- A burned-out home is for sale for $ 399,000.
- The house is located in the state of Massachusetts.
- This price is an example of the current status of the real estate industry.
A Massachusetts home that was severely damaged by fire is for sale for $ 399,000. WBZ-TV reported on Monday that the home’s advertised price in Melrose, a Boston suburb, is evidence of the state’s booming housing market.
In August, industry groups said the average price for a single-family home in the state was between $ 535,000 and $ 552,000.
A fire in August
The online ad for the 1,857-square-foot (three-bedroom, 173-square-meter) home begins with a call for contractors, noting that “the house is in need of a total renovation or potentially being torn down and rebuilt. Buyer should give due consideration. The house is being sold as is ”.
The house suffered a fire in August that blew out the glass in the front windows, which are now covered with boards. The Boston Globe reported that firefighters had to break parts of the walls and ceiling to extinguish the blaze.
2021: year of high prices
High home prices have driven up average home equity growth. the owners at the highest level in more than a decade, although recent signs of a market american real estate that is cooling point to more moderate gains in the second half of the year.
Homes with a mortgage earned an average of $ 51,500 in equity in the second quarter, a 29.3% increase from the April-June quarter of last year, according to real estate information company CoreLogic. That’s the highest average quarterly gain in home equity since the second quarter of 2010, the firm said.
Increase accumulated value
That equates to nearly $ 3 trillion in equity earned by American homeowners with a mortgage, which is about 63% of all homes, CoreLogic said. Average homeowners equity increased nearly 20% in the first quarter from a year earlier.
Growth in home equity can have a broad impact on the economy, giving homeowners more financial flexibility to spend on large purchases or accumulate savings. Rising home values also make it increasingly difficult for prospective homeowners to buy.
Record in the last 10 years
Homeowners in California, Washington State and Idaho saw one of the largest increases in average equity in the second quarter: $ 116,000 in California, $ 103,000 in Washington State and $ 97,000 in Idaho.
The rise in homeowners’ net worth earnings follows a record rise in U.S. home prices this year amid a fiery housing market fueled by ultra-low mortgage rates, a tight inventory of properties for sale and the desire of many potential buyers for more living space. during the pandemic.
Figures that increased
S&P said this week that its 20-city S&P CoreLogic Case-Shiller home price index, closely followed, rose 19.9% in July from a year earlier, the biggest gain on records dating back to 2000. Still , there are signs that the skyrocketing house prices that boosts homeowner equity may have peaked.
The most recent snapshot of the real estate market from the National Association of Realtors showed that the median price of previously occupied homes in the US increased 14.9% in August from a year earlier to $ 356,700. That’s a more modest gain than earlier this year, when year-on-year increases were 20% to 25%.
Next year: different scenario
“It seems like there was that switch from July to August where you start to have a little pullback in terms of where prices have gone,” said Ali Wolf, chief economist at Zonda Economics, a real estate industry tracker. Wolf projects U.S. home price growth to slow to around 5% next year, citing expectations for moderately higher mortgage rates and a small but noticeable increase in the number of homes on the market.
“The days of runaway home price growth are behind us,” he said. In its most recent quarterly home forecast, homebuyer Freddie Mac forecasts that home prices will grow 5.3% next year, below the projected 12.1% increase in 2021.
Need for greater financial flexibility
If those home price outlooks hold, it would translate into a less torrid pace for homeowner equity growth next year. Still, the huge growth in homeowners’ equity this year will have ripple effects for the broader economy and the housing market.
Increasing homeowners equity creates a buffer for borrowers against potential financial hardship, such as job loss. And it can give homeowners financial flexibility to borrow against their principal to pay off high-interest debt or finance major purchases, such as home improvement projects, that can boost the economy.
More difficult purchases
“It’s good for broader economic growth, but there is an ugly side to the current price level,” Wolf said. “Those who have chosen not to buy a house or have not been able to do so, now it is very difficult to enter the market and, in many cases, these people are missing the accumulation of wealth.”
Rising home prices this year have made it difficult for prospective homeowners to buy. First-time buyers accounted for 29% of home sales in August, according to the National Association of Realtors. A year ago they made up 33% of buyers.
Negative net worth
The US homeownership rate was 65.4% in the second quarter, up from 66.6% last year and 66.2% a decade ago.
The increase in home equity has helped limit the number of homeowners who end up “sunk” in their mortgage or owing more on their loan than their home is worth. Also known as negative equity, this can happen when the value of a home decreases or when the size of the mortgage increases – for example, when someone takes out a home equity loan.
The big cities
At the end of the second quarter, 1.2 million homes, or 2.3% of all US homes with a mortgage, had negative equity, CoreLogic said. That’s 30% less than in the same quarter last year.
Among US metropolitan areas, Chicago had the highest share of homes with negative equity in the April-June quarter at 5.2%, the firm said.