CoreLogic reported This Week in Real Estate that homeowners gained the most equity in 2017 of any year since 2013…$908.4 billion collectively. Below are a few highlights from the second week of March that influence our business:
* Builder Confidence Remains on Solid Footing. Builder confidence in the market for newly-built single-family homes edged down one point to a level of 70 in March from a downwardly revised February reading on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). This is the fourth consecutive month at or above a level of 70 for the HMI, an indication of strong single-family housing market conditions. Builders’ optimism continues to be fueled by growing consumer demand for housing and confidence in the market. A strong labor market, rising incomes and a growing economy are boosting demand for homeownership even as interest rates rise. Managing construction costs and future sales prices will be a key challenge in medium-term as costs associated with both land development and home construction continue to increase. Nonetheless, with positive economic fundamentals in place, the single-family sector should continue to make gains at a gradual pace in the months ahead. Looking at the three-month moving averages for regional HMI scores, the Northeast rose one point to 57, the South decreased one point to 73, the West fell two points to 79, and the Midwest dropped four points to 68.
* Homeowners Gained an Average of $15,000 in Home Equity Last Year – or $908 Billion in Total.
A sharp rise in home values last year gave homeowners a strong infusion of cash, in the form of home equity. It also helped more than half a million borrowers rise above water on their mortgages. All real estate is, of course, local, and some homeowners saw significantly bigger gains than others, especially those in the Western region of the nation. Overall, however, they gained the most equity of any year since 2013. Homeowners with a mortgage, representing about 63 percent of all properties, saw their equity increase 12 percent over the course of last year, according to CoreLogic. That comes to an average of $15,000 per homeowner and a collective gain of $908.4 billion. Those calculations are based on the largest home price growth in four years. States like California and Washington saw even higher price growth, so homeowners in those states gained an average of $44,000 and $40,000, respectively. “Because wealth gains spur additional consumer purchases, the rise in home-equity wealth during 2017 should add more than $50 billion to U.S. consumption spending over the next two to three years,” said Frank Nothaft, chief economist at CoreLogic. The rise in home equity also brought about 700,000 borrowers into a positive equity position on their mortgages, according to CoreLogic.
* Millennials Lead all Other Generations in Buying Homes.
Millennials held the highest share of home buying activity out of all other generations for the fifth consecutive year, according to the 2018 Home Buyer and Seller Generational Trends study from the National Association of Realtors. Just over one-third of all home purchases were made by Millennials, who held a market share of 36% over the past year, up from 34% in 2017. Gen Xers ranked second at 26%, a drop from 28% in 2017, followed by the Baby Boomers with 32%, up from 30% in 2017 and the Silent Generation with 6%, down from 8% in 2017. Among the trends Realtors are seeing in the younger home-buying generation, they are more likely to live closer to friends and family, rather than in select areas of the city or certain schools. They are also buying condos in the city at a very low rate, and are the most likely generation to use a real estate agent with 90% of Millennials purchasing through an agent.
Have a productive week.