Homeowners Gained More Than $3.2 Trillion in Equity in Q3 2021, Says Report

This summer, home price growth reached the highest level in more than 45 years, pushing equity gains to another record high and allowing 70,000 properties to regain equity in the third quarter of 2021. These equity gains provided a crucial barrier against foreclosure for the 1.2 million borrowers who reached the end of forbearance in September.

“Not only have equity gains helped homeowners more seamlessly transition out of forbearance and avoid a distressed sale, but they’ve also enabled many to continue building their wealth,” said Frank Martell, president and CEO of CoreLogic. “This financial reserve will be especially helpful for homeowners looking to fund renovation projects.”

“Home price growth is the principal driver of home equity creation,” said Dr. Frank Nothaft, chief economist for CoreLogic. “The CoreLogic Home Price Index reported home prices were up 17.7% for the past 12 months ending September, spurring the record gains in home equity wealth.”

Negative equity, also referred to as underwater or upside-down mortgages, applies to borrowers who owe more on their mortgages than their homes are currently worth. As of the third quarter of 2021, negative equity share, and the quarter-over-quarter and year-over-year changes, were as follows:

• Quarterly change: From the second quarter of 2021 to the third quarter of 2021, the total number of mortgaged homes in negative equity decreased by 5.7% to 1.2 million homes, or 2.1% of all mortgaged properties.
• Annual change: In the third quarter of 2020, 1.6 million homes, or 3% of all mortgaged properties, were in negative equity. This number decreased by 28.9%, or approximately 470,000 properties, in the third quarter of 2021.
• National aggregate value: The national aggregate value of negative equity was approximately $276.2 billion at the end of the third quarter of 2021. This is up quarter over quarter by approximately $8.2 billion, or 3%, from $268 billion in the second quarter of 2021, and down year over year by approximately $8.3 billion, or 2.9%, from $284.5 billion in the third quarter of 2020.

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 third quarter of 2021 book of mortgages, if home prices increase by 5%, 145,000 homes would regain equity; if home prices decline by 5%, 191,000 would fall underwater.

The next CoreLogic Homeowner Equity Report will be released in March 2022, featuring data for Q4 2021. For ongoing housing trends and data, visit the CoreLogic Intelligence Blog: www.corelogic.com/intelligence.

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.