Home Equity Gains Reached New Highs in 2021

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It is widely anticipated that the Federal Reserve will announce This Week in Real Estate their intention to speed up the end of its bond-buying program sooner than the current timeline of June 2022. Strategists do not expect much market reaction unless its forecast for interest rate increases is more aggressive than expected. The Fed’s meeting is scheduled for Tuesday and Wednesday. Below are a few newsworthy events from the first week of December that influence our business: 

Home Equity Gains Reached New Highs in 2021. Soaring home prices over the past year boosted home equity wealth to new highs through Q3 2021. The amount of equity in mortgaged real estate increased by $3.2 trillion in Q3 2021, an annual increase of 31.1%, according to the latest CoreLogic Equity Report. The average annual gain in equity was $56,700 per borrower, which was the largest average equity gain in more than 11 years, and more than three times the gain from a year earlier. The nationwide negative equity share for Q3 2021 was 2.1% of all homes with a mortgage, the lowest share of homes with negative equity since CoreLogic started tracking this number in the third quarter of 2009. 

Fed Is Expected To Speed Up End Of Bond Buying And Signal Interest Rate Hikes Are Coming. In the coming week, the Federal Reserve could decide to speed up the end of its bond-buying program and signal that it expects to start hiking interest rates in 2022. In November, the Fed announced it would wind down its $120 billion in monthly bond purchases at a pace of $15 billion a month. If it speeds up the process, strategists say it may finish by March. The bond-buying program, known as quantitative easing, was put in place in early 2020 to help the economy and financial markets combat the impact of the pandemic. The Fed also had quickly slashed its fed funds target rate to zero. 

Will The Housing Market Continue Its Hot Streak In 2022? One, demand will continue to be strong into 2022. The first signal we look at to forecast the strength of the housing market is days on market – how fast are homes moving? Right now, we’re seeing a median of 49 days on market and climbing, as it normally does this time of year. A typical December would see market time at 85 – 100 days, so you can see from the chart that demand is staying elevated later in the year, which is a bullish sign for next year. Due to the strong seasonal patterns, I predict days on market will hit a low of 21 days in April, tying the record-fast market times from earlier this year. Two, low inventory will continue to be a major issue. Unfortunately for all these eager homebuyers, inventory continues to be at record low levels. We are currently at just over 350,000 single-family homes on the market. At this point, it looks like we’re going to end the year at just under 300,000 single-family homes for sale. If we’re lucky, we’ll start getting greater inventory in the housing market in February, then it’ll start climbing and be at a more normal curve next year, but we’re still miles away from a normal level, with no indication that we’ll return to our usual million homes anytime soon. Three, home prices will remain high into 2022. With demand showing no signs of cooling and record-low inventory, I expect home prices to remain high into next year. The median home price for single family homes this week is $375,000, which is about 10% higher than last year and where we are likely to end the year. As we look towards 2022, all the leading indicators show tight inventory and strong demand keeping prices high – a strong seller’s market. If interest rates start rising, and we’re seeing inflation or other economic challenges, this could have a cooling effect on the market. 

Did you know every home listed for sale with Berkshire Hathaway HomeServices Northwest Real Estate and Berkshire Hathaway HomeServices Real Estate Professionals are eligible to receive no-obligation home warranty coverage from American Home Shield or 2-10 Home Warranty the first six months the home is listed with our company?

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