According to Redfin, the U.S. housing market is now worth a stone’s throw from $50 trillion:
Depedning on the day, that puts the housing market roughly on par with the total value of the U.S. stock market. In the past decade alone the total value of the housing market has more than doubled (from $23 trillion in 2014).
Considering mortgage rates averaged nearly 7% in 2024, it’s hard to believe housing prices were up another 5% in 2024. That gain follows annual housing returns of +19%, +6%, +6% and +4% from 2021-2024.
When you throw in the fact that 70% of that $50 trillion is equity, Americans are sitting on some healthy housing gains.1
Despite all of that home equity just sitting there, consumers aren’t tapping it just yet (via Sonu Varghese):
My guess is a lot of this has to do with the fact that home equity loans are in the 7-8% range right now. One would imagine more people will be tapping that equity if rates ever come down. We shall see.
A lot of that equity resides with baby boomers, who own 40% of the housing market. Many of them now have houses paid off as well, which makes sense considering their age. Gen X makes up nearly 30% of the market but millennials are coming on strong:
I know it’s hard for many young people to buy a home right now. Prices are high. Rates are high. Insurance rates are high. Monthly payments are high.
Some young people are out of luck. Others are making it work with higher incomes and/or help from their parents.
Millennials are the biggest generation and they will be the largest generation of homeowners at some point in the next couple of decades. It’s just math.
So what happens to the housing market from here?
Your guess is as good as mine. The best-case scenario is that price increases grind to a halt for a few years so incomes can play catch-up. If housing prices do fall it’s not the end of the world because there is such a big margin of safety.
The worst-case scenario for prospective homebuyers is that prices keep rising 3-5% per year, and mortgage rates remain above 6% for an extended period.
We have a lot of problems right now that don’t have simple solutions. The simple solution to fix our housing market is to build more homes. It works. Just look what happened to rents in Austin when developers built more apartments:
Maybe the homebuilders and construction industry aren’t able to make this happen, but I can’t figure out why our politicians aren’t prioritizing it. Housing impacts everyone in some capacity.
Hopefully someday it will happen.
Michael and I talked all about the housing market and much more on this week’s Animal Spirits video:
Subscribe to The Compound so you never miss an episode.
Further Reading:
Timing the Housing Market: When Should You Sell?
Now here’s what I’ve been reading lately:
Books:
1Obviously it’s not all gains. A lot of that equity comes from people paying down their mortgages.
This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.
The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.
References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.
The Compound Media, Inc., an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here: https://www.ritholtzwealth.com/advertising-disclaimers
Please see disclosures here.