Equity Position of U.S. Households Improves

The Federal Reserve Board of Governors’ recently released statistics on the financial accounts of U.S. households. The release shows continued improvement in the financial position of U.S. households with real estate. In fact, the household real estate equity position improved to a level last reached in the second quarter of 2007.

According to NAHB tabulations of the quarterly series, the asset value or market value of owner-occupied real estate held by U.S. households increased by $758 billion dollars or 3.9%. The liability total – home mortgages – decreased by $37 billion or 0.4%. The equity position, the difference between assets and liabilities, increased by $795 billion or nearly 7.9%.

Chart1

The figures provided by the Federal Reserve Board of Governors are not adjusted for inflation. Therefore, it is useful to examine the owners’ equity in real estate as a percentage of household real estate. The ratio is calculated by taking the equity position divided by the market value of owner-occupied real estate held by U.S. households. The higher the ratio the more favorable is the financial position of U.S. households with real estate.

Chart2

The current ratio of owners’ equity in real estate as a percentage of household real estate is 53.6%. The ratio was last at this level in the first quarter of 2007. The ratio has rebounded rapidly since the first quarter of 2009 when it was at an all-time low of 36.6%.

The quarterly series shows continued improvement in the balance for U.S. households with real estate. This should not be a surprise given the increase in home prices and the low mortgage rates. The continuing improvement in the financial position of U.S. households with real estate is a welcome sign. The improved equity position represents fewer underwater homeowners, thereby unlocking housing supply and demand.

About these ads

3 Responses to Equity Position of U.S. Households Improves

  1. […] The Federal Reserve Board of Governors’ recently released statistics on the financial accounts of U.S. households. The release shows continued improvement in the financial position of U.S. households with real estate. If fact, the household real estate equity position improved to a level last reached in the second quarter of 2007. According to NAHB tabulations […] Eye on Housing […]

  2. […] For more information, or to view this original post, visit NAHB’s blog, Eye on Housing. […]

  3. […] data also reflect the progress in housing in recent years. According to the Flow of Funds data, home owner equity has reached a level last experienced in 2007. In the last quarter, home owner equity grew by $795 […]

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Follow

Get every new post delivered to your Inbox.

Join 6,541 other followers

%d bloggers like this: