Weekly Special | October 28, 2019

Equity Returns To The Housing Market

As home values continue to rise at a healthy pace, fewer homeowners are facing a situation where they owe more on their homes than it is worth. Equity has returned to the housing market.

In the graph above, we plot the average home value (measured in price per square foot) each month, and then produce a one-year average (green line) from the monthly ones.

The solid green line clearly shows home values are rising.

The yellow box in the middle of the graph highlights the time period where home buyers were paying more for their homes than they are currently worth today (on average).

There is less than a 3-year window where homes were valued higher than what we are seeing today, and that window is finally closing.

As more people gain equity in their homes, the healthier the housing market will be. We will see fewer short sales and foreclosures because people facing financial problems will be able to turn to the equity in their homes to satisfy the lenders.

Right now, average home values are within 13% of the high value at the peak of the market, suggesting that by the time 2022 comes to a close, home values will have set a new market high and the days of cheap real estate will be far behind us.

The original one-page Weekly Special PDF is still available.