Borrower Equity Update: Second Quarter 2021
- Average annual equity gain of $51,500 per borrower in Q2 2021 was five times the gain from a year earlier.
- National negative equity share was 2.3% Q2 2021, the lowest in at least 12 years.
National Home Equity Trends
Soaring home prices over the past year boosted home equity wealth to new highs midway through 2021. The amount of equity in mortgaged real estate increased by $2.9 trillion in Q2 2021, an annual increase of 29.3%, according to the latest CoreLogic Equity Report. The average annual gain in equity was $51,500 per borrower, which was the largest average equity gain in at least 11 years and five times the gain from a year earlier.
The nationwide negative equity share for Q2 2021 was 2.3% of all homes with a mortgage, the lowest share of homes with negative equity since CoreLogic started tracking this number in the third quarter of 2009. The number of properties in negative equity decreased by 520,000 from Q2 2020 to Q2 2021.
While the coronavirus pandemic created economic uncertainty for many, the continued acceleration in home prices over the last year has meant existing homeowners saw a notable increase in home equity. The accumulation of equity has become critically important to homeowners deciding on their post-forbearance options. In contrast to the financial crisis, when roughly 25% of borrowers were underwater, most borrowers today who are behind on mortgage payments can tap into their equity and sell their home rather than lose it through foreclosure.
State and Metro Level Home Equity
Figure 1 shows the ten states with the largest negative equity shares in Q2 2021. Louisiana stands apart with 7.8% of mortgages with negative equity – more than three times the national average. Iowa (5.2%) and Illinois (4.7%) rounded out the top three states with the highest negative equity shares. States with high negative equity shares have experienced low home price appreciation compared with the national average. In addition, places with high negative equity shares are at higher risk for foreclosure and distressed sales.
Negative equity shares vary greatly by metro area. Among the 10 large metro areas shown in figure 2, San Francisco had the lowest negative equity share (0.6%) and Chicago the highest (5.2%). Figure 2 also shows that the average amount of negative equity is inversely related to the negative equity share. The average underwater amount in San Francisco was $895,000, more than nine times the average underwater amount in Miami.
Double-digit home price increases have resulted in record amounts of home equity. This not only buffers homeowners from foreclosure, it also bolsters economic activity. Higher wealth spurs additional consumer expenditures and supports renovations and other investments in homes, adding to overall economic activity.
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