U.S. homeowners with mortgages benefited from the the largest one-year gain in average home equity wealth in the first quarter of 20222, according to a new report.
Approximately 62%, or 62,000, homeowners with mortgages saw their equity increase in the first quarter by 32.2% year over year, according to the latest Homeowner Equity Report (HER) from CoreLogic, a global property information, analytics and data-enabled solutions provider.
The 32.2% increase represents a collective equity gain of $3.8 trillion — or an average gain of $63,600 per borrower — since the first quarter of 2021, CoreLogic said.
Home prices on average grew around 20% year over year, the report said.
Homeowners in California, Hawaii, and Washington led the U.S. for annual equity increases in the first quarter, all gaining more than $100,000, the report said. Only 2% of homeowners with a mortgage remain underwater, a slight decline from the fourth quarter of 2021, it said.
“Price growth is the key ingredient for the creation of home equity wealth,” said Patrick Dodd, CoreLogic president & CEO. “Home prices were up by 20% in March compared to one year earlier in CoreLogic’s national Home Price Index. This has led to the largest one-year gain in average home equity wealth for owners and is expected to spur a record amount of home-improvement spending this year.”
Negative equity, also referred to as mortgages that are underwater or upside-down, applies to borrowers who owe more on their mortgages than their homes are currently worth. As of the first quarter of 2022, the changes in negative equity were:
- Quarterly change: From the fourth quarter of 2021 to the first quarter of 2022, the total number of mortgaged homes in negative equity decreased by 5.3% to 1.1 million homes, or 2% of all mortgaged properties.
- Annual change: In the first quarter of 2021, 1.4 million homes, or 2.6% of all mortgaged properties, were in negative equity. This number decreased by 23%, or approximately 300,000 properties, in the first quarter of 2022.
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. Looking at the first quarter of 2022 book of mortgages, CoreLogic said, if home prices increase by 5%, 130,000 homes would regain equity; if home prices decline by 5%, 167,000 properties would fall underwater.
CoreLogic said the amount of equity for each property is determined by comparing the estimated current value of the property against the mortgage debt outstanding (MDO). If the MDO is greater than the estimated value, then the property is determined to be in a negative equity position; if the estimated value is greater than the MDO, then the property is determined to be in a positive equity position, it said.
CoreLogic said it uses public record data as the source of the MDO, which includes more than 50 million first- and second-mortgage liens and is adjusted for amortization and home equity utilization in order to capture the true level of MDO for each property. Only data for mortgaged residential properties that have a current estimated value are included, it said.
CoreLogic is a global property information, analytics, and data-enabled solutions provider. Headquartered in Irvine, Calif., CoreLogic operates in North America, Western Europe and Asia Pacific.
