The past two years haven’t been kind to Americans who are looking to buy a home or who are renting places to live, as home prices and rents have exploded.
But it’s been a great time to be a homeowner. Over the past two years, people in that category have seen their wealth rise $6 trillion excluding rental properties, according to The New York Times, citing a Federal Reserve study.
That increase, of course, stems from the surge in home prices. Home prices soared 19.8% in the 12 months through February, according to the Case-Shiller Home Price Index.
Homeowners 62 and older have certainly fared well. In the fourth quarter of last year, they enjoyed a 3.98% increase in housing wealth to a record $10.6 trillion, according to the National Reverse Mortgage Lenders Association/RiskSpan.
As you might expect, the wealthy have made out the best from rising home prices over the years. Of the $8.2 trillion in housing wealth amassed from 2010 through 2020, high-income homeowners claimed 71% of it, according to The National Association of Realtors.
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‘A Wakeup Call’“It’s a wakeup call,” Gay Cororaton, senior economist at NAR, said according to The Wall Street Journal. “Policies have to be focused more on making sure that the lower-income and many more middle-income folks participate in the benefit of homeownership.”
The recent home-price increase has sent the housing market out of whack and contributed to rampaging inflation. Consumer prices rose 8.5% in the 12 months through March.
In one of the latest negative signs for the housing market, the National Association of Realtors’ Pending Home Sales Index fell 1.2% in March, the fifth monthly drop in a row. Pending sales measured for existing homes slid 8.2% from a year earlier.
A sale is pending when the contract has been signed but the transaction hasn’t closed. The sale is usually finalized within one or two months of signing. So pending sales are a good indicator for actual future sales.
Meanwhile, the 30-year fixed mortgage rate averaged 5.1% in the week ended April 28, down a tick from the prior week’s 12-year high of 5.11%, according to Freddie Mac. The rate was 2.98% a year ago.
And with the Federal Reserve poised to implement a series of interest-rate increases, following an initial hike in March, mortgage rates are likely to resume their ascent.