CoreLogic found a 15% annual decrease in the number of underwater homes, marking an improvement in homeowner equity nationwide.
According to the report, U.S. homeowners with mortgages experienced an 8.6% year-over-year increase in home equity, amounting to a collective gain of $1.3 trillion. This surge in equity translates to an average rise of over $24,000 per borrower since the fourth quarter of 2022, propelling total net homeowner equity to surpass $16.6 billion by the end of 2023.
The fourth quarter of 2023 witnessed robust equity gains, particularly in the Northeastern region of the United States. Rhode Island, New Jersey, and Massachusetts emerged as the top performers, with homeowners in these states experiencing annual equity gains exceeding $50,000 each. Driven by healthy home price increases in the area, Rhode Island and New Jersey led the nation for year-over-year appreciation, recording respective gains of 13.2% and 11.6%, according to CoreLogic's Home Price Insights report.
“Rising home prices continue to fuel growing home equity, which, at $298,000 per average borrower remained near historic highs at the end of 2023,” CoreLogic Chief Economist Selma Hepp said. “By extension, at 43%, the average loan-to-value ratio of U.S. borrowers has also remained in line with record lows, which suggests that the typical homeowner has notable home equity reserves that can be tapped if needed.”
Negative equity, also known as underwater mortgages, witnessed a decline in the fourth quarter of 2023. The total number of mortgaged homes in negative equity decreased by 1.1% quarter-over-quarter, reaching one million homes, or 1.8% of all mortgaged properties. On an annual basis, the number of homes in negative equity plummeted by 15%, from 1.2 million homes in the fourth quarter of 2022 to one million homes in the same period of 2023.
These fluctuations in home equity are closely tied to changes in home prices, with borrowers near the negative equity cutoff being most susceptible to transitions into or out of negative equity as prices fluctuate. Analysis of the fourth quarter of 2023's mortgage data suggests that a 5% increase in home prices could result in 114,000 homes regaining equity, while a corresponding 5% decline could push 162,000 properties underwater.
These trends bode well for homeowners, providing them with increased financial stability and opportunities for leveraging their equity in the evolving housing market landscape. But it's bad news for homebuyers looking to find an affordable home.
