NEWS: Redfin: People Who Bought Homes in 2012 Have Earned $203 Billion in Equity

September 27, 2019

MBA NewsLink Staff

Redfin, Seattle, said people who bought a home at the bottom of the market in 2012 have earned a median $141,000, or 261%, in home equity since then.

The report, based on a Redfin analysis of the home equity earned from 1.4 million homes purchased across 138 markets in the U.S. in 2012, said the typical home that sold in 2012 has increased by $110,000 in value, from a median sale price of $210,000 in 2012 to an estimated value of $320,000 in September. The typical 2012 homebuyer started off with $54,000 in home equity and has $195,000 today.

“The opportunity to build wealth through home equity when prices hit their low point was available only to a fortunate subset of Americans who had enough cash for a down payment,” said Redfin chief economist Daryl Fairweather. “And now many people who weren’t able to buy into homeownership during that window of time find themselves on the other side of the housing market coin: Many areas are just plain unaffordable for people who don’t have equity built up to trade in for a new home. And those who are waiting in the wings, hoping to buy a home when the next recession hits, probably won’t be as lucky as buyers were in 2012. Even if home prices do come down slightly, the housing market won’t be impacted nearly as much as it was during the Great Recession and home equity gains won’t be nearly as big.”

Redfin said the 12-figure total equity growth is driven by large, expensive coastal markets, mostly in California, where home values have increased by at least two-thirds and the typical homeowner has earned more than $300,000 in equity since 2012. Metros with the biggest total home equity gains in dollars are Los Angeles ($15 billion), Seattle ($8 billion) and Oakland ($7.9 billion).

The report noted the list of places with the biggest percent increases in home equity includes many metros near large U.S. military bases, including Tacoma, Wash. (1,453%) and Virginia Beach (,1333%), home to the largest concentration of military personnel outside of the Pentagon. That commonality is partly explained by the fact that a lot of homebuyers in those areas would have been able to take advantage of a VA or FHA loans, which often have small or no down-payment requirements, meaning their home equity started out particularly low in 2012.

“Just like many other places around the country, the Hampton Roads area, which includes Virginia Beach, was hit hard during the Great Recession. But because there’s such a large military presence in Virginia Beach and its surrounding cities, our housing market will always be one of the most stable in the country,” said Redfin agent Jordan Hammond. “People in the military are able to obtain VA loans, and military buyers are also often able to obtain low interest rates. That turned out to be hugely beneficial for people in the area who bought homes in the wake of the recession.”

The report said nine of the 10 metros with the biggest median home equity growth in dollars are in California, led by San Francisco ($741,000), San Jose ($669,000) and San Rafael ($604,000). Seattle ($364,000), is the only non-California metro on the list. Compared with the metros with the highest percent equity growth, these areas all started in 2012 with high home prices, and local homebuyers likely made much higher down payment–close to 20 percent. Since then, Coastal California and Seattle have seen enormous growth in home values, which equates to huge dollar gains in equity.
Top 10 metro areas with the biggest dollar home-equity growth, from 2012 to 2019

The report can be accessed at https://www.redfin.com/blog/home-equity-gain-after-great-recession.

https://www.mba.org/mba-newslinks/2019/september/mba-newslink-friday-9-27-19/residential/redfin-people-who-bought-homes-in-2012-have-earned-203-billion-in-equity

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