US Home Values 1Q 2019: Record-Highs


Benchmark Dimension Softwood Lumber Construction Framing Prices vs US Median House Sales Price: 2019
SOURCE: Madison’s Lumber Reporter www.madisonsreport.com

The value of all US owner-occupied homes increased to a record US$26.1 trillion in 1Q 2019, according to aย Federal Reserveย reportย  known as the Flow of Funds, released Thursday.

That was a gain of +4.3% from a year earlier, the slowest annualized increase since 2012. The collective value of US homes is now +15% higher than the bubble peak reached in 2006. Once that bubble popped, it was a decade before values recovered to the same level.

Today, the national average for equity is about 50 percent, meaning that half of US homeowners still have โ€œhalf of a houseโ€ to pay for. Here are some other enlightening facts about home ownership andย home equity:

  • The average US homeowner has US$114,000 of equity in a home
  • As of 2018, the grand total of home equity held by US homeowners reached an all-time high of US$15.8 trillion.
  • On average, people who own their homes have more income and more education that those who donโ€™t.
  • In 2016, the purchase price of a typical US home was US$187,000.
  • Home ownership is the single most efficient way for Americans to increase net worth.
  • Ninety percent seems to be an important number for home buyers. The most recent data shows that 90% of first-time buyers used a mortgage loan to purchase their homes, rather than paying cash. And of those 90%, the amount of the purchase price they financed was, ironically, 90%. These facts might be coincidental but they are not surprising.

An increase in home equity traditionally has been a support to the US economyย as Americans either refinance their first-lien mortgages at higher balances, known as cash-out refis, or get home equity loans in a junior lien position. That supports consumer spending, which accounts for 70% of the US economy. Cashed-out equity typically is used either for renovations, college tuition, or to pay off credit card debt, according to Fed economists.

Americans converted US$19 billion of their home equity into cash in 1Q 2019, the largest amount since the year-earlier quarter when it was US$22.7 billion, according to a Freddie Mac estimate. Most was through cash-out refinancing, at US$16.7 billion, while home equity loans accounted for US$2.3 billion.

The current level of equity cash-outs pales in comparison to the amount seen during the peak of the housing bubble. For example, in 2006โ€™s first quarter, Americans turned US$80.7 billion of equity into cash using either refis or home equity loans, according to Freddie Mac data.ย