According to real estate data tracker CoreLogic, the average U.S. homeowner with a mortgage, which applies to around 63% of U.S. homes, has seen a decline in home equity – the first time in over 10 years. Specifically, the average homeowner equity per borrower was $274,070 in the first quarter, down 1.9% from the same period last year.
The last instance of a year-over-year decline in average homeowner equity was observed in the first quarter of 2012, a time when the housing market was still recovering from the mortgage meltdown and foreclosure crisis that contributed to the Great Recession.
CoreLogic’s data highlights that U.S. homeowners with a mortgage have collectively lost $108.4 billion in home equity between the first quarter of 2022 and the first three months of 2023, which translates to a 0.7% decline.
Homeowner equity, which is the difference between the current value of a property and the amount still owed on the mortgage, is strongly influenced by the fluctuation of home prices. As home prices rise, so does homeowner equity, while a decrease in home prices, can lead to a decline in homeowner equity.
Housing slump fallou
Average US homeowner equity fell in the first quarter, marking first annual decline in more than a decade.
In the first quarter of 2012, the average U.S. homeowner equity was $75,130, which then saw a rapid increase in the subsequent years as a result of rock-bottom mortgage rates and a chronic shortage of properties for sale that generated a higher demand for homes.
Consequently, home prices surged, and by the second quarter of 2022, the average U.S. homeowner equity reached a record high of $297,510, according to data from CoreLogic.
However, starting a little over a year ago, the housing market saw a slowdown, largely due to sharply higher mortgage rates and a limited inventory of available homes.
Consequently, sales of previously occupied U.S. homes fell by 23.2% in the 12 months ending in April, marking nine consecutive months of annual sales decline of 20% or more, according to the National Association of Realtors.
The housing market’s slowdown has also had an impact on home prices, with the national median home price falling by 1.7% year-over-year to $388,800 in April after a growth in January, as per the reports.
Despite the decline in home prices, there was a silver lining for homeowners, with average homeowner equity seeing a slight increase of 0.9% in the first quarter when compared to the previous quarter, according to CoreLogic.
CoreLogic’s Chief Economist, Selma Hepp, stated that “Home equity trends closely follow home price changes.” As a result of this, while the average amount of equity has decreased year-over-year, it has increased from Q4 2022 due to accelerated monthly home price growth in early 2023.
Despite this decline in home equity, the number of homeowners who owe more on their mortgage than the worth of their home (“underwater”) held steady between Q4 and Q1 at 1.2 million homes, or approximately 2.1% of properties with a mortgage.
However, this figure has increased by 4% compared to the same period the previous year. On a state-wide basis, Washington, California, and Utah experienced the largest average home equity declines of $74,300, $59,600, and $37,700, respectively.