paper to circulating in the monetary system.
Key Points and Stats
- For the month of January 2024, CoreLogic S&P Case-Shiller pegged the rate at 6.07%, the Federal Housing Finance Agency came in at 6.35%, Freddie Mac models had things at 6.19%, and Zillow lagged its peers at the lowest reading of just a 3.13% rate.
- The latest S&P HPI reading reveals that home prices are now 71% above the housing bubble peak, 131% above the trough, and 46% higher than at the onset of the pandemic based in nominal terms.
- The inflation adjusted principal and interest payment indexed to 2000 is flashing warning signs that this market’s home prices are 46% higher than the prior housing bubble top.
- If you are currently a homeowner, things still appear rosy for the majority of the country as most markets continue to hit new all-time home price highs.
- The acceleration in home price growth since the pandemic and quick rebound more recently has pushed homeowners’ equity back above the $30 trillion mark to $31.79 trillion as of December 2023. This marks the highest levels as a share of the total real estate market value since December 1960 at 70.9%.
- Homeowners’ equity is sitting at a plush $368,715 per owned household.
- Of the $30 trillion, households in the top 80-99% of income earners enjoy access to 43% of the pie, baby boomers claim 50%, college educated households account for 68%, and white households take the lions share at 80%.
- The rise in home prices has equated to decreased risk for borrowers being upside-down on their mortgage with only 0.2% of active mortgage loans having a mark-to-market loan-to-value of greater than 100% or an estimated 101,596 borrowers.
- There is $512.34 billion in outstanding home equity lending debt funded by depositories and nonbanks as of December 2023, less than half of what was outstanding in March 2009.
- There remains 56.2% of HELOC commitments being unused on existing lines of credit held by banks and credit unions, although we have seen an uptick in utilization since March 2022.
If you’re looking to enter the housing market this spring there’s one feeling that every homebuyer will be experiencing if they haven’t been tracking home price movements, and that’s sticker shock. According to most home price indicators, annual growth rates have returned to pre-pandemic levels of 5% or more. For the month of January 2024, CoreLogic S&P Case-Shiller pegged the rate at 6.07%, the Federal Housing Finance Agency came in at 6.35%, Freddie Mac models had things at 6.19%, and Zillow lagged its peers at the lowest reading of just a 3.13% rate.
Either way you slice it, home prices are growing faster than overall inflation and household incomes. For historical context, the latest S&P HPI reading reveals that home prices are now 71% above the housing bubble peak, 131% above the trough, and 46% higher than at the onset of the pandemic based in nominal terms.
Strength in home prices is nothing new. U.S. housing has typically always been a “safe” asset class to invest in, but things are truly starting to test that narrative.
Prior to the pandemic, after adjusting for inflation, home prices were on par with the prior housing bubble and a principal and interest payment put things into context that home prices still had room to run before hitting the prior housing bubble peak thanks to low mortgage rates. Fast forward to today’s rising rate environment and even the inflation adjusted principal and interest payment indexed to 2000 is flashing warning signs that this market’s home prices are 46% higher than the prior top.
Looking across the country, there has been significant outperformance since the start of the millennium in markets such as Miami, Los Angeles, San Diego, and Tampa. Meanwhile markets such as Atlanta, Chicago, and Detroit have underperformed. However, there are indications that these overperformers might just be the ones to experience the biggest shock if and when home prices start to pull back as noted by the movement in the most recent months for each respective series when home prices attempted to correct.
If you are currently a homeowner, things still appear rosy for the majority of the country as most markets continue to hit new all-time highs; especially in the Midwest where housing is more affordable, Northeast where demand is strong, and markets where new construction activity adding to supply is weak.
Owners’ Equity in Real Estate
The acceleration in home price growth since the pandemic and quick rebound more recently has pushed homeowners’ equity back above the $30 trillion mark to $31.79 trillion as of December 2023. This marks the highest levels as a share of the total real estate market value since December 1960 at 70.9%.
Restated another way, homeowners’ equity is sitting at a plush $368,715 per owned household. However, owners’ equity is not evenly dispersed among households based on various demographic characteristics. Of the $30 trillion, households in the top 80-99% of income earners enjoy access to 43% of the pie, baby boomers claim 50%, college educated households account for 68%, and white households take the lions share at 80%.
When it comes to mortgage holders and lenders, the rise in home prices has equated to decreased risk for borrowers being upside-down on their mortgage with only 0.2% of active mortgage loans having a mark-to-market loan-to-value of greater than 100% or an estimated 101,596 borrowers.
As of December 2023, the top three states with the best mortgage equity position are California, Hawaii, and Montana. The top three states in the least desirable position are Louisiana, Alaska, and North Dakota.
Home Equity Lending
Surprisingly, current homeowners remain reluctant to tap into these elevated equity levels. Data from Inside Mortgage Finance estimates that there is $512.34 billion in outstanding home equity lending debt funded by depositories and nonbanks as of December 2023, less than half of what was outstanding in March 2009. Furthermore, there remains 56.2% of HELOC commitments being unused on existing lines of credit held by banks and credit unions, although we have seen an uptick in utilization since March 2022. If this capital transitions from just being on paper to circulating in the monetary system, it could make the job of getting inflation under control that much harder for the Fed and we could see that reacceleration that everyone fears is coming.
Have an Amazing Week & Hook 'Em!
MH
Full Report Hyperlink -
Click Here For Full Report With Charts and Diagrams
PS I just checked and this report is not yet on LinkedIn - I get an advanced copy.
Full report should be up later today for public viewing.
