The housing recovery is giving Americans a boost to their net worth.
Home equity in the first quarter rose to $11.7 trillion, the highest since 2007, according to a Federal Reserve report released Thursday in Washington. Real estate equity accounted for almost 14% of households’ net worth, the biggest share since 2008.
A surge in home prices in the past three years is helping Americans rebuild their wealth after the real estate crash stripped more than $5 trillion from household balance sheets, according to Fed data. During the last boom, from 2001 to 2006, equity as a portion of net worth averaged about 20%.
"Before the financial crisis, home equity had been the primary wealth-building vehicle for American households, particularly middle-class households," said Christopher Low, chief economist at financial-products provider FTN Financial. "Even though it’s rising, families already have lost a decade of savings."
The median home price has surged 42% since the start of the recovery, to $219,400 in April from a 10-year low of $154,600 in January 2012, according to the National Association of Realtors. Home equity is the value of real estate minus mortgages.
Home prices are being helped by the strength of the labor market. About 280,000 jobs were created in May, the most in five months, the Commerce Department said last week. Demand for workers is pushing incomes higher. The median annual household income was $54,578 in April, about 0.6% higher than the previous month, according to Sentier Research.
