Home equity growth offsets inflation and rising homeownership costs
Homeowners in the US are seeing their home equity steadily rise, providing a much-needed financial cushion in a time of inflation and higher living costs.
CoreLogic’s latest Homeowner Equity Report for the second quarter showed that even as the cost of homeownership outside of mortgages climbs, equity gains are keeping mortgage delinquencies at historic lows.
On average, homeowners with mortgages, about 62% of all US properties, saw their equity increase by 8% from a year ago. This translates to an average gain of $25,000 per homeowner and a total nationwide equity boost of $1.3 trillion. According to CoreLogic’s data, homeowners now collectively hold over $17.6 trillion in net home equity.
The biggest equity increases were seen in states like Maine, where homeowners gained an average of $57,500, followed by California with $55,300, and New Jersey with $52,600. However, not all regions fared as well. Texas, Oklahoma, and North Dakota posted small losses, with homeowners in those states seeing slight declines in their home equity.
“Persistent home price growth has continued to fuel home equity gains for existing homeowners who now average about $315,000 in equity and almost $129,000 more than at the onset of the pandemic,” said CoreLogic chief economist Selma Hepp.
Hepp emphasized the importance of these gains as homeowners face rising costs in other areas, like insurance and property taxes.
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“The substantial accumulation of home equity for existing homeowners has served as an important financial buffer in times of uncertainty, as some homeowners are facing higher costs of homeowners’ insurance and taxes and have had to tap into their equity to prevent falling behind on their mortgages,” she said. “As a result, mortgage delinquency rates have remained at historical lows despite the inflationary pressures and higher costs of almost all non-mortgage homeownership-related expenses.”
Even with rising expenses, fewer homeowners are underwater – meaning they owe more on their mortgages than their homes are worth. Negative equity dropped across the country, with only 1.7% of all mortgaged properties in that category, down from 2% last year.
Cities like Las Vegas and Los Angeles showed particularly low levels of negative equity, at just 0.6% and 0.7%, respectively.
CoreLogic’s forecast also predicts steady home price growth of 2.3% over the next year, which could help even more homeowners build equity and stay ahead financially. However, a drop in home prices could push more homes into negative equity, though current trends suggest that most markets will continue to see moderate gains.
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