American homeowners with mortgages saw their collective home equity increase by 6.5% between the first quarter of 2019 and Q1 2020, a percentage figure totalling approximately $590.1 billion. Meanwhile, negative equity fell by 16% from 2.2 million homes, or 4.1% of all mortgaged properties, in Q4 2019. This is according to the quarterly Homeowner Equity Insights report published this week by financial, property and consumer analytics firm CoreLogic.
The report also details that since the end of the 2008 financial crisis, consistently rising home prices have led to a notable increase in the positive equity position of American homeowners.
“As the economy climbed out of the recession in the first quarter of 2010, 25.9% or 12.1 million homes were still underwater, compared to the first quarter of 2020 when the negative equity share was at 3.4%, or 1.8 million properties,” the report reads. “Borrowers have seen an aggregate increase of $6.2 trillion in home equity since the first quarter of 2010 and the average homeowner has gained about $106,100 in equity.”
A reduction in the share of homes that have negative equity has been felt in all 50 states, with Nevada recording the largest drop in negative equity share: 70% between Q1 2010 and Q1 2020.
While this is all generally good news for the standing of American homeowners, the coming economic difficulties stemming from the COVID-19 coronavirus pandemic are likely to have an effect on the U.S. housing market.
“As the pandemic continued to unfold and shelter-in-place orders were extended, unemployment reached double digits within a few short weeks and left many homeowners scrambling to cover mortgage payments,” the report details about the early days of the pandemic. “However, home prices continued to rise, which added to borrower equity through March.”
The recession stemming from the pandemic is likely going to have a negative impact on housing prices, according to CoreLogic chief economist Frank Nothaft. Still, the severity of the drop is not expected to reach the same levels as the fallout from the 2008 crisis, he says.
“The pandemic recession will likely lead to price declines in many areas during the next year and weaken home equity gains,” Nothaft says in the report. “However, price declines will be far less than those experienced during the Great Recession, when the national CoreLogic Home Price Index fell 33% peak-to-trough. Our latest forecast shows the national index to have a peak-to-trough decline of 1.5%.”
In the end, this report represents a generally positive shift even when acknowledging the headwinds that could be in front of home values.
“CoreLogic began reporting homeowner equity data in the first quarter of 2010; at that time, the equity picture for homeowners was rather bleak in the United States,” the report reads. “Since then, many homes have regained equity and the outstanding balance on the majority of mortgages in this country are now equal to or in a positive position when compared to their loan balance.”
Read the Homeowner Equity Insights report at CoreLogic.