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.
Advertisement
Related Stories
Affordability
What Is the Relationship Between Urban vs. Suburban Development and Affordability?
A new paper from Harvard's Joint Center looks at whether expanding the supply of suburban housing could, in turn, help make dense urban areas more affordable
Off-Site Construction
New Study Examines Barriers and Solutions in Manufactured Housing
The study from Harvard's Joint Center looks at the challenges faced by developers using manufactured housing and how they're overcoming those barriers
Affordability
The Disappearing Act That Is Middle-Income Housing
An expert weighs in on the diminishing supply of middle-income housing, which is particularly acute in California, and what to do about it