Housing equity rose 30% or more than $2 trillion over the past year as prices rose, home purchases rebounded, and mortgages outstanding continued to decline according to second quarter data from the Federal Reserve’s Flow of Funds.
Mortgage debt outstanding fell by slightly less than $200 billion while the market value of household real estate surged 12 percent, topping $18.6 trillion.
The rise in the value of household real estate is welcome relief to owners, but as prices rise and affordability starts to wane, some wonder whether we are seeing a return of a housing bubble. Here are some reasons that is unlikely the current case.
In spite of the rise in house prices, the total value of household real estate remains roughly 18 percent below the peak in 2006. Additionally, mortgage debt has been on the decline.
The housing market has rebounded in spite of falling mortgage debt in large part because of all-cash or high cash purchases. Scholastica Cororaton discusses the latest results from the Realtors® Confidence Index here, which show that 29 percent of recent transactions in July were all-cash purchases. This trend has been quite consistent over the last few years in spite of low mortgage rates.