Economists' Outlook

Housing stats and analysis from NAR's research experts.

Homeowner Equity as a Share of the Value of Real Estate Could Normalize Within the Year



  • Just as the rise in home prices had slowed in the middle quarters of 2014, the rise in owners’ equity in real estate slowed.  Now, however, as home prices are accelerating, owners’ equity in real estate is growing at the fastest quarterly rate since 2013.
  • Household owners’ equity—the value of real estate households own less any outstanding mortgage debt—rose by $443 billion (3.9 percent) from 2014Q4 to 2015Q1.  The total value of household equity is now $11.7 trillion or $5.6 trillion higher than the trough during the housing crisis.  This is roughly $63,000 per property[1].
  • Home owner equity is on the rebound as a result of construction, rising prices, and a continued decline in mortgages outstanding according to first quarter data from the Federal Reserve’s Flow of Funds. Mortgage debt outstanding fell by nearly $33 billion while the market value of household real estate rose $411 billion.
  • The total value of household real estate reached $21.1 trillion, still $1.4 trillion or 6 percent shy of its value in the first quarter of 2006, near the previous value peak[2].
  • One way of judging whether we are back to “normal” would be to look at the equity that is accumulated in real estate relative to the value of the real estate.  In total, home owners now have equity equal to slightly more than half of the total value of household real estate  (56%) compared to as little as 37 percent in the first and second quarters of 2009.
  • The chart below shows that the share of equity was roughly stable at just less than 60 percent from 1995 to 2005.  Holding the current level of mortgage debt outstanding constant, the value of household real estate would need to grow to about $22.3 trillion to reach that share of equity, or roughly a 6 percent gain from its current level.
  • At the growth rate seen in 2015Q1, the share of equity in real estate would be fully recovered by the end of the year, but if the growth rate slows to what we saw in mid-2014, the share of equity would be fully recovered by mid-2016.

[1] The Fed indicates that this includes owner-occupied housing, second homes that are not rented, vacant land,

and vacant homes for sale.  Using the Census Housing Vacancy Survey, housing units meeting this description have totaled roughly 88 million for the past 8 years. The experience of any particular owner may vary notably from the average.

[2] Because the data is not seasonally adjusted, we have compared first quarter 2015 to the first quarter of 2006 in an attempt to mitigate any seasonal effects.

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