Home equity is your home’s current value less the amount you still owe on your home mortgage. If you have no mortgage and you own your home outright, your home equity is the full value of your home. For every other homeowner, their home’s value is some portion of their own and the remaining portion the bank’s or other mortgage lender’s. Today, home equity is building fast, and, if you hold a mortgage on your home, this is benefitting you.
About the CoreLogic Report
Every year, CoreLogic publishes its Homeowner Equity Insights report. This is a quarterly report designed to show average equity gains and negative equity share, among other relevant metrics, at the state and national levels as well as the “Core Based Statistical Area (CBSA)/Metro level.”
The report analyzes homes with mortgages, accounting for approximately 63 percent of homes at the time. It does not include homes owned outright, or non-mortgage homes.
The Most Recent Report
The most recent report, published at the end of 2021, reveals what CoreLogic’s Chief Economist calls the largest annual gain in home prices recorded in the report’s 45-year history. This represents an enormous gain in home equity wealth.
National Homeowner Equity
Year-over-year, home equity has risen and underwater mortgages have dropped. Both of these are excellent indicators for homeowners.
Gains in Home Equity
For the fourth quarter of 2021, homeowner equity across the U.S. grew by 29.3 percent, or $3.2 trillion, compared with the fourth quarter of 2020.
Declines in Negative Equity
Negative equity refers to mortgage borrowers who owe more than their homes are worth, often called “upside-down” or “underwater.” Gains in negative equity can indicate and result from:
- The value of the home declining
- The amount of mortgage debt increasing
- Both of these
Therefore, when negative equity declines, homeowners are generally seeing their home values increasing and/or their mortgage debt decreasing–all desirable scenarios by any measure.
That said, for the fourth quarter of 2021, the number of homes with negative equity dropped three percent, amounting to 1.1 million homes (or 2.1 percent of all mortgaged properties,) from the previous quarter and, year over year, dropped 24.9 percent from 1.5 million homes (or 2.8 percent of all properties,) amount to a drop in negative equity in 380,000 homes since this time last year.
The Effect on Home Prices
As real estate agents in Estes Park can tell you best of all, home prices in the country grew by 18 percent year over year, representing an eight-percent gain. This pushed negative equity to its lowest level in over 12 years.
Predictions for Home Prices in 2022
If home prices increase by five percent in 2022, 141,000 homes would move out of negative equity; if home prices drop by five percent in 2022, 183,000 home mortgages would go underwater. The CoreLogic HPI Forecast predicts a five-percent increase in home prices year over year between December 2021 and December 2022.