US homeowners continue to build wealth through home equity gains
More than 70,000 homes regained equity in the third quarter, according to a new CoreLogic report, providing a buffer against foreclosure for the 1.2 million borrowers who reached the end of forbearance in September.
According to the report, homeowners with mortgages have seen a 31.1% year-over-year bump in their home equity, representing a collective increase of over $3.2 trillion and an average gain of $56,700 per borrower.
“Not only have equity gains helped homeowners more seamlessly transition out of forbearance and avoid a distressed sale, but they’ve also enabled many to continue building their wealth,” said Frank Martell, president and CEO of CoreLogic. “This financial reserve will be especially helpful for homeowners looking to fund renovation projects.”
The number of mortgaged homes in negative equity – also referred to as underwater or upside-down mortgages – dwindled by 28.9% year over year (approximately 470,000 properties) in Q3. About 1.6 million homes, or 3%, of all mortgage properties remain in negative equity.
The national aggregate value of negative equity was $276.2 billion at the end of the third quarter, up by 3% from $268 billion in the second quarter and down by 2.9% from $284.5 billion in the third quarter of 2020.
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If home prices rise by 5%, 145,000 homes would regain equity, according to CoreLogic. But if prices drop by 5%, 191,000 would fall underwater.
“Home price growth is the principal driver of home equity creation,” said CoreLogic chief economist Frank Nothaft. “The CoreLogic Home Price Index reported home prices were up 17.7% for the past 12 months ending September, spurring the record gains in home equity wealth.”