$6 TRILLION IN HOUSING WEALTH CREATED
U.S. homes appreciated at record pace during COVID-19 pandemic
Over the past two years, Americans who own their homes have gained more than $6 trillion in housing wealth. To be clear, that doesn’t mean homebuilders have transferred to buyers $6 trillion worth of new housing, or that existing homeowners have made $6 trillion in upgrades.
Rather, most of this money has been created by the fact that housing, in short supply and high demand, has appreciated at record pace during the pandemic. Millions of people — broadly spread among the 65 percent of American households who own their home — have gained a share of this windfall.
It’s a remarkably positive story for Americans who own a home; it’s also inseparable from the housing affordability crisis for those who don’t. For them, rents are rapidly rising. Inflation is whittling away their incomes. And the very thing that has created all this wealth has pushed homeownership as a means of wealth-building further out of reach.
In percentage terms, the stock market has risen by more during the pandemic, but fewer Americans have profited from that. During the last housing boom,
the run-up in home values was similarly dizzying but limited to fewer parts of the country. And that equity largely vanished in the kind of bust that economists say is far less likely to happen this time.
The $6 trillion sum, estimated by the Federal Reserve, doesn’t count all the equity in rental properties. So it’s an underestimate of the riches piling up in the housing market lately.
Hard-to-predict events, like a painful recession, could still claw back some of this total. Property taxes can go up.
And this wealth is not the same as having money parked in a bank account. To use it, households must sell a home or tap its value through a tool like a homeequity loan, and that’s not riskfree. But evidence shows that homeowners wield home equity in real ways — to send their children to college, to start businesses, to invest further in housing, building even more wealth.
“There’s a rosy picture and a not-so-rosy picture,” said Emily Wiemers, an economist at Syracuse University who has studied how families tap their home equity to pay for higher education. “The flip side is pretty troubling. There’s this set of kids whose parents don’t own a home and so didn’t see this increase in wealth, and also whose parents may have seen declines in income.”