Household Balance Sheets in the First Quarter

The latest results from the Federal Reserve’s Z.1 Financial Accounts of the United States, i.e., the Flow of Funds, show that in the first quarter of 2022, the aggregate market value of all owner-occupied real estate in the United States showed the largest year-over-year percentage gain since 2001. Owners’ equity as a percentage of households’ real estate was the highest since 1986.

From $38.1 trillion in the fourth quarter of 2021, the market value of owner-occupied real estate increased by $1.6 trillion to $39.7 trillion in the first quarter of 2022, on a non-seasonally adjusted basis. Households real estate assets’ year-over-year gain in the first quarter was 16.2%, breaking the previous quarter’s record for the largest post-Great Recession increase. Staggering and unprecedented home price growth, an ongoing phenomenon since the pandemic, was the main contributor to the increase in market value. Remodeling is another factor that boosts a house’s market value but held steady during this period.

Real-estate secured liabilities of households’ balance sheets, i.e., mortgages, home equity loans, and HELOCs, showed an increase of $0.2 trillion to $12.0 trillion from the previous quarter. This also marked an 8.4% year-over-year gain, the largest such increase since the first quarter of 2007. The change in the value of total home mortgages owes to a combination of new loans taken out for home purchases and the aggregate unpaid principal balance of all existing mortgages. This period’s increase, then, may have owed more to the heated market catering mostly to those who could afford more expensive homes, as evidenced in the Mortgage Bankers Association’s Weekly Application Surveys from the first quarter.

Aggregate owners’ equity, i.e., the difference between homeowners’ real estate-secured assets and liabilities, rose to $27.8 trillion or 70% of all owner-occupied household real estate. Home equity’s value is many homeowners’ source for financing remodeling projects, collateral against which loans can be taken out (home equity lines of credit or home equity loans).