If you own a home and you’re paying attention to its value, you may have noticed that prices are on the rise. In some cases prices have increased substantially, and other prices have increased at a head scratching, almost mind-numbing pace!
The chart below, from the Federal Reserve’s FRED database, shows the year over year change in US housing prices. Since the start of the index in 1987, housing prices have never risen at a faster rate.
One interesting point. On the chart above, recessions are shaded. Prior to 2020, housing prices either declined heading into recessions (anything below zero is an actual decline) or at least the rate of increase slowed (a downward sloping line above zero). But in 2020 housing process not only rose but accelerated into the recession.
Part of the reason for this is monetary. The Federal Reserve has been printing money and pushing it out into the economy at an unprecedented rate in response to the pandemic. They’ve also been buying mortgage-backed securities to support the lending market, again at an unprecedented rate.
Another underlying reason for the price increases is structural. Due to the pandemic, there’s been significant movement from people out of the close quarters of cities and into lower population density suburbs. This shift has created a sharp increase in demand for single family homes.
While the “unprecedented” nature of home-price changes may be novel, the accumulation of home equity is nothing new. If you are wondering what to do with the increased value of your home, or struggling with issues about buying or selling property, consider talking with a financial advisor. Home equity is often one of the largest components of net worth. Give it the consideration it merits.
Sincerely,
Jim, Mark, and Dave
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