Americans Regain $7 Trillion in Home Equity
The 2006-2009 housing slump reduced wealth by $7 trillion. Since then, the value of homeowners’ equity in real estate has more than doubled from a low in the first quarter of 2009, a recent Federal Reserve report showed. What’s more, housing wealth is poised to reach a new record as early as the second quarter of 2016. From the end of 2013 through last year’s fourth quarter, home equity climbed 22% compared with an 11% gain in the Standard & Poor’s 500 Index during that period. Some cities, including Charlotte, are already seeing prices at all-time highs. Home values in Dallas, Denver, San Francisco and Portland all hit records in December, while they’re down less than 1% in Boston from an August peak, according to S&P/Case-Shiller indexes. About 38% of 87 U.S. metropolitan areas were in record territory last year, according to RealtyTrac. The housing bust, and the resulting recession that was the worst since the 1930s, has prompted 5.6 million American households to lose homes through foreclosure, according to RealtyTrac. At it’s worse, more than a quarter of homeowners had paper losses as their mortgages exceeded the value of their properties. Now, with the recovery in home values, that carnage has dissipated. Foreclosures were filed on just 95,186 properties in January, an almost 10-year low, RealtyTrac data show. Even in the worst-hit markets, home equity is being restored. Just 8.5% of properties had so-called negative equity in the fourth quarter, with debt exceeding their value, according to a report this month by consumer analytics firm CoreLogic, while a study by Zillow put it at 13.1%. For all the gains, the recovery in home equity has been uneven and narrower than in the 2002-2006 housing boom, said William Emmons, senior economic advisor at the St. Louis Fed’s Center for Household Financial Stability. In Las Vegas, housing prices are 38% below the level reached in April 2006, according to the Case-Shiller index. Homes in Miami, Tampa and Phoenix are all fetching at least 25% less than they did at their peaks. Even so, property values in Las Vegas have recovered 61% from their low. “Underwater” homeowners are still an isolated concern. In Nevada, almost one-fifth of properties were upside down, followed by Florida, Illinois and Arizona. Among 10 large metro areas, Miami had the largest share of properties with negative equity — about 22% in the fourth quarter.