Real Estate

Own real estate? You should feel twice as wealthy!

Homeowners are borrowing less against their equity than they did before the market crash

Thanks to rising home prices (and we know they have been rising in San Francisco), homeowners (and investors) are getting wealthier, according to a recent study from real estate data firm CoreLogic. Its Home Price Index and HPI Forecast indicate that home equity has doubled in the last half-decade.

“Home equity wealth has doubled during the last five years to $13 trillion, largely because of the recovery in home prices” said Frank Nothaft, chief economist for CoreLogic. “Nationwide during the past year, the average gain in housing wealth was about $11,000 per homeowner, but with wide geographic variation.”

Nationally, home prices have recovered all of their losses and are back at the highest levels since June 2006 record highs, per the S&P Case-Shiller August index. Locally, CoreLogic reported that in the month of September 2016, home sales in San Francisco rose 23 percent year over year, compared to a 3.2 percent increase in the Bay Area as a whole. Most of the sales increases in San Francisco are attributable to new construction, primarily condos. Typically, condo developers begin selling their condominiums long before construction is completed, resulting in clusters of closings down the line. We are now experiencing those closings, and they are having an impact on the percent of price increase for San Francisco homes overall. If, however, we pull these sales out of the equation, we find single family homes in San Francisco have increased 5.3 percent year-to-date, while resale condos are down 9 percent. Always bear in mind that each month the properties sold will be different, and this in turn affects these figures.
Nevertheless, the San Francisco market has been enjoying a strong year to date as total home and condominium sales in San Francisco are up 7.5 percent, which is much better than the overall Bay Area, which is down 2.7 percent.

The outlying factor is that Millennials are slower to start the home-buying process. This is partly due to the large student loan debts with which they are dealing. We are lucky that there are so many good high-tech jobs in our marketplace, and I hope this will contribute to helping the local Millennials become homeowners’ sooner and get them started on the equity accumulation path.
All real estate is local. We are very lucky to be in one of the country’s consistently strong areas. Even though the U.S. as a whole has appreciated, some states — such as Connecticut and Alaska — are seeing annual declines, and Arkansas, New Jersey, North Dakota, Oklahoma, Wyoming, Maine, and Maryland are barely in the black. Washington, Oregon, Colorado, and Utah are enjoying gains as many tech companies are relocating to those states.
It’s important to note that though homeowners are showing more wealth on paper, they are not extracting it at the high rates we saw prior to the recession. The practice of using their homes like personal ATM machines got many homeowners in trouble when the economic downturn hit.

Thankfully, while today’s near-record low mortgage rates have certainly prompted many to refinance, only a very small share have extracted equity.
So homeowners get wealthier, and those trying to become homeowners have to face not just higher prices, but a lack of inventory. There is clearly demand, but just not enough supply to fulfill it.

My suggestion is to take the long view. It is better to get your foot in the door of homeownership, even if it is not your dream property. You might even consider buying an investment property to start on the path of equity building, with the long view to parlaying that equity into your dream home down the line. I have even suggested to some first-time buyers that they find another friend who wants to buy and purchase a duplex together. There are more ways to begin property ownership than just waiting for that perfect home to come along.
So the good news is that home equity has increased personal wealth in the United States, and most definitely here in San Francisco. This is yet another benefit of living in the beautiful Bay Area.


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Stephanie Saunders Ahlberg has been a real estate agent for more than 30 years and joined Hill & Co. in 1983, where she has consistently been among the top 10 salespeople. She can be reached at