The third quarter Federal Reserve Flow of Funds report showed continued improvement in the financial position of U.S. households who own real estate with the market value of all owner-occupied residential real estate (household owned) rising to $25.6 trillion. This figure is up by $298 billion when compared to the second quarter of 2018 and up by $1.53 trillion versus the third quarter of 2017.

Of equal, if not greater, interest to me is that mortgage liability only rose by $276 billion year over year. With slower increases in debt and rising home values, the Federal Reserve now calculates that homeowners have $15.4 trillion in home equity (up $207 billion over Q-2 and up by $1.25 trillion versus a year ago. The value of owners’ equity in real estate as a percentage of household real estate reached 59.9% in the third quarter, a level not seen since 2002.

Owner-occupied real estate (including vacant land and mobile homes) at market value reached and surpassed the highest ever seen prior to the recession, which was $22.64 trillion in Q-2 2006. The break-even occurred in the fourth quarter of 2016. Thus, both in terms of market value, and owners’ equity as a percentage of market value, households’ balance sheets have now reached pre-recessionary levels.