California Home Equity Up $1 Trillion Since 2000
Looking at the upside of the rapid escalation in housing prices in booming California markets, a new report from the California Building Industry Association estimates that the state’s home owners have seen their equity grow by $1 trillion since 2000.
Excluding downpayments, median equity grew by $230,386 for single-family home owners and $200,544 for condominium owners, according to the report, which was prepared by Alan Nevin, the association’s chief economist.
“For the person who owned a single-family home in the year 2000 and bought that home with a 15% downpayment, their return on equity would be approaching 1,000%,” Nevin said.
Nevin added that much of this equity has already been plowed back into the economy through refinancing, allowing home owners to buy goods and services they wouldn’t have been able to afford otherwise and helping keep California’s economy growing.
The study — released last week at PCBC The Premier Building Show in San Francisco — found that the 2.5 million homes purchased since 2000 have seen an increase in value of $378.69 billion, while the 4.3 million homes owned but not sold in that time period have increased in value by $641 billion.
Homes sold in the San Francisco Bay Area and Los Angeles County appreciated the most — by $83.24 billion and $82.16 billion, respectively.
Nevin said that despite the steep increases in home values, he doesn’t foresee a housing “bubble,” because the underlying demand for homes remains strong, while the supply has been constrained by government barriers, slow-growth pressures and other factors. However, he said that he did expect the rate of price appreciation to slow to more sustainable, healthier levels.
“Rates of gain will not go up as fast as they have in the last three years,” he said. “We anticipate that over the next three years, the appreciation rate will be in the 5%-8% range per year.”
To read the report, click here.
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