Recent data from CoreLogic indicates a noteworthy shift in the home equity landscape for homeowners in the United States. After more than a decade of growth, the average homeowner with a mortgage experienced a decline in their home equity.
In the first quarter of this year, the average homeowner equity per borrower dropped by 1.9% compared to the same period last year. This decline reflects a change in the value of their homes relative to the outstanding mortgage balances.
Despite this overall decline in home equity, the number of homeowners who found themselves “underwater” on their mortgages, meaning the outstanding loan amount exceeded the value of their homes, remained relatively stable. Approximately 1.2 million homes, which accounts for about 2.1% of properties with mortgages, fell into this category.
This data highlights the complex nature of the housing market and the various factors that can influence homeowners’ equity. While the decline in home equity may raise concerns for some homeowners, it is worth noting that the majority of homeowners still maintain positive equity in their properties.
As the housing market continues to evolve, it is important for homeowners to stay informed about their home equity and closely monitor any changes. Consulting with real estate professionals and financial advisors can provide valuable insights and guidance to help navigate these fluctuations in home equity and make informed decisions.
The housing market in the United States has experienced a significant shift, as for the first time in over a decade, the average homeowner with a mortgage has witnessed a decline in home equity.
According to CoreLogic, a real estate data tracker, the average homeowner equity per borrower in the first quarter of this year stood at $274,070, which is a 1.9% decrease compared to the same quarter last year. This decline in equity marks a departure from the consistent growth seen in previous years.
The last time there was a year-over-year decline in average homeowner equity was during the first quarter of 2012. This period coincided with the aftermath of the mortgage crisis and the Great Recession, where the housing market faced significant challenges.
Collectively, homeowners with mortgages across the United States experienced a total decline in home equity of $108.4 billion between the first quarter of last year and the initial months of 2023, representing a 0.7% decrease.
It is important to note that homeowner equity is influenced by fluctuations in home prices. As the value of properties fluctuates, the equity, which represents the current value of the property minus the remaining mortgage balance, can rise or fall.
This recent decline in home equity highlights the evolving nature of the housing market and its impact on homeowners. It underscores the need for homeowners to stay informed about market conditions and to regularly assess their financial standing. Seeking guidance from real estate professionals and financial advisors can be valuable in navigating these changes and making informed decisions regarding homeownership and personal finances.
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Following the first quarter of 2012, when the average homeowner equity stood at $75,130, there was a significant upward trend in subsequent years. Factors such as historically low mortgage rates and a scarcity of available properties led to a surge in home prices, resulting in the average US homeowner’s equity reaching a record high of $297,510 by the second quarter of last year, as reported by CoreLogic.
However, the housing market has experienced a slowdown in the past year due to several factors. Increasing mortgage rates and a limited inventory of homes for sale have constrained the market. The National Association of Realtors has reported a 23.2% decline in sales of previously owned US homes over the 12 months leading up to April, marking a nine-month streak of annual sales declines of 20% or more.
This slowdown has also had an impact on home prices nationwide. While prices initially increased in January, they have since declined. In April, the national median home price dropped by 1.7% compared to the previous year, amounting to $388,800.
These developments indicate a shifting landscape in the housing market, characterized by a cooling-off period after a prolonged period of growth. Potential homebuyers and homeowners should stay informed about market conditions and consult with real estate professionals to make well-informed decisions regarding buying, selling, or maintaining their homes.
Despite the overall decline in homeowner equity compared to a year ago, there is a silver lining for homeowners. According to CoreLogic, average homeowner equity actually increased by 0.9% in the first quarter when compared to the fourth quarter of the previous year.
Selma Hepp, the chief economist at CoreLogic, explained that home equity trends closely align with changes in home prices. While the average amount of equity decreased compared to the previous year, it saw an increase in the fourth quarter of 2022. This was due to accelerated monthly home price increases that carried over into early 2023.
This suggests that while there may be some fluctuations in homeowner equity, the upward trajectory of home prices in recent months has contributed to an improvement in equity positions for many homeowners. It’s important for homeowners to stay informed about market conditions and consult with experts to navigate the evolving landscape of the housing market.