Matthew Puzzini ‘25

Owning a home is something that many people dream about. While the pandemic destroyed countless lives, it has handsomely rewarded homeowners. Rock-bottom mortgage rates combined with pent-up demand have created unprecedented gains. These gains have impacted both buyers and sellers, and it has economists looking to predict the future of a red-hot housing market.

Housing prices have been flying since the start of the pandemic. CoreLogic published statistics that showed homeowners with mortgages had an equity increase of 20% from Q1 2020 to Q1 2021. This works out to be a collective cash gain of almost two trillion dollars and an average gain of $33,400! The period from Q2 2020 to Q2 2021 was an even greater increase with an average gain of $51,500 per borrower. Frank Martell, CEO of CoreLogic, said that “Homeowner equity has more than doubled over the past decade and become a crucial buffer for many weathering the challenges of the pandemic.” This has been true, and homeowners that bought pre-pandemic have seen immense increases in just under two years.

However, being a homeowner is just a dream for some. Experts say that rising home prices contribute to continued inequality, as income has not nearly kept pace with home prices. Over the last 10 years, incomes have increased 11%. Over this same period, median home prices have risen 30%. Lenders recommend spending less than 28% on your pre-tax income on a mortgage, and the average household income is $67,521. With the average sale price of a new home reaching $408,000 in 2021, many workers have no chance. These trends continue to increase the wealth gap, and the recently inflated prices put many people further away from the ability to purchase a home.

With so much recent growth, many Americans are wondering if there is a housing crash looming. Most experts give a resounding ‘no’ to this question. Unlike the early 2000s, mortgage underwriting standards have remained steady. Also, unlike earlier housing crashes, the supply is not expected to greatly outpace the demand. However, although experts do not expect an all-out free fall, many do expect a slight dip as interest rates rise and people are priced out of the process. The Federal Reserve is also expected to stop buying securities each month by mid-2022, which could impact the housing market. Even with this uncertainty, the benefits of owning a home remain as strong as ever. History has shown that if you hold, good things happen.

Housing prices have an impact on many Americans and are often the largest purchase of one’s lifetime. Homeowners saw massive spikes in the value of their homes over Covid, and this has continued to be the case. Experts have brushed off any concern for a complete collapse, but many are saying that a pullback is likely. So, while homeowners may feel some dejection in the future, for now, the market continues to roar ahead. 

Sources:

https://abcnews.go.com/Business/wireStory/us-home-prices-register-191-annual-gain-september-81466326

https://www.census.gov/library/publications/2021/demo/p60-273.html

https://www.cnbc.com/2021/11/10/home-prices-are-now-rising-much-faster-than-incomes-studies-show.html

https://www.forbes.com/sites/billconerly/2021/10/05/the-housing-boom-is-not-a-bubble/?sh=5ed2afc42eb4

https://www.foxbusiness.com/real-estate/record-number-homes-sell-above-list-price

https://www.marketwatch.com/story/pending-home-sales-surge-higher-in-october-will-the-new-covid-variant-trip-up-the-real-estate-market-11638198301

https://www.marketwatch.com/story/the-average-family-cant-afford-to-own-a-home-in-most-u-s-counties-study-finds-11609785827

https://www.reuters.com/business/feds-bond-buying-timeline-roaring-entry-boring-exit-2021-11-02/

https://www.statista.com/statistics/240991/average-sales-prices-of-new-homes-sold-in-the-us/