The total value of owner-occupied real estate in the US retreated in the fourth quarter of 2022 due to a decline in home prices and a rise in mortgage debt. The total value slipped to $43.5 trillion from $43.6 trillion in the prior quarter, while mortgage debt rose to $12.5 trillion, $155 billion higher than its third quarter total, and $760 billion more than its prior year level. Homeowners saw their equity drop slightly compared to the prior quarter, but it remains very close to its second quarter peak of 71.9%, the highest share going back to 1960.
As seen on realtor.com, the total value of owner-occupied real estate slipped to $43.5 trillion from $43.6 trillion the prior quarter, due to the retreat of home prices from their seasonal highs combined with a rising amount of mortgage debt. This is the first annual decline in the median home sale price in February after more than a decade of consistent gains. Seasonally adjusted monthly data suggest that these declines began late in 2022.
Although the value of homes advanced by $4.2 trillion over the past year, the smallest annual gain since 2021-Q1, it is well above the $1.7 trillion that was typical from 2017 to 2019. The value of household real estate is more than double the value of real estate 10 years ago when the current streak of home price gains began.
Despite the retreat of home prices, the amount of debt buyers took on to finance them grew. Mortgage debt totaled $12.5 trillion in the fourth quarter of 2022, which was $155 billion higher than its third quarter total and $760 billion more than its prior year level. Although the fourth quarter saw smaller growth in household mortgage liabilities than the prior two quarters, both of which exceeded $200 billion, mortgage debt grew by more than twice the rate that was typical in the three years before the pandemic (2017 – 2019).
With mortgage debt continuing to climb as the value of real estate retreated, homeowners saw their equity drop compared to the prior quarter. The total value of equity that homeowners had in real estate was just under $31.0 trillion in the fourth quarter, $0.2 trillion less than the third quarter but still $3.5 trillion more than the previous year. Equity as a share of real estate value dropped slightly, from 71.6% to 71.2%, but remains very close to its second quarter peak of 71.9%–the highest share going back to 1960. It’s well above the lows seen in 2011 (46%) and also above the 60-65% share it saw through much of the late 1990s and early 2000s. It continues to mark a striking contrast to earlier periods.
The total value of owner-occupied real estate retreated from its third quarter record due to the combination of the retreat of home prices from their seasonal highs and the rising amount of mortgage debt. The value of household real estate, although it advanced by $4.2 trillion over the past year, was the smallest annual gain since 2021-Q1, but well above the $1.7 trillion that was typical from 2017 to 2019. Mortgage debt continued to climb, totaling $12.5 trillion in the fourth quarter of 2022, which was $155 billion higher than its third quarter total and $760 billion more than its prior year level. Home equity dropped compared to the prior quarter, but it remains very close to its second quarter peak of 71.9%–the highest share going back to 1960. Despite the retreat of home prices, homeowners still have a significant amount of equity in their homes.
