Homeowners faring better than buyers in the current housing climate, data shows

Homeowners are well-situated to take advantage of rising equity levels which could allow seniors to age in place, while prospective buyers and renters face an affordability crisis

Homeowners have seen their collective home equity rise by more than $6 trillion over the past two years, and while mortgage rates are increasing, so are home values. This is according to data from the New York Times citing a study by the Federal Reserve, reported in a new column published by The Street.

This comes at a time when renters and those looking to become homeowners are facing affordability concerns due both to rising rates of home price appreciation (HPA) and precipitous increases in rental costs across the country, the column says.

“Home prices soared 19.8% in the 12 months through February, according to the Case-Shiller Home Price Index,” the column says.

Seniors are also specifically faring well, with the column citing the recent data release from the National Reverse Mortgage Lenders Association (NRMLA) and data analytics firm RiskSpan, which recently revealed that collective senior housing wealth reached $10.6 trillion in the fourth quarter of 2021.

“As you might expect, the wealthy have made out the best from rising home prices over the years,” the column reads. “Of the $8.2 trillion in housing wealth amassed from 2010 through 2020, high-income homeowners claimed 71% of it, according to the National Association of Realtors (NAR).”

However, such increases in home prices have likely contributed to the rise in inflation that has been harming the U.S. economy of late even while homeowners are well-positioned, the column says.

“The recent home-price increase has sent the housing market out of whack and contributed to rampaging inflation. Consumer prices rose 8.5% in the 12 months through March,” it reads. “In one of the latest negative signs for the housing market, [NAR’s] pending home sales index fell 1.2% in March, the fifth monthly drop in a row. Pending sales measured for existing homes slid 8.2% from a year earlier.”

However, when it comes to senior homeowners specifically looking to age in place, the levels of HPA could make a product like a reverse mortgage a more attractive option according to Steve Irwin, president of NRMLA.

“To help ameliorate the risks and concerns surrounding the ability of homeowners to age their way, it is critical that housing wealth is carefully and responsibly considered when developing a comprehensive retirement plan,” Irwin said alongside the recent data release. “For many, housing wealth is indeed their greatest asset, and tapping that equity, under the right circumstances, will enable a secure path to aging security.”

Read the column at The Street.

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