Collective home equity grows to $3.6 trillion

Despite a recent deceleration in home price growth, overall home equity rose to $3.6 trillion in the second quarter, CoreLogic reported Friday.

Homeowners with mortgages in Q2 saw their equity increase by 27.8% year over year, representing an average of $60,000 per borrower. The total average per borrower hit a record high of $300,000, while the average loan-to-value ratio fell to 42%, the lowest since 2010.

“Although US home price growth slowed on an annual basis in the second quarter of 2022, homeowners continued to gain near-record equity from the second quarter of 2021, with 15 states posting higher gains than the national average, led by Hawaii, California and Florida,” CoreLogic wrote in the report.

“For many households, home equity is the only source of wealth creation,” said Selma Hepp, interim lead for CoreLogic’s office of chief economist. “As a result, recent record gains in equity and record declines in loan-to-value ratios will provide many owners with a financial buffer in case economic conditions worsen. In addition, record equity continues to provide fuel for housing demand, particularly if households are relocating to more affordable areas.”

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Negative equity declined by 7% to one million mortgaged homes, or 1.8% of all mortgaged properties, in the second quarter. Year over year, negative equity was down 18% to 1.3 million homes, or 2.3% of all mortgaged properties, were in negative equity.

“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,” CoreLogic said. “Looking at the second quarter of 2022 book of mortgages, if home prices increase by 5%, 116,000 homes would regain equity; if home prices decline by 5%, 148,000 properties would fall underwater.”