Since the third quarter of 2020, mortgage holders have realized a $3.2 trillion gain in equity—a gain of 31.1% year-over-year—the highest rate of growth seen in 45 years.
According to a new report [1] by CoreLogic [2], mortgage holders, which account for 63% of all properties, have gained an average of $56,700 per property due to recent market conditions. These gains proved to be an effective stopgap against foreclosure for the some 1.2 million borrowers who exited their forbearance plans when they expired in September.
“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 [3], President and CEO of CoreLogic. “This financial reserve will be especially helpful for homeowners looking to fund renovation projects.”
“Home price growth is the principal driver of home equity creation,” said Dr. Frank Nothaft [4], Chief Economist for CoreLogic. “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.”
CoreLogic found that as of the third quarter of 2021, negative equity share, and the quarter-over-quarter and year-over-year changes, were as follows:
- Quarterly change: From the second quarter of 2021 to the third quarter of 2021, the total number of mortgaged homes in negative equity decreased by 5.7% to 1.2 million homes, or 2.1% of all mortgaged properties.
- Annual change: In the third quarter of 2020, 1.6 million homes, or 3% of all mortgaged properties, were in negative equity. This number decreased by 28.9%, or approximately 470,000 properties, in the third quarter of 2021.
- National aggregate value: The national aggregate value of negative equity was approximately $276.2 billion at the end of the third quarter of 2021. This is up quarter over quarter by approximately $8.2 billion, or 3%, from $268 billion in the second quarter of 2021, and down year over year by approximately $8.3 billion, or 2.9%, from $284.5 billion in the third quarter of 2020.
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 third quarter of 2021 book of mortgages, if home prices increase by 5%, 145,000 homes would regain equity; if home prices decline by 5%, 191,000 would fall underwater.