Residential Real Estate Created $2 Trillion in Wealth for Homeowners
July 27, 2021
3 min read

While the current residential real estate market may be causing home buyers short-term pain, the strength in housing is a long-term positive for the overall health of the US economy and has added a tremendous amount of wealth for homeowners. As recently reported by, “Homeowners with mortgages saw their equity jump by 20% in the first quarter from a year earlier. This represents a collective cash gain of close to $2 trillion. Per borrower, the average gain was $33,400. The massive gain is thanks to soaring home prices, which CoreLogic said were up over 11% in March, the end of the quarter, from a year earlier. That’s the sharpest gain since 2006.” The United States is still the main driver of global commerce. When US consumers are flush with cash and feeling confident, the global economy has tended to perform well. Therefore, this magnitude of wealth creation is great news coming out of the extremely challenging year that was COVID 2020.

As we witnessed in the 2008/2009 housing crisis, when the national residential housing market is struggling, the economy as a whole suffers. In the aftermath of that crisis, high levels of unemployment and an economy in recession both contributed to historical levels of residential home foreclosures. 

In the midst of the COVID19 crisis in 2020, the US economy experienced the highest unemployment figures since the Great Depression of the 1930’s. It would not have been unreasonable at that time to expect similar levels of home foreclosures and consumer pain following this crisis. However, that has not been the case, and one of the keys has been increasing home prices. As detailed in the article, “Homeowner equity has more than doubled over the past decade and become a crucial buffer for many weathering the challenges of the pandemic,” said Frank Martell, president and CEO of CoreLogic. “These gains have become an important financial tool and boosted consumer confidence in the U.S. housing market, especially for older homeowners and baby boomers who’ve experienced years of price appreciation.”

As we have stated in the past, the health of the residential housing market is intimately tied to industries that span the entire U.S. economy. These can include skilled labor, construction, building materials, plumbing and electric, banking, insurance, and retail. When the US residential housing market is strong and healthy, all of those sectors see a boost in economic activity. As the US economy begins to emerge from this latest crisis, the strength in the residential home market is emerging as a significant support system for millions of homeowners and bodes well for a strong bounce back with consumers.

No one can know for sure how long this strength in housing will continue. There are already signs that the demand for homes is beginning to cool a bit. As the acute supply shortage continues, many buyers have stepped back from the market, rather than get caught up in bidding wars. Many families have hit an affordability wall with respect to purchasing a home and have opted to rent instead. However, It could be some time before the home supply/demand dynamic moves toward a healthier balance. As detailed in the article, “Home prices are not, however, expected to crash, since there is still strong demand for housing, and the demographics support that going forward. As prices moderate, buyers will come back. Unlike the last time home prices crashed, today’s mortgage underwriting is far more stringent.”

The all-encompassing and dire nature of the pandemic meant that it had the potential to cause serious long standing financial damage to the global economy. While the current housing boom is unquestionably creating challenges for families looking to rent or purchase a home, the strength in the underlying fundamentals of the housing market are a significant plus for US consumers and the economy as a whole.

Chris Jones
Chris Jones

Chris oversees business development, investor relations, and capital partnerships. With 25 years of experience in alternative investments, Chris has raised $250 million in assets. He’s served as Chief Compliance Officer, co-managed a Fund of Funds, and worked in operations and trading. Chris has been instrumental in growing four companies. Through firms like Sapourn Financial Services, Dekker Capital Management, and Diamond Peak Capital, he’s delivered solid absolute returns across varied market cycles.