Home News Homeowners lost more than a trillion dollars in equity

Homeowners lost more than a trillion dollars in equity

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Data: Zillow; Chart: Tory Lysik/Axios Visuals

The housing market is back on Earth. Home sellers cannot simply specify a price and expect the buyer to pay. Meanwhile, over $1 trillion in wealth has evaporated in the form of home equity.

Important reasons: Think of this as a fix, not a crash. The housing boom caused by the pandemic was an explosive moment in real estate demand.

  • The Federal Reserve hiked rates as intended, crushing that demand.

State of play: Homes were selling above list price during the pandemic boom. It’s a “historically extraordinary” situation, says Zillow Senior Economist Nicole Bashaw.

  • Sellers are now on average accepting below list price to make a sale, returning to pre-COVID trends.
  • Experts say this is back to normal in many ways, even though 7% of mortgages feel abnormal. “We’re coming out of this pandemic frenzy, so it’s a very troubling stage in the market,” Bachaud said.

in the meantime: Mortgage holder assets totaled $1.37 trillion in the third quarter. Price, calculated by Mortgage Technology Company Black Knight.

  • This is the sharpest decline in the value of the dollar in a single quarter since 2000. On a percentage basis, it is the steepest decline since 2009.
  • Since this is real estate, there is a great deal of variation from location to location. Stocks fell the most in San Jose (24%), Seattle (21%) and San Francisco (20%).
  • California accounted for more than half of the national stock decline.
Data: Black Knight; Chart: Axios Visual
Data: Black Knight; Chart: Axios Visual

Reality check: U.S. mortgage holders own more equity in their homes than they did before the coronavirus housing boom.

  • The average borrower, on paper, has lost about $30,000 in assets since the beginning of the year, but still has $92,000 more than in February 2020.
  • Unless the house needs to be sold or rented, the value is more of an atmosphere than a practical matter.
  • Most homeowners have access to low-cost mortgages with large amounts of equity capital.
  • “If you close your eyes at the beginning of a pandemic and live there, [your home valuation today]We think you’ll be very happy with it,” said Andy Walden, vice president of enterprise research at Black Knight.

What to see: Those who bought a home in 2021 or this year were most at risk of being “drunk” on their mortgage, with more debt than their home was worth, Black Knight found. People who remember the Great Recession know As you can see, it’s a dangerous place.

  • That crop of recent buyers As Axios did recently, it included more Black and Latinx borrowers than usual. report.
  • Further home price declines are likely, but Bachaud said relatively low inventories will limit the declines for the time being. “You won’t see these sharp price drops because there just isn’t enough inventory to allow that to happen.”

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