American Homeowners Gain $1 Trillion in Equity During COVID-19 Housing Boom
Since the World Health Organization declared COVID-19 to be a pandemic on March 13, 2020, American homeowners have seen their equity grow by $1 trillion. The housing boom has been driven by the pandemic, and homeowners are seeing their property values soar. However, this might not be a totally good thing.
What the Rising Home Sale Prices Mean
As the sales prices of homes on the real estate market increase, homeowners see their equity grow. In 2020, homeowners have seen their average equity increase by an astounding 10.8%. Homeowners with mortgages account for 63% of all houses. The other 37% includes people who have paid off their houses as well as homes that are in foreclosure. The average amount of equity gained per home is more than $17,000 in 2020. That is the largest annual boost in home equity in more than six years.
Which Places Have Seen the Most Growth in Home Equity
The states with the highest home prices have also seen the largest gains in equity. In the state of Washington, homeowners gained an average of $35,800 in equity. In California, homeowners with mortgages have seen their equity go up by $33,800 on average. The average home equity increase in Massachusetts is $31,200.
Not All Homeowners Are Benefiting
Homeowners in North Dakota, which has a high rate of COVID-19 infection, has seen the lowest annual equity gain out of all 50 states. They saw their equity go up by only $5,400. In the past year, home prices have not risen that much in North Dakota. Homeowners need to remember that as their property values go up, so will their property taxes. On the other hand, real estate agents argue that an increase in home equity could offer a buffer for a family if they experience financial difficulty, such as a job loss. However, they can only access that equity if they take out a loan against it or if they sell. If they sell their homes, they will have to find some other type of affordable housing. The lack of affordable housing is what is driving the housing boom.
Other Good Housing News
The rise in home equity has helped with the lowering of foreclosure rates. It's not the only factor in the reduction of foreclosures. The Center for Disease Control's moratorium on evictions and foreclosures as well as the forbearance programs offered by lenders since the start of the COVID-19 pandemic have played large roles in this development. People who are struggling may still not be able to afford their mortgage payments, but they might be able to sell and generate a profit if they live in the right place and sell at the right time.
Housing Prices Are Still on the Rise
Home prices are still going up. That's because the demand for single-family homes continues to be strong. The supply continues to be low. Since the COVID-19 pandemic began, a lot of people have been working from home and doing remote learning for K-12 and higher education. The Millennial generation has also gotten old enough to be in a place in their lives when they are ready to become homeowners. Mortgage rates are still at record-low levels. They have set 14 record low points so far in 2020. The low interest rates make it easier for a first-time buyer to purchase a home.
Homes Are Selling at a Fast Pace
Signed contracts on existing homes slowed somewhat in September and October. That's consistent with the seasonality of existing home sales, especially in the northern states. New contracts for newly built homes have remained steady at high levels. Economists think that the housing boom and high prices are more of a result of tight supply than of a high demand. A few economists think the housing bubble could be running out of steam. Fewer people are leaving the cities for suburban areas. Tight credit is also causing problems, especially for people who have lost their jobs as a result of the pandemic. Some buyers are returning to look for housing bargains in cities.
What 2021 Holds for Housing Prices
Economists think that home prices will increase in 2021, but not by as much as they did in 2020. The low supply will continue to fuel the price increase. Negative equity is decreasing, and experts expect that to continue through 2021 as well.
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