CoreLogic released a new analysis showing that U.S. homeowners with mortgages (roughly 63 percent of all homeowners) saw their equity increase by a total of $227 billion in Q3 2016 compared with the previous quarter, an increase of 3.1 percent. Additionally, 384,000 borrowers moved out of negative equity, increasing the percentage of homes with positive equity to 93.7 percent of all mortgaged properties, or approximately 47.9 million homes. Year over year, home equity grew by $726 billion, representing an increase of 10.8 percent in Q3 2016 compared with Q3 2015.
In Q3 2016, the total number of mortgaged residential properties with negative equity stood at 3.2 million, or 6.3 percent of all homes with a mortgage. This is a decrease of 10.7 percent quarter over quarter from 3.6 million homes, or 7.1 percent of mortgaged properties, in Q2 2016 and a decrease of 24.1 percent year over year from 4.2 million homes, or 8.4 percent of mortgaged properties, in Q3 2015.
Negative equity, often referred to as “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 a combination of both.
Negative equity peaked at 26 percent of mortgaged residential properties in Q4 2009, based on CoreLogic negative equity data, which goes back to Q3 2009.
The national aggregate value of negative equity was about $282 billion at the end of Q3 2016, decreasing approximately $2.1 billion, or 0.8 percent, from $284 billion in Q2 2016, and decreasing year over year about $25 billion, or 8.2 percent, from nearly $307 billion in Q3 2015.
“Home equity rose by $12,500 for the average homeowner over the last four quarters,” said Dr. Frank Nothaft, chief economist for CoreLogic. “There was wide geographic variation with homeowners in California, Oregon and Washington gaining an average of at least $25,000 in home equity wealth, while owners in Alaska, North Dakota and Connecticut had small declines, on average.”
“Price appreciation is the main ingredient for home equity wealth creation, and home prices rose 5.8 percent in the year ending September 2016 according to the CoreLogic Home Price Index,” said Anand Nallathambi, president and CEO of CoreLogic. “Paydown of principal is the second key component of equity building. Many homeowners have refinanced into shorter-term loans, such as a 15-year loan, and by doing so, they have significantly fewer mortgage payments and are able to build equity wealth faster.”