The economic expansion over the past nine years has not only created more than 20 million jobs and raised family incomes but has also driven the recovery of the housing market, according to a special report by CoreLogic.
The report indicated that over the past decade, not only has the number of homes with negative equity decreased (4.1% in Q1 2019 against 25.9% during the same period in 2010), but total home equity has also hit a record high.
At the end of Q1 2019, total home equity reached $15.8 trillion, up from $6.1 trillion a decade ago. Additionally, between Q1 2010 and Q1 2019, the average equity per borrower increased from approximately $75,000 to around $171,000.
“Home prices have increased steadily since 2011, creating record amounts of home equity and putting homeowners in a good position to weather future downturns,” said Molly Boesel, Principal Economist at CoreLogic.
But the rise in home prices has also impacted housing affordability, especially in some areas of the country.
Take California for example. According to Frank Nothaft, Chief Economist at CoreLogic, “While California’s home prices grew considerably from 2013 to 2018, affordability issues in the state have since hampered growth with the state’s average annual home price dropping from 7.4% in 2018 to 4.9% in 2019.”
The effects of affordability are being felt by millennials—the largest cohort of homebuyers. According to the report, millennials made up 44% of home-purchase mortgage applications in 2018. However, metros in California had the lowest percentage of millennials applying for a mortgage.
Additionally, the millennial share of homebuyers was higher in more affordable metros. Citing data from the CoreLogic Market Conditions Indicator the report said that of the top 10 metros for millennial buyers, four (Pittsburgh; Rochester, New York; Wichita, Kansas; and Grand Rapids, Michigan) were undervalued, five (Buffalo, New York; Milwaukee; Albany, New York; Provo, Utah; and Des Moines, Iowa) were at value, and one (Salt Lake City) was overvalued .
But despite the challenges of affordability, the housing market is set to remain stable over the next 24 months, the report found. “We expect the housing market to enter a normalcy phase over the next 24 months. With prices, neither rising too fast nor too slow, and with a growing stream of young households looking to buy homes over the next two decades, the long-term view looks healthy,” said Ralph McLaughlin, Deputy Chief Economist.