Home Equity Rising – Lee Chandler

Despite a current global pandemic, home equity has been continuing to rise. “Home equity for homeowners with a mortgage rose 6.6% annually in the second quarter, according to CoreLogic. Collectively, that adds up to a gain of $620 billion, or $9,800 per home” (Olick). This is due to a stall in home selling during the initial stages of the pandemic, followed by a rapid increase in home buying and selling in the later or more current stage (Olick). The increase in demand combined with record low mortgage rates made up for the stall and continued to increase home values.

With price increases in 48 out of 50 states, home prices have increased 5.1% annually (Olick). This is enabling homeowners with negative equity (having a higher mortgage than home value) to get out of their negative position, which happened for 3% of all mortgages (Olick). 

I think that it will be crucial to look at how this spike in demand will impact the market in the winter months, along with a potential surge of COVID-19. If the demand slows down due to the virus or due to the previous increase in buying, then home values may drop along with it. 

 

References

Olick, Diana. “Home Equity Surges as Demand Soars and Mortgage Rates Hover near Lows.” CNBC, CNBC, 21 Sept. 2020, www.cnbc.com/2020/09/21/home-equity-surges-as-demand-soars-and-mortgage-rates-hover-near-lows.html. 

 

Daniel Murphy

Lee-Chandler

Acquisition Analyst

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