The pandemic has been good for one thing; real estate values. The New York Times reported that American homeowners cleared over $6 trillion in housing wealth.
The primary reason was supply and demand, and the story said that 65% of homeowners in America took part in this windfall.
According to experts that follow real estate trends, this has never happened before. Here’s a quote from Benjamin Keys of the Wharton School of Business.
“I really struggle to come up with a parallel to this.”
In the most recent housing boom, the increase in values was similar to this one, but the difference was that it was limited to certain parts of the country.
A recession has the potential to claw back some of this $6 trillion windfall, and there’s a chance property taxes can go up, too, so the vast value gain in real estate is not similar to people having a total of $6 trillion sitting in the bank. Homeowners would need to sell their home or leverage the value for a home-equity loan to tap into the increased values.
The pros and cons of this massive increase in value depend on if you own a home or not. For some, the rising equity will help families create intergenerational wealth for the first time, according to the NYT. It will almost certainly delay their opportunity to get in the game for others who don’t own homes.
For those fearing a similar housing bust like 2008, Mark Zandi of Moody’s said this housing boom is different because it is not hinging on risky loans and mortgages.
Markets that saw the most significant home value increase include San Jose, Los Angeles, San Diego, San Francisco, and Seattle.
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