us home equity gains rose annually in q3 but fell sharply from q2

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Homeowners posted average annual equity gains of $34,300 in the third quarter of 2022, which was about half the year-over-year increase recorded in the second quarter.
Florida led the U.S. for annual home equity increases at $76,700, with Miami in the No. 1 spot among major metro areas at $101,000 gain per borrower.

CoreLogic®, a leading global property information, analytics and data-enabled solutions provider, released the Homeowner Equity Report (HER) for the third quarter of 2022. The report shows that U.S. homeowners with mortgages (which account for roughly 63% of all properties) saw equity increase by 15.8% year over year, representing a collective gain of $2.2 trillion, for an average of $34,300 per borrower, since the third quarter of 2021.

Nationwide, annual home equity gains began to slow in the third quarter of 2022, with the average borrower netting $34,300, compared with the nearly $60,000 year-over-year gain recorded in the second quarter. Slowing prices also caused an additional 43,000 properties to fall underwater. The quarter-over-quarter decline in equity is partially due to cooling home price growth across the country, as annual appreciation fell from about 18% in June to just slightly more than 10% in October. As home price gains are projected to relax into single digits for the rest of 2022, then possibly move into negative territory by the spring of 2023, equity increases will likely decline accordingly in some parts of the country.

“At 43.6%, the average U.S. loan-to-value (LTV) ratio is only slightly higher than in the past two quarters and still significantly lower than the 71.3% LTV seen moving into the Great Recession in the first quarter of 2010,” said Selma Hepp, interim lead of the Office of the Chief Economist at CoreLogic. “Therefore, today’s homeowners are in a much better position to weather the current housing slowdown and a potential recession than they were 12 years ago.”

“Weakening housing demand and the resulting decline in home prices since the spring’s peak reduced annual home equity gains and pushed an additional number of properties underwater in the third quarter,” said Hepp. “Nevertheless, while these negative impacts are concentrated in Western states such as California, homeowners with a mortgage there still average more than $580,000 in home equity.”

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 the third quarter of 2022, the quarterly and annual changes in negative equity were:

Quarterly change: From the second quarter of 2022 to the third quarter of 2022, the total number of mortgaged homes in negative equity increased by 4% to 1.1 million homes or 1.9% of all mortgaged properties.
Annual change: In the third quarter of 2021, 1.2 million homes, or 2.2% of all mortgaged properties, were in negative equity. This number declined by 9.8% in the third quarter of 2022, to 1.1 million homes or 1.9% of all mortgage 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 the third quarter of 2022 book of mortgages, if home prices increase by 5%, 127,000 homes would regain equity; if home prices decline by 5%, 172,000 properties would fall underwater.

The next CoreLogic Homeowner Equity Report will be released in March 2023, featuring data for Q4 2022. For ongoing housing trends and data, visit the CoreLogic Intelligence Blog: www.corelogic.com/intelligence.

Source: CoreLogic