The latest Federal Reserve Z.1 Financial Accounts of the United States, i.e., the “Flow of Funds”, show that in the second quarter of 2021 the aggregate market value of all owner-occupied real estate in the United States registered the largest quarterly increase in the last 21 years of data. From $33.8 trillion in the first quarter of 2021, real estate rose by $1.1 trillion in value to $34.9 trillion, making it the largest quarterly increase on record. As a previous post details, the second quarter also saw unsustainably high home price appreciation due to lack of inventory.
On the liabilities side of real estate’s balance sheet, home mortgages rose by $220 billion in the last quarter to $11.3 trillion, which is greater than the previous quarter’s quarterly increase in aggregate value. In terms of the scale of increases, real estate assets are increasing much faster than real estate liabilities. Per the latest reports by the Mortgage Bankers Association (MBA), the share of loans in forbearance has decreased not only in recent weeks (i.e., thru the third quarter) but were also trending lower in the second quarter itself. The most current report by the MBA, as of September 12, indicates a forbearance rate of 3%.
Since the flow-of-funds data are not seasonally adjusted, it is useful to make year-over-year comparisons. In the second quarter, the year-over-year rate of appreciation of the market value of all real estate assets was 12%.
Finally, aggregate owners’ equity, that is, the difference between the market value of all owner-occupied real estate and the aggregate value of home mortgages increased in the latest quarter to $23.6 trillion, or 68% of all household real estate, the highest share since 1989.
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