Californians rich in real estate, builders' group reports

Home equity increases over $1 trillion in five years
Inman News
California's housing boom has generated $1 trillion in increased home equity since 2000 and pumped billions of dollars into the state's economy, the California Building Industry Association reported today.

The report, prepared by Alan Nevin, chief economist for the association, also found that the median equity gain for those who owned a single-family home in 2000 was $230,386, while the median equity gain was $200,544 for condominium owners.

"For the person who owned a single-family home in the year 2000 and bought that home with a 15 percent down payment, their return on equity would be approaching 1,000 percent," Nevin said. "Economists and housing experts have known for years that home ownership is the leading source of wealth creation for the vast majority of Americans. Now we have a better feeling for just how much wealth home ownership has created here in California."

Nevin also said that much of this equity has already been plowed back into the economy through refinancing, allowing homeowners to buy goods and services they wouldn't have been able to afford otherwise and helping keep California's economy growing.

The study, released at builders' conference in San Francisco, found that the 2.5 million homes purchased since 2000 have increased in value about $378.7 billion, while the 4.3 million homes owned but not sold in that time period have increased in value by $641 billion. The total gain in home equity was $1.02 trillion. Homes sold in the San Francisco Bay Area and Los Angeles County have appreciated the most: $83.24 billion and $82.16 billion, respectively.

Nevin said despite the steep increases in home values he doesn't foresee a housing "bubble," as some have speculated, because the underlying demand for homes remains strong while the supply – constrained by governmental barriers, slow-growth pressures and other factors – remains inadequate to meet the demand. But he does foresee the rate of appreciation slowing to more sustainable and healthier levels.

"Rates of gain will not go up as fast as they have in the last three years," he said. "We anticipate that over the next three years, the appreciation rate will be in the 5 to 8 percent range per year."