The Second Quarter of 2021 Sees a Rise in Real Estate Market Values

According to the "Flow of Funds" from the current Federal Reserve Z.1 Financial Accounts of the United States the aggregate market value of all owner-occupied real estate in the United States saw the largest increase in one quarter in the last 21 years. $33.8 trillion was reported in the first quarter of 2021 and rose by $1.1 trillion in the second quarter.

The Federal Reserve Z.1 Financial Accounts used to be known as the Flow of Funds accounts. This is a collection of financial accounts where the data is taken from them to see what funds are being used by whom. Basically, it is a way to track the net money going in and money coming out from several sectors of the US economy.

Due to lack of housing inventory, home prices are the highest we have seen in a while. Home mortgages also have jumped to $11.3 trillion which was a rise of $220 billion. Real estate assets are increasing faster than real estate liabilities. The Mortgage Bankers Association (MBA) reported as of September 12, indicates a forbearance rate of 3%.

The second quarter of 2021 saw a 12% year over year of appreciation of the market value of all real estate assets. Aggregate owners' equity also jumped to $23.6 trillion which was 68% of all household real estate, making it the highest seen since 1989.

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Investing Your Money In Real Estate Versus Stocks

A study conducted by the Federal Reserve Bank of New York found that the majority of homeowners believed investing in their house over the stock market was a better investment. In fact, over 50% of the households surveyed in the New York Fed survey said they would choose to invest in a rental property versus the overall stock market.

The SCE Housing Survey was conducted in February 2020, October 2020 and February 2021. Most data confirmed that housing represents the largest asset owned by most households and is a major means of wealth accumulation, particularly for the middle class. Those surveyed were asked what they would say to a couple in their early 30's when it comes to investing their money. Over 90% of the respondents said they would invest in a primary residence over the stock market.

The study did see a change from February 2020 to February 2021 in people's outlook on a home. Respondents chose high house prices and lower volatility in 2021 versus 2020 respondents who selected the choice of desired living environment that provides stability. This change has been pinned on the COVID-19 pandemic. The survey showed a dip in October 2020 of preference for housing. Consumers were worried during the pandemic about health safety and job stability.

Overall the survey highlights the importance that is currently put on housing as investments. Investors and homeowners alike feel that the housing market is currently more stable than the aggregate stock market.

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