Home Value

Household Real Estate Value Continues to Climb in Q3

Austin Luxury Group|January 25, 2023
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At the end of 2022, data from the Federal Reserve showed that home equity and value hit a new high despite slowed home price growth. The total value of owner-occupied homes reached a massive $41.9 trillion, and over the past year, home values have grown by $5.1 trillion.

Here are the report's main takeaways:

  • The value of residential real estate is well over double its value from 10 years ago. 
  • Equity as a share of real estate value held steady at 70.5%, tying its highest share since 1984. 
  • Even if home prices dip 10%, homeowners are still positioned to avoid a 2008-like housing crisis because of the higher equity in their homes.



The value of homes hits yet another new high

For over a decade, home prices have climbed consistently. While the more recent pace of home price growth is slower, home prices continue to register higher than in the previous year. Additionally, although home building has ebbed sharply from its early 2022 highs, it also continues to add to the total value of household real estate. These factors combined to push the total value of owner-occupied real estate, the value of all homes owned by those living in them, to a new high of $41.9 trillion. This was a very modest $0.7 trillion increase over the last quarter–half as large as the previous quarter’s $1.5 trillion gain, but still nearly double the $0.4 trillion quarterly increase that was typical from 2017 to 2019.   Over the past year, the value of homes advanced by $5.1 trillion, smaller than the previous few quarters, but still well above the $1.7 trillion that was typical from 2017 to 2019.  The value of household real estate is well over double the value of real estate 10 years ago when the current streak of home price gains began ($18.0 trillion).

Mortgage debt continues to climb, too

As home prices soared, the amount of debt buyers took on to finance them also grew. Mortgage debt totaled $12.4 trillion in the third quarter of 2022, which was $210 billion higher than its second quarter total and $850 billion more than its prior year level. Of note, the third quarter saw the third biggest quarterly growth in household mortgage liabilities since 2006, but annual growth was down slightly from the previous quarter.

Home equity hits a new high

With mortgage debt climbing at a slower pace than the value of real estate, homeowners continued to see equity increase to a new high mark. The total value of equity that homeowners had in real estate was just less than $29.6 trillion in the third quarter, $0.5 trillion more than the second quarter and $4.2 trillion more than the previous year. In fact, equity as a share of real estate value held steady at 70.5%, tying its highest share since 1984. It’s well above the lows seen in 2012 (46.0%) and also above the 60-65% share it saw through much of the late 1990s and early 2000s. It continues to mark a striking contrast to earlier periods. Although there are good reasons for concern about the lack of affordability in the housing market–this is a one-data-point summary of how different this housing market is from the early 2000s.

But how might homeowners fare if home prices decline?

While our outlook for housing in 2023 expects further growth in home prices for the calendar year, other forecasters have far less sanguine projections, with some calling for declines of as much as 20% peak to trough. While falling home prices would be welcome by potential first-time home buyers who may currently feel shut out of the housing market, they can create problems for current homeowners and potentially destabilize the financial system as we saw in 2008.  If housing were to experience a drop in price, homeowners are much better positioned to weather such a change. We examined what would happen to aggregate equity in the event of price declines in line with other forecasts and found that even if the value of homes were to universally decline by 10 percent from their level at the end of the third quarter, homeowner equity would still be at 67.2%, on par with fall 2020 which was then the highest level since 1989.

Financial Losses and Net Worth see Smaller Declines while Debt Continues to Climb

Although housing was a net contributor, declining financial asset values and an increase in debt ate into overall household and non-profit net worth. Driven largely by declines in mutual funds and equity holdings, the value of financial assets held by households and nonprofits slipped  just more than $1.0 trillion in the third quarter and was $6.9 trillion lower than the prior year. Debt and other liabilities increased somewhat less than in the second quarter, rising $320 billion, but are $1.3 trillion higher than in the prior year. After mortgage debt, the biggest contributor to increased household debt was consumer credit, which rose more than $100 billion in the quarter and was up nearly $350 billion from the prior year. As a result, total net worth for households and non-profit organizations fell just $0.4 trillion in the quarter, a big improvement over the second quarter’s $6.3 trillion decline. However, the impact of the second quarter persists, with net worth in the third quarter registering down more than $2.0 trillion from the prior year.

Find the full Flow of Funds data here.


Article By: Danielle Hale, Chief Economist Realtor.com