If you bought a home before 2022, you should be counted among the lucky ones.
of rising mortgage interest rates Combined with still-high home prices in most markets, housing affordability is rapidly being put out of reach for many.
Everyone struggles, but the situation is especially acute for first-time buyers who are unable to build the financial security that owning a home provides.
And since homeownership is the primary source of wealth for most families, exacerbate wealth inequality The difference between those who own a home and those who do not.
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How we got here
During the Great Recession, home prices fell 33% nationwide. However, the historically low interest rates that followed provided considerable buying opportunities.
In the decade preceding the pandemic, owner-occupied housing values rose again. In about 100 big cities, house prices have risen more than his $8 trillion, according to one study. Report from the National Real Estate Association.
But pandemic-era ultra-low interest rates fueled a buying boom, causing home prices to fall soaring to historic levels Homeownership has become invisible in many areas.
The cost of owning a home has reached new heights since the pandemic began. According to Zillow’s August housing report, monthly mortgage payments for a typical home bought in 2022 have nearly doubled since 2019, from $897 to $1,643.
So if you haven’t stepped onto the real estate ladder yet, it will be twice as difficult to actually step on it. But it also means that those who owned before pandemic demand sent prices skyrocketing will likely benefit from lower mortgage payments and lower fixed interest rates.
They’re paying far less each month for home than those who bought it during the pandemic or since interest rates started rising in mid-2022.
inequality is widening
This means that homeowners’ net worths are rising much faster than non-homeowners.
That said, there was already a big gap. According to one study, the median household net worth of homeowners was about 40 times the net worth of pre-pandemic rental homes. Investigation Released by the Federal Reserve in 2020.
The data shows that pre-pandemic American homeowners had a median net worth of $255,000, while renters had a net worth of just $6,300.
Now, thanks to home equity and rental prices, there’s probably a bigger difference.
Nearly half of American homeowners will be considered “equity rich” by mid-2022, according to ATTOM’s US Home Equity and Underwater report.
That’s the highest percentage ever, according to Rick Sharga, executive vice president of market intelligence for ATTOM, which collects housing data from markets across the country. Rich equity means your home loan is half, or even less than, your home’s estimated market value.
but it is concentrated in certain areas
However not every corner of the country equally affected. Eight of the top 10 equity-rich states are in the West, and 12 of the 15 states with the lowest percentage of equity-rich homes are in the Midwest and South.
At the same time, rental prices in major metropolitan areas are skyrocketing.
According to the online apartment search engine Zumper, the average rent for a one-bedroom apartment in New York City is nearly $4,000. This is a 20% jump year-over-year. In San Francisco, the average price for a one-bedroom he $3,000 is 10% higher than last year.
If you are paying rent in a big city, it will be difficult. save a down paymentput homeownership far down.
For those who own a home and buy it at the right time, it’s no surprise that their net worth will continue to grow. Especially if you live in an expensive city.
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