Household Balance Sheets: 1Q20


The first quarter of 2020’s Financial Accounts of the United States, the Federal Reserve’s flow of funds data, show the aggregate values of households’ assets and liabilities in the nation. Households’ real estate assets totaled $30.3 trillion and liabilities totaled $10.7 trillion, making homeowners’ equity $19.7 trillion or 65% of total household real estate.

The first quarter’s data saw a continuation in the increase in the aggregate values of home mortgages, suggesting that, prior to the outbreak of COVID-19 in the United States, there was some homebuying activity. At the same time, real estate assets’ market values increased, which was also echoed in House Price Indexes’ appreciation for the same period. As the virus killed the United States’ longest economic expansion in the U.S. on record, with GDP shrinking by 5.00% in the first quarter, in the following weeks, lenders increased their scrutiny over borrowers’ creditworthiness, with standards for mortgage approval steeply rising.

Net household equity, determined by the difference between households’ assets and liabilities, serves as an alternative means of financing for single-family homeowners. For the first quarter, net equity’s share of households’ real estate assets’ value increased from the previous quarter by one quarter of a percentage point. This phenomenon may owe more to home price appreciation as, according to the financial accounts, in the first quarter the outstanding value of home equity loans (including home equity lines of credit but excluding all loans held by individuals) taken out on one-to-four family residential mortgages decreased by $6 billion to $495.3 billion on a non-seasonally adjusted basis.

Ensuing quarters’ data may shed light on whether the equity was used for home equity loans, a form of non-revolving credit, or home equity lines of credit, a form of revolving credit, considering thesurge in unemployment in April.

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