If home values were to fall 4% by the end of 2023, just 3.4% of U.S. homeowners who bought in the last two years would fall underwater on their mortgage, Redfin reports. The typical home purchased in the last two years will gain $27,000 in value even with a 4% price drop, meaning that in order for the average pandemic home to lose value, prices will have to post double-digit declines, an unlikely scenario in the year ahead.
Homeowners who purchased in the last two years are likely to have low fixed mortgage payments and strong enough credit to meet tight lending standards, and with skyrocketing home prices, most are also pocketing significant equity.
Consider a homeowner who purchased their home in January 2021 for the then-median U.S. sale price of $329,000. Because of the pandemic homebuying frenzy, their home value has already increased about 20% to just under $400,000. Prices falling about 4% to $380,000 by the end of next year still leaves them with about $50,000 in home-price appreciation without accounting for the mortgage payments they have made in the last two years.
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