July 31, 2021

MP Now News

Mortgage News

Home Equity Gains are Breaking 8 Year Records

Homeowner Home ownership grew by record numbers in the fourth quarter of last year. According to CoreLogic, the average equity of a U.S. home in its Home Equity Report for that period increased 16.2 percent since the fourth quarter of 2019. This is the largest increase in seven years. Homeowners gained an average of $ 26,300 in equity, and the total increase for 62 percent of US homes with mortgages was $ 1.5 trillion.

CoreLogic’s chief economist, Frank Nothaft, said: “Compared to a year earlier, House prices rose sharply in December 2020 – 9.2%According to the CoreLogic Home Price Index – Increasing the home equity for the average homeowner with a mortgage to more than $ 200,000. This equity growth has enabled many families to fund home remodeling, such as adding an office or study, and so on, added to the record levels of home improvement spending last year. “

Of course, it was those countries with strong real estate price growth and high real estate prices that recorded the greatest increases in equity. At the top of the list was California averaging $ 54,400, Idaho averaging $ 48,500, and Washington averaging $ 47,000. States hard hit by the pandemic saw smaller gains, least of all in North Dakota, with an average annual increase of $ 7,900.

“Positive factors such as record low interest rates and a booming real estate market have encouraged many families to buy into home ownership,” said Frank Martell, President and CEO of CoreLogic. “This growing home ownership bank of personal wealth has been noticed by many, especially first-time buyers who want a piece of cake. Perhaps more of those currently renting will hit the market in the near future. ”

As equity increased, the number of mortgages that were underwater or in negative equity that owned the loan more than the value of the house decreased 21 percent from 1.9 million homes in the fourth quarter of 2019 (3.6 percent of all) pledged real estate) to 1.5 million or 2.8 percent. Eight percent of that decline occurred between the third and fourth quarters.

The national total value of negative equity at the end of the fourth quarter of 2020 was approximately $ 280.2 billion, down approximately $ 3.4 billion, or 1.2 percent, from the previous quarter from $ 283.6 billion in the third quarter of 2020. On an annual basis On this basis, it fell from 287.7 billion US dollars in the fourth quarter of 2019 by around 7.5 billion US dollars, or 2.6 percent.

The company says these profits have created a buffer for current owners against the financial hardships of the pandemic and have created funds to carry out renovations as people spend more time at home. For the broader market, home profits have also reduced the risk of homes falling underwater and bringing distressed sales to the market.

Borrowers with equity positions near (+/- 5 percent) the negative equity limit are most likely to move out of or into negative equity as prices rise or fall. If you look at the fourth quarter 2020 mortgage book with a price increase of 5 percent, 216,000 homes would gain equity. The same drop would submerge 292,000 homes.