American homeowners collectively saw their equity increase by more than $1 trillion year over year in the third quarter, according to the latest data from CoreLogic.
That’s a collective annual increase of 10.8%, as well as an average gain of $17,000 per homeowner — the largest average equity gain since 2014’s first quarter.
Homeowners with mortgages (accounting for some 63% of all properties in the U.S.) have benefited from skyrocketing home prices through the summer and fall, giving them a potentially crucial cushion with more uncertainty on the horizon as the COVID-19 crisis drags on.
“Over the past year, strong home price growth has created a record level of home equity for homeowners,” said Dr. Frank Nothaft, chief economist for CoreLogic. “The average family with a home mortgage loan had $194,000 in home equity in the third quarter. This provides an important buffer to protect families if they experience financial difficulties, and is one reason for the generational low in foreclosure rates reported in September.”
“The housing market has remained a strong pillar in an otherwise tumultuous economic year,” concurred Frank Martell, president and CEO of CoreLogic. “A sharp rise in demand, spurred by record-low interest rates, continues to bolster homeowner equity. And with many people now spending more time than ever before at home, some homeowners have tapped into their strengthening equity to fund renovations.”
And while CoreLogic’s HPI Forecast still anticipates home price growth to slow to under 2% by next fall, the company reported that equity increases remain likely over the next several months, with strong purchase demand expected to stick in the near term to drive up prices further.
However, despite the impressive headline figure, there was a vast discrepancy in equity gains on the state level. Top equity gains among states were heavily concentrated in the West and Northeast, headed by Washington, where homeowners realized an average annual equity gain of $35,800 during Q3. Following Washington were California (where homeowners gained an average of $33,800) and Massachusetts ($31,200).
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On the flipside, North Dakota, which continues to reel from the COVID pandemic, saw the lowest yearly equity gain in the nation, with $5,400 year over year.
Meanwhile, as equity has grown for many homeowners, negative equity has fallen nationally. The national aggregate value of negative equity in the third quarter was about $283.3 billion at the end of the third quarter, down 0.8% quarter over quarter and 7.0% year over year.
The share of homes in negative equity is down as well. Two million homes — 3.7% of all mortgaged properties — were underwater in the third quarter of 2019. That number has dropped by 370,000 properties (about 18.3%) year over year, bringing the number of properties with negative equity to 1.6 million in the third quarter of 2020. That new figure represents approximately 3.0% of mortgaged properties in the country.
Quarterly, the number of homes with negative equity is also down, falling 6.9% from 2020’s second quarter.
