American homeowners with mortgages saw their equity increase by 6.6% year over year in the second quarter, a collective equity gain of more than $620 billion.
That’s according to CoreLogic’s Q2 Home Equity Report, which noted that the average year-over-year gain per homeowner during the second quarter was $9,800. Some 63% of all residential properties in the United States carry mortgages, so the second quarter’s equity gain represents a sizable bump for a significant share of Americans.
“Homeowners’ balance sheets continue to be bolstered by home price appreciation, which in turn mitigated foreclosure pressures,” said Frank Martell, president and CEO of CoreLogic. “Although the exact contours of the economic recovery remain uncertain, we expect current equity gains, fueled by strong demand for available homes, will continue to support homeowners in the near term.”
Homeowners with mortgages in Montana reaped the biggest benefit in the second quarter, seeing their equity grow by $28,900 year over year. With median home prices in the West climbing steadily, homeowners in several other Western states saw similarly big equity jumps, including Idaho (up $21,200) and Washington ($20,400).
While prices continue to grow in the near term, however, CoreLogic predicts that nationwide home price growth will slow over the next 12 months, while mortgage delinquencies rise. Coupled, those two conditions could lead to growing distressed-sale inventory, further hindering price growth and negatively impacting home equity.
“The CoreLogic Home Price Index registered a 4.3% annual rise in prices through June, which supported an increase in home equity,” said Dr. Frank Nothaft, chief economist for CoreLogic. “In our latest forecast, national home price growth will slow to 0.6% in July 2021 with prices declining in 11 states. Thus, home equity gains will be negligible next year, with equity loss expected in several markets.”
Meanwhile, during the second quarter, the number of mortgage homes in negative equity — that is, their borrowers owe more on their mortgages than the homes are worth — fell 5.4% quarterly to 1.7 million homes. Year over year, that number fell from 2.1 million homes, a decrease of 15%. At the end of June, 3.2% of all mortgaged properties nationwide were underwater.
The national aggregate value of negative equity at the end of June was approximately $284 billion, down 0.2% quarterly and 6.6% annually.