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Home Equity Gains Experience Significant Decline From Q1 2022

CoreLogic has released the Homeowner Equity Report (HER) for Q4 of 2022, showing that U.S. homeowners with mortgages —which account for roughly 63% of all properties— saw equity increase by 7.3% year-over-year. This represents a collective gain of $1 trillion for an average of $14,300 per borrower since Q4 of 2021.

As U.S. home price growth continued its slow, steady decline in the final months of 2022, home equity trends naturally followed suit. In Q4 of 2022, the average borrower earned about $14,300 in equity year-over-year, compared with the $63,100 gain seen in Q1 of 2022.

Four Western states and one district posted annual home equity decreases:

  • Idaho (-$21,400)
  • Washington (-$18,900)
  • California (-$8,500)
  • Utah (-$4,600)
  • Washington, D.C. (-$8,300)

This partially mirrors trends recorded in CoreLogic’s latest Home Price Index (HPI), which found that Idaho, Washington and Washington, D.C. saw home price growth decline slightly year-over-year in January 2023.

Meanwhile, Florida homeowners saw the highest annual equity growth in the fourth quarter, at $49,000. Florida has posted the largest year-over-year home price gains in the country for the past year, according to HPI data, with prices up by 13.4% in January.

“While equity gains contracted in late 2022 due to home price declines in some regions, U.S. homeowners on average still have about $270,000 in equity more than they had at the onset of the pandemic,” said Selma Hepp, chief economist at CoreLogic. “Even in Idaho, where borrowers were the most vulnerable to losses, the typical homeowner with a mortgage still has about $250,000 in remaining home equity.”

“Nevertheless, with 66,000 borrowers entering negative equity in Q4, the total number of underwater properties is now approaching levels seen at the end of 2021, which was the lowest since the Great Recession,” Hepp said. “The new hot spots for equity declines are largely markets that have seen the most significant home price deceleration, including Boise, Idaho; the San Francisco Bay Area; cities in Utah; Phoenix and Austin, Texas.”

CoreLogic_HER_Figure2_NationalHomeEquityDistribution-2022-Q4.jpg (6472×5923)

Negative equity, also referred to as underwater or upside-down mortgages, applies to borrowers who owe more on their mortgages than their homes are currently worth. As of Q4 of 2022, the quarterly and annual changes in negative equity were:

  • Quarterly change: From Q3 of 2022 to Q4 of 2022, the total number of mortgaged homes in negative equity increased by 6%, to 1.2 million homes or 2.1% of all mortgaged properties.
  • Annual change: From Q4 of 2021 to Q4 of 2022, the total number of homes in negative equity declined by 2% to 1.2 million homes or 2.2% of all mortgaged properties.

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 Q4 of 2022 book of mortgages, if home prices increase by 5%, 145,000 homes would regain equity; if home prices decline by 5%, 215,000 properties would fall underwater.

The next CoreLogic Homeowner Equity Report will be released in June 2023, featuring data for Q1 2023.

To read the full report, including more data, charts and methodology, click here.

About Author: Demetria Lester

Demetria C. Lester is a reporter for DS News and MReport magazines with more than eight years' writing experience. She has served as content coordinator and copy editor for the Los Angeles Daily News, the Orange County Register, in addition to 11 other Southern California publications. A former editor-in-chief at Northlake College and staff writer at her alma mater, the University of Texas at Arlington, she has covered events such as the Byron Nelson and Pac-12 Conferences, progressing into her freelance work with the Dallas Wings and D Magazine. Currently located in Dallas, Texas, Lester is a jazz aesthete and loves to read. She can be reached at [email protected]

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