According to CoreLogic’s Homeowner Equity Insights report for the second quarter of 2022, US homeowners now have a record average equity per borrower of $300,000. In just one year, From Q2 of 2021 to Q2 of 2022, the average home equity has increased nationally by $60,000 and in Illinois by $33,000. Homeowners with a mortgage (63% of all homeowners) have seen their equity increase 27.8% or $3.6 trillion!
As the housing market slows due to higher interest rates and prices, homeowners are naturally worried about a housing recession. Since Illinois home prices only recovered from the Great Recession in 2021, the prospect of another housing recession is especially concerning.
While recession fears are understandable, given that most people’s wealth is bound up in their homes, the situation that resulted in the 2008 recession was the exact opposite of today, with outstanding home equity loans roughly double ($680 billion) what they are now ($380 billion). Since then, homeowner equity has gone up steadily.
Most economists are predicting a slowing market with prices leveling off. The University of Illinois Chicago Stuart Handler Department of Real Estate is predicting that prices will increase in the 5% range for the remainder of 2022. CoreLogic predicts home prices nationwide to increase 3.8% over the next year. That’s because low housing inventory relative to increased household formations will keep demand for homes strong.
Americans are sitting on a mountain of home equity. This will dampen the effect of any market slowdown or correction making a repeat of the Great Recession very unlikely. That is great news for everyone!