Homeowner Equity Insights
Data Through Q4 2020
The CoreLogic Homeowner Equity Insights report, is published quarterly with coverage at the national, state and Core Based Statistical Area (CBSA)/Metro level and includes negative equity share and average equity gains. The report features an interactive view of the data using digital maps to examine CoreLogic homeowner equity analysis through the fourth quarter of 2020.
Negative equity, often referred to as being “underwater” or “upside down,” applies to borrowers who owe more on their mortgages than their homes are worth. Negative equity can occur because of a decline in home value, an increase in mortgage debt or both.
This data only includes properties with a mortgage. Non-mortgaged properties (that are owned outright) are not included.
Homeowner Equity Q4 2020
CoreLogic analysis shows U.S. homeowners with mortgages (roughly 62% of all properties*) have seen their equity increase by a total of nearly $1.5 trillion since the fourth quarter of 2019, an increase of 16.2%, year over year.
*Homeownership mortgage source: 2016 American Community Survey.
Negative Equity Falls
In the fourth quarter of 2020, the total number of mortgaged residential properties with negative equity decreased by 8% from the third quarter of 2020 to 1.5 million homes, or 2.8% of all mortgaged properties. On a year-over-year basis, negative equity fell by 21% from 1.9 million homes, or 3.6% of all mortgaged properties, in the fourth quarter of 2019.
Because home equity is affected by home price changes, borrowers with equity positions near (+/-5%) the negative equity cutoff are most likely to move out of or into negative equity as prices change, respectively. Looking at the fourth quarter of 2020 book of mortgages, if home prices increase by 5%, 216,000 homes would regain equity; if home prices decline by 5%, 292,000 would fall underwater.
As competition for the dwindling supply of for-sale homes drove prices up, average annual homeowner equity gains in the fourth quarter of 2020 reached the highest level since 2013. For current owners, these gains have created a buffer against financial difficulties brought on by the pandemic, and enabled means for pursuing renovations as people are spending more time at home. For the broader market, home equity gains have also reduced the risk of homes falling underwater and pushing distressed sales into the market.
"Compared with a year earlier, home prices in December 2020 were up sharply — 9.2%, according to the CoreLogic Home Price Index — boosting the amount of home equity for the average homeowner with a mortgage to more than $200,000. This equity growth has enabled many families to finance home remodeling, such as adding an office or study, further contributing to last year’s record level in home improvement spending."
Chief Economist for CoreLogic
National Aggregate Value of Negative Equity: Q4 2020
The national aggregate value of negative equity was approximately $280.2 billion at the end of the fourth quarter of 2020. This is down quarter over quarter by approximately $3.4 billion, or 1.2%, from $283.6 billion in the third quarter of 2020 and down year over year by approximately $7.5 billion, or 2.6%, from $287.7 billion in the fourth quarter of 2019.
Negative equity peaked at 26% of mortgaged residential properties in the fourth quarter of 2009, based on the CoreLogic equity data analysis which began in the third quarter of 2009.
“Positive factors like record-low interest rates and a booming housing market encouraged many families to enter homeownership. This growing bank of personal wealth that homeownership affords was noticed by many but in particular for first-time buyers who want a piece of the cake. As a result, we may see more of those currently renting start to enter the market in the near future.”
President and CEO of CoreLogic
National Homeowner Equity
In the fourth quarter of 2020, the average homeowner gained approximately $26,300 in equity during the past year.
California, Idaho and Washington experienced the largest average equity gains at $54,500, $48,500 and $47,200 respectively. Meanwhile, North Dakota experienced the lowest average equity gain in the fourth quarter of 2020 at $7,900.
10 Select Metros Change
CoreLogic provides homeowner equity data at the metropolitan level. In this graphic, 10 of the largest cities, by housing stock, are depicted.
Negative equity has seen a recent decrease across the country. San Francisco-Redwood City-South San Francisco, CA, is the least challenged, with Negative Equity Share of all mortgages at 0.7%.
Loan-to-Value Ratio (LTV)
The graph represents National Homeowner Equity Distribution across multiple LTV Segments.
CoreLogic began reporting homeowner equity data in the first quarter of 2010; at that time, the equity picture for homeowners was rather bleak in the United States. Since then, many homes have regained equity and the outstanding balance on the majority of mortgages in this country are now equal to or in a positive position when compared to their loan balance.
CoreLogic will continue to report on homeowner equity as it continues to adjust in communities and states across the country. To learn more about homeowner equity, visit the CoreLogic Insights page on www.corelogic.com.
The amount of equity for each property is determined by comparing the estimated current value of the property against the mortgage debt outstanding (MDO). If the MDO is greater than the estimated value, then the property is determined to be in a negative equity position. If the estimated value is greater than the MDO, then the property is determined to be in a positive equity position. The data is first generated at the property level and aggregated to higher levels of geography. CoreLogic data includes more than 50 million properties with a mortgage, which accounts for more than 95 percent of all mortgages in the U.S. CoreLogic uses public record data as the source of the MDO, which includes both first-mortgage liens and second liens, and is adjusted for amortization and home equity utilization in order to capture the true level of MDO for each property. The calculations are not based on sampling, but rather on the full data set to avoid potential adverse selection due to sampling. The current value of the property is estimated using a suite of proprietary CoreLogic valuation techniques, including valuation models and the CoreLogic Home Price Index (HPI). In August 2016, the CoreLogic HPI was enhanced to include nearly one million additional repeat sales records from proprietary data sources that provide greater coverage in home price changes nationwide. The increased coverage is particularly useful in 14 non-disclosure states. Additionally, a new modeling methodology has been added to the HPI to weight outlier pairs, ensuring increased consistency and reducing month-over-month revisions. The use of the enhanced CoreLogic HPI was implemented with the Q2 2016 Equity report. Only data for mortgaged residential properties that have a current estimated value are included. There are several states or jurisdictions where the public record, current value or mortgage data coverage is thin and have been excluded from the analysis. These instances account for fewer than 5 percent of the total U.S. population.
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