Homeowner Equity Insights – Q2 2023

Data Through Q2 2023

Introduction

The CoreLogic Homeowner Equity Insights report, is published quarterly with coverage at the national, state and metro level and includes negative equity share and average equity gains. The report features an interactive view of the data using digital maps to examine CoreLogic homeowner equity analysis through the second quarter of 2023.

Negative equity, often referred to as being “underwater” or “upside down,” applies to borrowers who owe more on their mortgages than their homes are worth. Negative equity can occur because of a decline in home value, an increase in mortgage debt or both.

This data only includes properties with a mortgage. Non-mortgaged properties (that are owned outright) are not included.

Homeowner Equity Q2 2023

CoreLogic analysis shows U.S. homeowners with mortgages (roughly 63% of all properties*) have seen their equity decline by a total of $287.6 billion since the second quarter of 2022, a loss of 1.7% year over year.

*Homeownership mortgage source: 2016 American Community Survey.

In the second quarter of 2023, the total number of mortgaged residential properties with negative equity decreased by 6%  from the first quarter of 2023 , representing 1.1 million homes, or 2% of all mortgaged properties. On a year-over-year basis, negative equity rose by 4% to 1.1 million homes, or 1.9% of all mortgaged properties, from the second quarter of 2023.

Because home equity is affected by home price changes, borrowers with equity positions near (+/- 5%) the negative equity cutoff are most likely to move out of or into negative equity as prices change, respectively. Looking at the second quarter of 2023 book of mortgages, if home prices increase by 5%, 128,000 homes would regain equity; if home prices decline by 5%, 178,000 would fall underwater. The CoreLogic HPI Forecast ^TM projects that home prices will increase by 4.3% from June 2023 to June 2024.

Western Homeowners See Largest Annual Equity Losses but Remain in Good Shape

U.S. homeowners with mortgages gained on average $13,900 quarter over quarter, amounting to a collective increase of $806 billion – or a 5.2% gain – in home equity. And while borrowers in the West continued to experience the largest year-over-year equity losses (as seen in Chart 4), homeowners in states like Hawaii, California and Washington still have the most accumulated equity due to the pace of appreciation over the past decade.

National Aggregate Value of Negative Equity: Q2 2023

The national aggregate value of negative equity was approximately $335.3 billion at the end of the second quarter of 2023. This is down quarter over quarter by approximately $2.7 billion, or -0.8%, from $338 billion in the first  quarter of 2023 and up year over year by approximately $28.8 billion, or 9.4%, from $306.5 billion in the second quarter of 2022.

Negative equity peaked at 26% of mortgaged residential properties in the fourth quarter of 2009, based on the CoreLogic equity data analysis which began in the third quarter of 2009.

“While U.S. home equity is now lower than its peak in the second quarter of 2022, owners are in a better position than they were six months ago, when prices bottomed out. The 5% overall increase in home prices since February means that the average U.S. homeowner has gained almost $14,000 compared with the previous quarter, a significant improvement for borrowers who bought when prices peaked in the spring of 2022.

Also, while more borrowers are underwater compared with one year ago, they are not necessarily concentrated in markets that have seen the largest price declines, as negative equity also depends on the down payment. Natural disasters and related risks also play a substantial role in home equity changes.”

-Selma Hepp

Chief Economist for CoreLogic

National Homeowner Equity

In the second quarter of 2023, the average U.S. homeowner lost approximately $-8,300 in equity during the past year.

New Jersey, New Hampshire, Connecticut and Rhode Island experienced the largest average equity gains, all at $20,000 or more. Sixteen states and one district posted annual equity losses: Arizona, California, Colorado, Hawaii, Idaho, Louisiana, Minnesota, Montana, Nevada, New York, Oregon, Tennessee, Texas, Utah, Washington, Wyoming and Washington, D.C .

10 Select Metros Change

CoreLogic provides homeowner equity data at the metropolitan level, in this graphic 10 of the largest cities, by housing stock are depicted. 

Negative equity has seen a recent decrease across the country. Los Angeles and San Francisco are the least challenged, with negative equity shares of all mortgages at 0.8%.

Loan-to-Value Ratio (LTV)

This chart shows national homeowner equity distribution across multiple LTV segments.

Summary

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. 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. 

CoreLogic will continue to report on homeowner equity as it continues to adjust in communities and states across the country. To learn more about homeowner equity, visit the CoreLogic Insights page on www.corelogic.com.

Methodology

The amount of equity for each property is determined by comparing the estimated current value of the property against the mortgage debt outstanding (MDO). If the MDO is greater than the estimated value, then the property is determined to be in a negative equity position. If the estimated value is greater than the MDO, then the property is determined to be in a positive equity position. The data is first generated at the property level and aggregated to higher levels of geography.  CoreLogic uses public record data as the source of the MDO, which includes more than 50 million first- and second-mortgage liens, and is adjusted for amortization and home equity utilization in order to capture the true level of MDO for each property. Only data for mortgaged residential properties that have a current estimated value are included. There are several states or jurisdictions where the public record, current value or mortgage data coverage is thin and have been excluded from the analysis. These instances account for fewer than 5% of the total U.S. population. The percentage of homeowners with a mortgage is from the 2019 American Community Survey. Data for the previous quarter was revised. Revisions with public records data are standard, and to ensure accuracy, CoreLogic incorporates the newly released public data to provide updated results.

CoreLogic HPI Forecasts™ are based on a two-stage, error-correction econometric model that combines the equilibrium home price—as a function of real disposable income per capita—with short-run fluctuations caused by market momentum, mean-reversion, and exogenous economic shocks like changes in the unemployment rate. With a 30-year forecast horizon, CoreLogic HPI Forecasts project CoreLogic HPI levels for two tiers — “Single-Family Combined” (both attached and detached) and “Single-Family Combined Excluding Distressed Sales.” As a companion to the CoreLogic HPI Forecasts, Stress-Testing Scenarios align with Comprehensive Capital Analysis and Review (CCAR) national scenarios to project five years of home prices under baseline, adverse and severely adverse scenarios at state, metropolitan areas and ZIP Code levels. The forecast accuracy represents a 95% statistical confidence interval with a +/- 2% margin of error for the index.

Source: CoreLogic

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About CoreLogic

CoreLogic is a leading global property information, analytics and data-enabled solutions provider. The company’s combined data from public, contributory and proprietary sources includes over 4.5 billion records spanning more than 50 years, providing detailed coverage of property, mortgages and other encumbrances, consumer credit, tenancy, location, hazard risk and related performance information. The markets CoreLogic serves include real estate and mortgage finance, insurance, capital markets, and the public sector. CoreLogic delivers value to clients through unique data, analytics, workflow technology, advisory and managed services. Clients rely on CoreLogic to help identify and manage growth opportunities, improve performance and mitigate risk. Headquartered in Irvine, Calif., CoreLogic operates in North America, Western Europe and Asia Pacific. For more information, please visitwww.corelogic.com.

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