Just weeks away from the start of the spring homebuying season, U.S. homeowners looking to sell will earn record gains, as CoreLogic’s Home Equity Report for Q4 2020 shows that homeowners with mortgages (which account for roughly 62% of all properties) have seen their equity rise by 16.2% year-over-year, a gain of $1.5 trillion-plus in equity, and an average gain of $26,300 per homeowner, since Q4 of 2019.
“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,” said Dr. Frank Nothaft, Chief Economist for CoreLogic. “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.”
Nationwide, states with strong home price growth and high home prices continued to experience the largest gains in equity, whereas states that were hard hit by the pandemic continue to experience dwindling gains.
California, Idaho and Washington experienced the largest average Q4 equity gains at $54,500; $48,500; and $47,200, respectively. North Dakota experienced the lowest average equity gain in Q4 of 2020 at $7,900.
California, for example, remains a hot market as an increasing number of workers are seeking more spacious homes with offices in lieu of a commute. Redfin analyzed housing markets in vacation destinations and found that El Dorado County, Calif.—an area that spans from the eastern outskirts of Sacramento to the southern part of Lake Tahoe—had a median average of $592,500, increasing 36% year-over-year in January, a market that has grown more than any other U.S. county over the last year.
“Positive factors like record-low interest rates and a booming housing market encouraged many families to enter homeownership,” said Frank Martell, President and CEO of CoreLogic. “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.”
In terms of negative equity, from Q3 of 2020 to Q4 of 2020, the total number of mortgaged homes in negative equity decreased by 8% to 1.5 million homes or 2.8% of all mortgaged properties. In Q4 of 2019, 1.9 million homes, or 3.6% of all mortgaged properties, were in negative equity. This number decreased by 21%, or 410,000 properties, in the fourth quarter of 2020.
The national aggregate value of negative equity was approximately $280.2 billion at the end of Q4 of 2020. This is down quarter-over-quarter by approximately $3.4 billion, or 1.2%, from $283.6 billion in Q3 of 2020, and down year-over-year by approximately $7.5 billion, or 2.6%, from $287.7 billion in Q4 of 2019.