Strong Home Price Gains During the Pandemic Fueled Home Equity Gains

Borrower Equity Update: Second Quarter 2020

By Molly Boesel Housing Affordability, Mortgage Finance

  • Borrower equity increased by $620 billion in the second quarter of 2020 compared with a year earlier.
  • National share of homes with negative equity was 3.2% for the second quarter of 2020, the lowest in over 10 years.

The amount of equity in mortgaged real estate increased by $620 billion in the second quarter of 2020 from the second quarter of 2019, an annual increase of 6.6%, according to the latest CoreLogic Equity Report. Borrower equity hit a new high in the second quarter of 2020, and borrowers have gained over $6 trillion in equity in the last 10 years.

The nationwide negative equity share for the second quarter of 2020 was 3.2% of all homes with a mortgage, the lowest share of homes with negative equity since CoreLogic started tracking it in the third quarter of 2009.  The number of underwater properties decreased by 309,000 from the second quarter of 2019 to the second quarter of 2020.

In the wake of the pandemic, home price appreciation picked up momentum as for-sale inventory contracted. This rise in home prices lifted home equity through the middle of 2020 and bolstered homeowners’ balance sheets. While home prices are predicted to increase in the next year, the pace of increase is expected to slow, which will slow gains in borrower equity.

Fgiure 1: Ten States With the Largest Negative Equity Shares

Figure 1 shows the ten states with the largest negative equity shares in the second quarter of 2020. Louisiana stands apart with 9.3% of mortgages with negative equity – nearly three times the national average. Illinois (6.5%) and Connecticut (6.4%) rounded out the top three states with the highest negative equity shares. States with high negative equity shares have experienced low home price appreciation.

Figure 2: Average Amount of Negative Equity By CBSA (Q2 2020)

Figure 2 shows the average dollar amount of negative equity and the negative equity share for 10 large metropolitan areas in the second quarter of 2020. The average amount of negative equity is inversely related to the negative equity share. For example, in this group of metropolitan areas, San Francisco has the largest average amount of negative equity, but the lowest negative equity share at 0.7%. Miami has the smallest average amount of negative equity, but has a negative equity share of 7.7%, which is more than double the national rate.

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