The Federal Reserve’s latest release of the Z.1 Financial Accounts of the United States shows the flows into and out of households and non-profit organizations as of the third quarter of 2020. As of the third quarter of 2020, the market value of all real estate assets held by households stood at $31.2 trillion. On the other side of the balance sheet, liabilities, mortgages totaled $10.8 trillion. As a result, total owners’ equity, equaled $20.4 trillion or 65% of household real estate values.

The percentage of owners’ equity was down by one-hundredth of a percent from the second quarter, owing to the disproportionate increase in home mortgages by over $100 billion, unprecedented in recent history. In fact, this is the first time since the first quarter of 2011 that the equity share has decreased from a previous quarter. The gain in mortgages is due to a surge in home buying during the third quarter as well as mortgage payment deferrals.

The figure above also shows that, as of the third quarter of 2020, the total value of all home mortgages reached $10.79 trillion, thus, for the first time, exceeding the boom-related peak level of $10.70 trillion that existed at the outset of the Great Recession (the first quarter of 2008).

Given the robustness of housing demand, the rise in the aggregate value of home mortgages is expected. Rising buyer demand and inventory shortages also explain accelerating price growth.

Tags: federal reserve board, financial accounts of the united states, flow of funds, homeowner equity, house price growth, household balance sheets, housing demand, owners' equity, recession