Home Equity Levels Rise in Reverse Mortgage Hotspots

According to new data from CoreLogic, mortgage holders in the Western United States saw the greatest gains in home equity between 2015 and 2016 — a region that perhaps not coincidentally has tended to lead the nation in Home Equity Conversion Mortgage originations from month to month.

Washington state homeowners with mortgages saw an average equity gain of a $31,000 from the final quarter of 2015 to the same period in 2016, with its southern neighbor Oregon following close behind at $27,000; that’s a 10.2% and 10.3% increase, respectively. Continuing the trend, California rounded out CoreLogic’s top three dollar equity gainers with an average of $26,000 per homeowner. The East Coast doesn’t make an appearance on the list until New York at number five with $23,000, then Massachusetts in seventh place with $20,000.

According to the most recent regional data from industry tracking firm Reverse Market Insight, only two of the top 10 states by reverse mortgage endorsement saw growth in 2016 from the previous year: Colorado, which clocked a whopping 33.8% jump — and took fourth place in CoreLogic’s measure of equity growth with $24,000 — and Washington state, which turned in a more modest gain of 6.3%. On RMI’s heat map of endorsement growth trends, Colorado, Washington, and Oregon were the only three states in positive territory from 2015 to 2016.

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RMI president John K. Lunde advocated caution when discussing a potential direct correlation between the numbers, noting that with a relatively small sample size, other factors are likely at play, and that the connection might not be a straight line.

“From a statistical perspective, it would be useful to say it’s one of the pieces of your equation,” Lunde said in an e-mail to RMD. “But there are other significant pieces of the equation as well.”

“It helps,” Lunde said of increasing equity values and Home Equity Conversion Mortgage origination. “But it’s not enough on its own.”

On the negative side, Delaware was the only state in CoreLogic’s analysis that saw an equity drop, with borrowers taking an average $1,000 hit between 2015 and 2016. Alaska (no change), North Dakota ($1,000 increase) and Iowa ($3,000 increase) rounded out the bottom four states for equity growth during that period.

Nationwide, CoreLogic found that 6.2% of all U.S. homes with a mortgage have negative equity,  down from a total underwater rate of 8.4% in the fourth quarter of 2015. Nevada had the highest proportion of upside-down mortgages at the end of 2016 with 13.6%, followed by Florida’s 11.6% and Illinois’s 11.1%.

Written by Alex Spanko