Key Highlights
- CoreLogic indicated that property values accelerating at fastest pace since May 2014
- ATTOM Data Solutions indicated that at least 30% of US homeowners equity rich in Q4 2020
Federal Reserve Creating Wealth Effect with Rising Home Values
Early on into the COVID pandemic, the Federal Reserve chose to keep interest rates near zero in order to keep lending afloat in the midst of overwhelming job losses and business closings. Additionally, the federal government initiated forbearance programs in an effort to keep homeowners from panic selling properties they could no longer afford in the midst these crushing job losses and closings.
The result? According to Todd Teta, chief product officer with ATTOM Data Solutions, “The housing market kept booming despite the damage caused by the virus pandemic to the broader economy.”
Q4 2020 Equity Rich Properties Held by +30% of US Homeowners
The latest S&P CoreLogic Case-Shiller property value index indicated that property values were accelerating at the fastest pace since May 2014 in Q4 2020. Data from ATTOM Data Solutions indicated that approximately 30.2% of the nation’s 59M mortgaged homes in the US were worth twice as much as their mortgage in Q4 2020. This rise in equity rich properties is considered to be a direct result of the currently historically low interest rates determined by the Federal Reserve.
Gap Between Equity Rich and Underwater Properties Only Growing
Despite the Fed’s intention to reduce the number of underwater properties in the country by initiating near record-low interest rates, the gap between equity rich properties and properties with delinquent mortgages is more than 40%.
True, there are fewer seriously underwater properties today due to nearly record-low interest rates…just 5.4% of all mortgaged properties but some states are suffering from these delinquent mortgages than others.
According to ATTOM, six states (Louisiana, Mississippi, West Virginia, Iowa, Arkansas and Illinois) are home to the most underwater properties in the country. Ten of the largest equity rich areas in Q4 2020 live in the western part of the country while five of the top zip codes were in California.
Tyler Durden, writing for zerohedge.com, recently wrote that it’s time for “…Powell (chairman of the Federal Reserve) and the rest of the central-planners…to wake up to the reality that their so-called ‘recovery’ has left tens of millions of people behind.”
Thanks to zerohedge.
