Thread by @bopinion

The Covid-19 housing boom is even bigger than we Imagined.

The latest data on household finances shows the extent to which record-low mortgage rates and surging home prices turbocharged the economic recovery trib.al/5FJjtRb

Each quarter, the Federal Reserve Bank of New York releases a report on household debt and credit. Its strategists decided to dig deeper into:

🏡Mortgage originations
🏡The types of buyers during Covid
🏡Those who take out cash against their home equity trib.al/5FJjtRb

While much of what they found confirms many of the narratives about the housing market, it’s the sheer magnitude of the move that’s breathtaking.

It puts into context where the economy stands almost one year after the coronavirus crisis began in the U.S. trib.al/5FJjtRb

Mortgage originations reached almost $1.2 trillion in the final 3 months of 2020, the highest on record.

People refinanced more mortgage debt last year than any time since 2003, while mortgages taken out to purchase a home surged to the highest since 2006 trib.al/5FJjtRb

First-time buyers took on more debt than at any time in history, while mortgages for repeat buyers and those looking for a second home or an investment property reached the highest in more than a decade trib.al/5FJjtRb

Meanwhile, home prices soared across the U.S., with the S&P CoreLogic Case-Shiller index jumping 9.5% in November, the most since 2014.

This surge led to “a notable increase in cashout refinance volumes” trib.al/5FJjtRb

Collectively, homeowners withdrew $182 billion in home equity in 2020, or an average of about $27,000 for each household.

Even those who chose not to take out extra cash saved an average of $200 a month on their mortgage payments trib.al/5FJjtRb

Hundreds of billions of dollars of newfound cash will leave a mark.

Some of it undoubtedly flowed into the financial markets, helping to lift stock prices to records in a matter of months trib.al/5FJjtRb

With most travel on pause, these extra funds might have encouraged spending on goods rather than services — look no further than the giant rebound in retail sales in May and June, just as 30-year mortgage rates began setting new lows trib.al/5FJjtRb

But the specter of a K-shaped recovery looms large.

Those benefiting from the boom in housing prices are Americans who are disproportionately the most creditworthy trib.al/5FJjtRb

It seems as if 2021 could go in two different directions.

On the one hand, 30-year mortgage rates remain near record lows, providing opportunities for refinancing. Yet the sharp increase in housing prices could lock out many Americans from homeownership trib.al/5FJjtRb

2020’s housing boom was bigger than anyone could have imagined at this time last year.

It has fundamentally shifted the ground beneath the U.S. economy and set the foundation for a recovery that could be unlike anything in recent memory trib.al/5FJjtRb