Households are finally beginning to increase equity again

The September 21 Wall Street Journal article titled “Rising Home values Repair Balance Sheets” by Neil Shah, reported that rising home values help boost personal balance sheets by 4.3% in the past six months.  Homeowner equity is up, stock portfolios are up, and debt balances aren’t growing.

As home values rise, homeowners have more options.  Appreciation allows them to sell, or get closer to selling, and the expectation of higher prices in the future increases demand today.  One of the reasons there is a buyers market for homes in St. George Utah right now is that homeowners expect home prices to rise, which makes them want to wait to sell, and buyers also expect prices to rise, which makes them want to hurry and buy.  Both effects make the shortage of available homes even more acute. See our September 3 article addressing falling exiting home inventories.

The adjustment to homeowner’s personal finances from the recession has been very painful.  Lost equity, lost investments, lost homes, and lost pride have all been casualties.  The recent news is a positive sign that can help the process of restoring confidence in housing markets.  Like the stock market after a crash, the general sentiment is to avoid being bit twice by jumping back in.  The shortage of inventory coupled with rising prices and strengthening balance sheets will help signal a housing recovery not just for the nation as a whole, but for Southern Utah and the greater St. George housing market as well.