Home prices continue to surge across the country, recuperating the lost equity for homeowners.
A new report from Black Knight reveals that home prices reached record highs in 60% of U.S. markets in June, surpassing the previous year’s levels with an annual growth rate of 0.8%. The overall index also experienced a month-to-month increase of 0.67% from May to June.
This price surge is primarily due to the insufficient housing supply to meet the rising demand. Current homeowners are hesitant to list their properties for sale because higher mortgage rates discourage them from purchasing new homes.
Consequently, the increase in home prices has restored homeowner wealth, bringing home equity levels within 3% of last year’s peak. The total equity surpasses $16 trillion, with tappable equity amounting to $10.5 trillion. This leaves homeowners with approximately $200,000 in accessible cash.
However, this surge in home prices has led to a decline in home affordability for potential buyers, reaching a 37-year low. Existing homeowners with mortgage rates between 3% and 4% spend only 21% of their median household income on mortgage payments. In contrast, prospective buyers today may need to allocate more than 36% of their income towards payment obligations due to higher home prices and interest rates.
The average rate for a 30-year fixed mortgage has risen to 7.2%, a significant increase from the 3% rate just two years ago.
“The low income share required for existing homeowners to meet mortgage obligations, combined with the strong credit quality of current mortgage holders and industry efforts to mitigate losses, contribute to the historically low levels of seriously delinquent mortgages,” explains Walden.
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